Diversified conglomerate ITC Ltd is looking to up its play in the value-added paperboards and speciality papers vertical as it ramps up on exports to existing countries like the Middle East, EU, UK, South East Asia, Australia and New Zealand; while focusing on the high margin value-added and sustainable packaging solutions for both the domestic and export markets.

Over the last few quarters, it has invested in innovative products while upping R&D in the segment. Work is on towards solutions “that are more resilient and strengthen supply chain” thereby benefitting farmers, among others.

Sustainable packaging solutions

Sanjiv Puri, Chairman and Managing Director, ITC Ltd, during a recent interaction with BusinessLine said investments were being made towards “value-added segment” with “sustainable packaging” as a focus.

For instance, the company has been actively substituting plastics with the help of sustainable packaging solutions developed at its Bhadrachalam unit in Telangana.

“We are a very clear leader in the value-added segment in paperboards and speciality papers. There are new products that have already been launched; more are in development stages. We have developed a sustainable fibre value chain which strengthens our competitiveness. The ITC Life Sciences and Technology Centre continues to work towards developing better hybrids, including improved solutions for farmers that are more resilient to strengthen the value chain” Puri said.

The recyclable barrier paperboards ‘Filo’ (used in QSR and exports) and biodegradable paperboards ‘Omega’ are “gaining customer franchise”; while other launches include ‘Bioseal’ (compostable packaging solution), ‘Oxyblock’ (recyclable packaging solution for foods, edible oils) and ‘Antimicrobial coating’ (solution for germ-free packaging surface).

Amongst in-house divisions – personal care foods and hotels (food delivery) – witnessed conscious plastic substitution. These include Aashirvaad Instant Meals being packed using the in-house developed ‘IndoBowl’ paperboard in place of used-plastic packaging.

According to the Flexible Packaging Association, the beverage sector in the United States accounted for nearly 50 per cent of the packaging market. Currently, over 30 per cent of Americans (nearly a third) order food twice a week, which is expected to grow by 3 per cent in the coming years.

Market sources say many younger buyers are prepared to spend more on products packed sustainably. The move towards sustainable / non-plastic cutlery by food-service providers is also an indication of growing consciousness in matters of sustainability.

The company’s paperboards, packaging and printing business performed well, driven primarily by the cartons segment.

ITC’s paperboard, paper and packaging division saw a 25 per cent jump YoY in Q2FY22 to ₹1,830 crore; while segment profits (at a profit before tax level) rose 24 per cent YoY to ₹409 crore.

Paperboard, paper and packaging divisions contribute around 14 per cent to gross revenues and approximately 8 – 10 per cent of the bottom line (before tax).

Import Substitution

According to Vadiraj Kulkarni, Divisional Chief Executive, Paperboards and Specialty Papers Division, ITC Limited, the segment witnessed a revival of demand across most end-user segments apart from publications, quick service restaurants and wedding card segments (which remain subdued).

There was robust growth in value-added products; strong performance in exports on a high base, notwithstanding logistical challenges while realizations improved.

Investments were made in pulp import substitution (at Bhadrachalam), cost-competitive fibre chain, a sharper focus on operational efficiency by leveraging data analytics, and Industry 4.0 enabled margin expansion despite the escalation in key input prices.

“Our strategy is to develop new and superior products, in collaboration with the value chain partners (customers, printers, converters etc.). And once we scale up, these offerings will contribute significantly to our top-line growth and will become margin accretive. We have ambitious growth targets,” Kulkarni said.