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EXPANSION @ GLOBAL OR LOCAL Abstract This case is about one of the Indians largest manufacturer of flexible plastic packaging company known as Uflex Ltd. After its great success and dominance in Indian market, company has two options; either the company should allocate its resources locally and capture Indian market or manage its funds globally. This case talk about various expansion facts and figures and risk factors associated with it. Keywords Plastic films, packaged products, packaging cost, packaging films, food packaging, packaging materials Introduction UFLEX is a Multi Million Group headquartered at Noida, on the periphery of New Delhi, India and having manufacturing facilities in India, Dubai, UAE and Mexico USA, offices in Europe and North America and market presence in 80 countries around the world. UFlex facility enjoys ISO 9001 and ISO 14001 certifications and has FDA and BGA approvals. For their products, UFlex is part of the D&B Global Database and winner of various prestigious national and international awards like the top exporter of BOPET and BOPP films, and the Worldstar award for packaging excellence. FPA, AIMCAL and the Dupont Awards in 2004-2005 are the latest in this series. UFLEX Group came into existence in 1983 and has grown into one of the biggest multi integrated packaging groups in the world. The group
to bring ideas to life. Under Mr. The list is a veritable who’s who of international Page 2 . Ashok Chaturvedi who is Chairman and Managing Director of the company. Chaturvedi's guidance the company has shown tremendous growth over past few years. BRC and HACCP. Laminates.Case Study Uflex Ltd. Films (BOPET. Holographic films Gravure cylinders. Coated Film.The Company is a one-stop shop which offers the entire range of innovative packaging solutions. Inks and adhesives to all types of packaging & printing machines. offering total flexible packaging solutions to the entire world. Some of the best brands in the world work with UFLEX. Achievements UFLEX is the only integrated packaging unit of its kind in India. Uflex is currently promoted by Mr. BOPP and CPP .both in plain and metalized form). Under a single roof – housing a multi-million dollar integrated infrastructure – it has proven competencies and certifications from ISO. is a multi faceted organization which has backward integrated its operations from manufacture of Polyester chips. 91 countries and several hundred customers. The company’s back-end supports the demands from six continents. Pouches.
the World Star Award. The UFLEX story isn’t just about supplying to manufacturers. Castrol. a versatile. the 5-Star India Packaging Award. Godrej. Pillsbury and dozens of others. It would hardly be surprising to know that India’s fastest growing flexible packaging company has won every significant national and international award. ISO 22000:2005 for conforming to Hygiene and Food Safety Application for Packaging and the HACCP-based Food Safety System Standards. Amongst the more prominent ones are the Top Exporter Award of BOPET and BOPP films. D S Group. modern and a hygienic storage solution that meets the changing food habits of Indian consumers. This ultra modern facility is certified with ISO 9001:2000 for Quality Management Systems. Unilever. Lays. GSK. The company spotted a need and created – the zip pouch. Cadbury. Britannia. This technology has been used for brands like TATA tea and Haldiram’s. UFLEX has also joined hands with world leader Hosokewa Yoko of Japan to bring to India a remarkable packaging solution: sleeve-in-pouch (SIP). P&G. UFLEX has served these brands not only through quality products but also through regular innovations. Perfetti. and Colgate Palmolive. Such is the dominance of UFLEX in India that nine times out of ten a customers’ preferred choice of an FMCG brand would have been dressed in UFLEX technology. the DuPont USA Global Packaging Award. Haldiram’s. Walmart-Bharti. In pursuing excellence. business – Nestle. Other innovative products include the zipper and slider action. the Flexible Packaging Achievement Award in the US and the Award for Waste Management in Switzerland. UFLEX has invested heavily in a manufacturing plant in the UAE.Case Study Uflex Ltd. tamper-evident packaging – Z-Step – as also WPP bags and 3-D pouches. Page 3 . ISO 14001:2004 for Environmental anagement Systems Standards.
The campaign was rich in visual appeal and amply demonstrated the products ability to retain freshness longer. It periodically puts forward communications relevant to this audience. Uflex has plants in Dubai and Mexico and is setting up one in Egypt.Case Study Uflex Ltd. cut across consumer profiles and showcased the achievements of the company. Promotion UFLEX is largely a business-to-business brand. A measure of its success is the niche that the product has Page 4 . Besides the corporate campaign. however. while the Mexico plant looks at the Americas. A corporate campaign released recently has. The Dubai and Egypt plants cater to the growing demands of Middle East. Global operations Apart from its manufacturing plants in India. largely aimed at decision-makers. Uflex exports its goods to more than 100 countries giving them a global presence. The attempt was to build confidence and put on display the vast and versatile product range and the clients – both big and small – who patronize it. African and Southern European markets. UFLEX has been able to connect with housewives with its Zipouch range of storage bags. It has also started work on increasing capacities in Mexico and has plans to expand Egypt in after the completion of phase 1.
These figures indicate towards a change in the industrial and consumer set up.a. This growth rate is expected to double in the next two years. New entry of FMCG companies in India will enhance demands for flexible packaging going forward. Flexible packaging is a $26. been able to so quickly carve for itself. The Indian packaging industry itself is growing at 14-15% annually. Page 5 . the company participates in major domestic and overseas exhibitions where the core competencies of UFLEX as an integrated packaging giant are showcased. Flexible packaging is the second largest packaging segment in the U. In USD it is 14 billion and growing at more than 15% p. garnering 18 percent of the U. Besides this. However this is yet significantly lower than the developed markets which have it above 80% leaving large opportunity for growth. respectively..4 billion industry in the United States. India's per capita packaging consumption is less than USD 15 against worldwide average of nearly USD 100. The per capita consumption of packaged food in India has moved up significantly from 5 to 25%. Increasing demands for packaged goods Indian packaging market is growing at an annual rate of 12 to 15% and this is expected to grow at a quicker pace over the next couple of year.S.S. The flexible packaging industry directly employs a little over 79 thousand people.Case Study Uflex Ltd. with Western Europe and North America accounting for a majority of the world’s flexible packaging demand at 28% and 27%. Global Packaging Industry The global packaging industry is estimated to be $505 billion. $135 billion packaging market.
Raw Material Manufacturers (RMM) Aluminum foil manufacturers and manufacturers of plastic films such as • Polyester films. inks and adhesives and various other applications used by converters to make packaged goods. • Low density polyethylene (LDPE) films. • High density Polyethylene (HDPE) films • biaxially oriented polypropylene (BOPP) films cater to the flexible packaging segment. These raw materials are used by the converters to convert it into packaging material used by FMCG. Pharma and various other industries. Nearly 60% of BOPP films and around 100% of polyester films are Page 6 . hologram sheets.Case Study Uflex Ltd. Converters Converters are engaged in the processing of packaging material into packaging products and they act as the link between the customer and the raw material manufacturer. Uflex has a large capacity both in India as well as overseas to produce raw materials such as plastic films.
These expansions are expected to get commissioned gradually starting FY11 and will be fully operational by the end of Fy12. besides that they also manufacture printing inks and adhesives with a capacity of 9600 and 6000 MT pa respectively.Case Study Uflex Ltd. Increasing Capacities Uflex currently has manufacturing capacities in India. 14. Uflex has large domestic converting capacities for making range of packing products. Dubai and Mexico. Uflex has commenced work to expand both its Indian and overseas manufacturing operations. Conversion provides a value addition of around 35%-40% on the basic raw materials. they have the capacity to produce 72. Domestic Expansion Uflex manufactures various products which are directly used for packaging and packaging material. Page 7 . The total installed capacity is 2. metalizing and printing of films. Post the expansion the capacities of their overall plastic film and packaging goods will raise to 3.000 MT pa of PET chips which is used as a raw material to produce plastic films. lamination.41. they can manufacture 1570 numbers of packaging and converting machines in a year which are used in flexible packaging industry. it can produce 700 lac sheets of hologram sticker sheets pa. In the flexible packaging sector.960 MT/annum. 000 numbers of rotogravure cylinder and shims . It has current combined capacity of 1. Uflex is expanding its packaging production in Jammu by 24.960MT pa to produce films and packaging materials.560 MT/annum for films and packaging divisions.000 MT per annum. It also has capacity to manufacture 47. used only after conversion. 62. conversion involves the coating.
It has undertaken to enhance this capacity by another 26400 MT of PET films. Seeing the opportunity Uflex has successfully commissioned a plant of PET film with a capacity of producing 26400 MT of film in Mexico. The management has indicated they expect the plant to get commissioned by mid FY11E. Page 8 .Case Study Uflex Ltd. The full benefit of the same will be felt in FY12E. Expansion at Mexico USA is the biggest consumer of packaged goods worldwide. doubling the current capacity.
Case Study Uflex Ltd. Uflex major Page 9 . Pharma and Food and Processing Industry. as they produce and sell goods and service that consumer’s use on a regular basis. Resilient in times of recession Uflex sound business profile is driven by the growth in FMCG. regardless of their economic status or income level. All these industries are not as severely affected during recession.
the permeation cannot be totally eliminated. A problem with stitched bags is that they suffer from permeation of oxygen and moisture and ingress of mites through the stitching which causes deterioration of sensitive products and foods. this makes it possible for them to be stacked only while resting on the main panels with only the narrow side panels available for display. New Innovations Uflex were the first to offer both stitched and non-stitched WPP bags. Pepsi. This is a big plus as the main front and back panels of the bag become fully available for display and merchandising. hence its inherent growth story is based on the growth of these companies which are not very much affected by the economy slowdowns. Castrol. Godrej Consumer. Coca cola etc. revenues comes from companies like . Risk Factors Rise in Input costs The largest component of cost involved in making flexible packaging films and products is from the attributes to raw materials.Britania. Colgate. The permeation can be reduced by using smaller stitches but this affects the strength of the joint. Gillette. Henkel. Uflex have overcome the problem by developing hermetically sealed bags using hot-melt closing. The PET resin used to make films as well as the polymers that go into producing packaging films are derived from Page 10 . Nestle. in any case. Another new development being pioneered by Uflex is a pinched bottom construction consisting of both side and bottom gussets that enables the bags to stand up on the bottom and be stacked in that configuration.Case Study Uflex Ltd. Conventional WPP bags do not stand up well on their bottom even if provided with side gussets. Dabur. P&G. ITC. Cadbury.
Case Study Uflex Ltd. Higher equity dilution at low prices Given the European problem overhang rising of funds through equity at fair valuations may be difficult. however to complete the huge orders from FMCG and Food processing industries one need to have large capacity base and a performance track record. Change in government policies Uflex has started implementing plans to put manufacturing capacity in Egypt. Entry barriers in flexible packaging is not very high given the easy nature of business. We believe they would be able to do this going forward Increase in competition The competition is increasing with the addition of new capacities and emergence of new global players especially from China. Given the volatile trend in crude oil and demands for polymers for other applications the pressure on the input cost is expected to fluctuate. any change in government policy can have direct impact on the Page 11 . style and most importantly the quality of packaging have always plays a crucial role in Indian flexible packaging market. Uflex might have to dilute equity at a low price if markets don't rebound over the next year as they might need funds for their expansion plans. However we do not see this as too much of a concern as the funds required may not be too large and could be for the short term funded through debt. Flexible films manufacturer and converters have been able to pass on these costs in the change in raw materials. pattern. Continuous innovation in terms of design. Equity Dilution at lower levels could affect our EPS target and in turn lead us to lowering our estimates and target price. petroleum. Most of the raw materials for packaging industry in Egypt are heavily dependent on imports.
The solution used at Uflex is designed on the Oracle E-Business Suite. ink dispenser. As a result • There is reduction in wastage from 12 to 4. manufacturing cost of the company. however action is being taken to increase the level of recycling of polyester based products. PET bottles posed a problem over 2006 and 2007 due to the lack of infrastructure for recycling. Gap between actual cost and standard cost At Uflex. • 125 crore per year saving in ink consumption. Page 12 . • Business analytics helps in improving market share and profitability. CRM machine.3 %. Everything is weighed and measured before and after printing. Environmentalists and the government are concerned about the increasing amount of waste in Mexico and the lack of space for its management and disposal of plastic waste. Reducing this difference helps clients know the actual margins. This helps determine actual consumption and the associated costs. This integration helps monitor energy and material consumption in a few clicks. even the attendance system and genset. For example. more accurate estimates also help in reducing wastage of material. there was a huge gap between the actual and standard costing in the past 28 years of its operation.Case Study Uflex Ltd. This includes the weighing machine. Every machine used in production is linked to the Oracle server.
Case Study Uflex Ltd. How should Uflex market itself globally? Page 13 . After such risk factors should the company focus on local market or expand globally? 2. Questions 1. What other strategies should company follow in order to reduce its wastage? 3.