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Tetra Pak International SA

Tetra Pak International SA

70 Avenue Général-Guisan
Case Postale 446
CH-1009 Pully/Lausanne
Switzerland
Telephone: (41) 21 729 2111
Fax: (41) 21 729 2244
Web site: http://www.tetrapak.com/

Wholly Owned Subsidiary of Groupe Tetra Laval
Incorporated:
1951 as AB Tetra Pak
Employees: 20,200
Sales: EUR 7.6 billion ($8.15 billion) (2001)
NAIC: 322212 Folding Paperboard Box Manufacturing; 322215 Nonfolding Sanitary Food Container Manufacturing; 322221 Coated and Laminated Packaging Paper and Plastics Film Manufacturing; 333993 Packaging Machinery Manufacturing

Tetra Pak International SA makes laminated containers such as juice boxes. For decades identified with its unique tetrahedral dairy packaging, the companys product line has grown to include hundreds of diverse containers. It is a leading supplier of plastic milk bottles. With its sister companies, Tetra Pak claims to be the only provider of complete systems for processing, packaging, and distributing liquid foodstuffs worldwide. Tetra Pak products are sold in more than 165 countries. The company describes itself as a partner in developing its clients concepts rather than as a mere vendor. Tetra Pak and its founding dynasty have been notoriously secretive about profits; parent company Tetra Laval is controlled by the family of Gad Rausing, who died in 2000, through Netherlands-registered Yora Holding and Baldurion BV. The company reported 94.1 billion packages sold in 2001.

Origins

Dr. Ruben Rausing was born on June 17, 1895 in Raus, Sweden. After studying economics in Stockholm, he went to America in 1920 for graduate studies at New Yorks Columbia University. There, he witnessed the growth of self-service grocery stores, which he believed would soon be coming to Europe, along with a heightened demand for packaged foods. In 1929, with Erik Akerlund, he established the first Scandinavian packaging company.

Development of a new milk container began in 1943. The goal was to provide optimal food safety while using a minimum amount of material. The new containers were formed from a tube that was filled with liquid; individual units were sealed off below the level of the beverage inside without introducing any air. Rausing reportedly got the idea from watching his wife Elizabeth stuffing sausages. Erik Wallenberg, who joined the firm as a lab worker, is credited with engineering the concept, for which he was paid SKr 3,000 (six months of wages at the time).

Tetra Pak was founded in 1951 as a subsidiary of Akerlund & Rausing. The new packaging system was unveiled on May 18 of that year. The next year, it delivered its first machine for packaging cream in tetrahedral cartons to Lundaortens Mejerifõrening, a dairy in Lund, Sweden. The 100 ml container, which was covered in plastic rather than paraffin, would be named Tetra Classic. Before this, European dairies typically dispensed milk in bottles or in other containers brought by customers. Tetra Classic was both hygienic and, with individual servings, convenient.

The firm continued to focus exclusively on beverage packaging for the next 40 years. Tetra Pak introduced the worlds first aseptic carton in 1961. It would become known as Tetra Classic Aseptic (TCA). This product was different in two important ways from the original Tetra Classic. The first was in the addition of a layer of aluminum. The second was that the product was sterilized at a high temperature. The new aseptic packaging allowed milk and other products to be kept several months without refrigeration. The Institute of Food Technologists called this the most important food packaging innovation of the century.

Tetra Pak set up a Japanese subsidiary in 1962. It took six years to turn a profit but would soon be one of the companys most successful regions, generating annual sales of about ¥40 billion in the early 1980s. The rectangular Tetra Brik made its commercial debut in 1963. Tetra Rex, introduced in 1965, had a pointed top.

The rest of the packaging company, apart from Tetra Pak, was sold off in 1965. During this decade, a joint ownership arrangement between Hans and Gad Rausing, sons of the founder, was put in place.

Building with a Erik in the 1970s-80s

Tetra Brik Aseptic (TBA), a rectangular version, debuted in 1968 and sparked dramatic international growth. The TBA would account for most of Tetra Paks business into the next century. Borden Inc. brought Brik Pak to U.S. consumers in 1981 when it began using this packaging for its juices. At the time, Tetra Paks worldwide revenues were SKr 9.3 billion ($1.1 billion). Active in 83 countries, its licensees were putting out more than 30 billion containers a year, or 90 percent of the aseptic package market, reported Business Week. Tetra Pak claimed to pack 40 percent of Europes dairy packaging market, reported Britains Financial Times. The company had 22 plants, three of them for making machinery. Tetra Pak employed 6,800 people, about 2,000 of them in Switzerland.

In 1981, the company relocated its headquarters to Lausanne, Switzerland, mostly for tax reasons. Research and development facilities remained in Sweden. In 1984, much of the companys assets were transferred to a holding company registered in the Netherlands.

Tetra Paks ubiquitous coffee-cream packages, often seen at restaurants, were by then only a small portion of sales. The Tetra Prisma Aseptic carton, eventually adopted in more than 33 countries, would become one of the companys greatest successes. This octagonal carton featured a pull-tab and a range of printing possibilities. Tetra Fino Aseptic, launched in Egypt, was another successful innovation of the same time period. This inexpensive container consisted of a paper/polyethylene pouch and was used for milk. Tetra Wedge Aseptic first appeared in Indonesia. Tetra Top, introduced in 1991, had a resealable plastic top.

By 1990, the company was selling 50 billion containers a year. There were some setbacks, however. It dropped a paper and plastic bottle for carbonated beverages due to the rising cost of plastic. There was also concern about Tetra Paks impact on the environment. Unlike glass or plastic bottles, the laminated containers could not be sterilized and reused. In 1990, the company introduced a recycling program for its drink cartons in Canada, which converted used containers into a superwood plastic material.

Acquisition of Alfa-Laval in 1991

In 1991, Tetra Pak acquired Alfa-Laval AB for SKr 16.25 billion ($2.5 billion) in Swedens largest takeover deal to date. Another Swedish multinational corporation, Alfa-Laval was a world leader in industrial and agricultural equipment, particularly dairy equipment. This allowed Tetra Pak to develop entire processing and packaging solutions for clients, a capacity that came to be increasingly in demand.

The deal drew intense anti-competitive scrutiny from the European Commission, which was already handing Tetra Pak an EUR 75 million ($89 million) fine for abusing its market dominance in Italy. The takeover nevertheless went through.

After the merger, Tetra Pak announced plans to return its headquarters to Sweden. Group Tetra Laval was created on January 1, 1993, with three divisions. Alfa-Lavals liquid packaging machinery was absorbed into Tetra Pak, the largest unit.

Gad and Hans Rausing were credited with transforming their fathers milk carton firm into a leading global packaging company. They became wealthy in the process. The brothers had moved to England in the early 1980s and were considered to be the richest people in the country. One survey estimated their personal fortune at £4 billion ($6.4 billion).

In August 1995, Gad Rausing bought out the interest of Hans Rausing, who had retired from active management in early 1993. Terms were not officially disclosed, but it is estimated the 50 percent share in the company sold for $7 billion, making it Europes largest private buyout ever, reported the Financial Times. The paper reported that a group of Swiss banks based the valuation on that of U.S. competitor International Paper, capitalized at slightly more than one times sales.

Hans Rausing preferred to focus on his farms in England and Portugal. His children were not interested in carrying on the business, while Gad Rausings sons Finn and Jorn were active in management.

Tetra Pak accounted for more than 70 per cent of Tetra Lavals total 1997 revenues of SKr 15.5 billion. Slowing growth in Western Europe, Tetra Paks biggest sales region, was being offset by emerging markets. By this time, Tetra Pak had invested $100 million in China and up to $50 million in Russia. Latin America was another area of rising demand. Besides geographic expansion, the company was aiming to aggressively grow its plastic bottling business, which the company had entered in 1994. Its research and development efforts were tackling the question of bottling beer in plastic. Tetra Pak launched a £1 billion bid for French plastic packaging group Sidel in 2001.

Company Perspectives:

We commit to making food safe and available, everywhere. We work for and with our customers to provide preferred processing and packaging solutions for food. We apply our commitment to innovation, our understanding of consumer needs, and our relationships with suppliers to deliver these solutions, wherever and whenever food is consumed. We believe in responsible industry leadership, creating profitable growth in harmony with environmental sustainability, and good corporate citizenship.

Gad Rausing died in 2000, leaving ownership of the Tetra Laval empire to his childrenJorn, Finn, and Kristen. When he sold his share of the company to his brother in 1995, Hans Rausing also agreed not to compete with Tetra Pak until 2001. He emerged from retirement backing a Swedish packaging company, EcoLean, devoted to a new biodegradable Lean-Material made primarily of chalk. Rausing acquired a 57 percent stake in the venture, which had been formed in 1996 by Ake Rosen.

Tetra Pak continued to introduce innovations. In 2002, the company launched a new high-speed packaging machine, the TBA/22. It was capable of packaging 20,000 cartons an hour, making it the fastest in the world. Under development was the Tetra Recart, the worlds first carton able to be sterilized.

Principal Divisions

Carton Ambient; Carton Chilled; Plastics; Processing Systems.

Principal Competitors

Crown Cork & Seal Company Inc.; International Paper Company; RPC Group plc.

Key Dates:

1929:
Erik Akerlund and Dr. Ruben Rausing form Scandinavias first food packaging company.
1951:
AB Tetra Pak is established in Sweden.
1961:
First aseptic packaging is introduced.
1968:
Tetra Brik Aseptic, the companys most enduring product, is launched.
1981:
The companys headquarters is moved to Switzerland.
1991:
Tetra Pak acquires Alfa-Laval.
1993:
Groupe Tetra Laval is formed.
1995:
Gad Rausing buys out brother Hans.
2000:
Gad Rausings children take over the company after his death.

Further Reading

Benson, Ross, Hes Making 1 Million a Day But Still Haggles Over the Cost of a Few Tomatoes, Daily Mail (London), January 29, 2001, p. 43.

Brown-Humes, Christopher, Deal Leads to Change of Control at Tetra Laval, Financial Times, August 23, 1995, p. 18.

Burt, Tim, Tetra Pak Shapes Up for Plastic Push, Financial Times, December 16, 1998, p. 28.

Carton Unit Still Dominant Within Group, Financial Times, December 16, 1998, p. 28.

Cash Rich Group Sees Rise of 9.5%, Financial Times, December 16, 1998, p. 28.

Cinquante ans dinnovation, Romont, Switzerland: Tetra Pak Group, 2002.

Couzens, Gerard, Dads Tetra Pak Invention Made Billions He Got £300, Sunday Mirror (London), February 11, 2001, p. 31.

Done, Kevin, Tetra Pak Shifts Partial Ownership from Sweden, Financial Times, July 19, 1984, p. 21.

Fabulous Wealth of the Rausing Dynasty, Financial Times, December 16, 1998, p. 28.

Foo Choy Peng, Tetra Pak Boosts Its Profile on Mainland, South China Morning Post, April 17, 1997, p. 4.

Hill, Andrew and John Thornhill, Packaging Crusader Wraps Up Merger Deal, Financial Times, May 24, 1001, p. 23.

Karnani, Roop, A White Revolution at Tetra Pak, Business Today (India), July 7, 2000, p. 50.

Lawson, Dominic, Swedish Packager Milks Old Markets, National Post, February 8, 2001, p. C13.

Mclvor, Greg, Balancing Risk and Reward: Doing Business In Russia, Financial Times, March 6, 1998, p. 31.

Packaging Industry Has Strong Trio, Financial Times, May 25, 1983.

Shick, Nicole, Le poumon Tetra Pak, La Gruyère, October 24, 2000.

Slavin, Terry, Leader of the Pack, Observer, August 5, 2001, p. 5.

Smith, Charles, Early Arrival Pays Off, Financial Times, July 5, 1982, p. 11.

Taylor, Robert, Tetra Pak Returns Base to Sweden, Financial Times, August 21, 1991, p. 18.

Testing a New Paper Package for Liquids, Business Week, April 6, 1981, p. 92.

Frederick C. Ingram

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