- January 24, 2002, Stanley Sacharow , Contributing Editor
With many problems still to overcome, the flexible packaging industry in The Russian Federation shows definite signs of life.
Plagued by economic disaster, corruption, and transitional problems, the Russian Federation has yet to recover from the difficulties resulting from its conversion to a free-market economy. (Note: While Russia is often used as the name of the nation, the correct full name is The Russian Federation. Both names will be used in this article.)
Although it has the largest population (147 million) of all nations in the former Socialist bloc, flexible packaging production is estimated to be only $250 million—about equal to Sweden, a country with only 10% of its population.
Poland is, by far, the leader in converting among the members of the former Socialist bloc of nations. There are more than 1,000 firms in Poland involved in printing and converting for the packaging industry. Although packaging consumption is, at present, well below the Western European average, it has increased by 21% in the last seven years.
Free-market reform has not been kind to Russia. Production and investment are in steep decline due to uncertainty, induced by both the pace of change and the suspicions born of endemic and insidious corruption.
Nordenia International ($140 million US), the multinational German flex-pack company, opened a sales office in Moscow in 1998, with the intention of building a flex-pack plant in the subsequent year. Because of economic uncertainty, the company recently decided to postpone its plans to build a manufacturing facility in Russia.
This scenario has been repeated by other multinational flex-pack companies. The net result has been a proliferation of small to medium size domestic flex-pack converters supplying both domestic and global packaging users.
There have been recent signs of a trend toward economic rebound, driven in part by soaring oil prices and the after-effects of currency devaluation. Yet foreign converters remain wary, looking for signs of meaningful change before committing new funds. This is in spite of an economy that was slated to expand in 2001 at a rate of 7%, consumer spending forecast to rise as much as 9%, and investment up to 20%.
With many of the large multinational food/beverage processors now operating in Russia, it would seem Western converters would proliferate. Yet there are only a handful of international converters in Russia today. In neighboring Ukraine and Belarus, the picture is even more dismal, with minimal foreign investment.
Perhaps the first foreign flex-pack converter to enter the Russian market was the huge multinational company Tetra Laval International AB. Operating as Tetra Pak, it entered the Soviet market in 1988 supplying both packaging material and filling liquid foods in the former Soviet Union. Followed in 1990 by an agreement to manufacture packaging machines to fabricate Tetra Brik aseptic cartons, the newly formed joint venture was called Tetra Pak-Luth and located in Podolsk, near Moscow. Now widely used in Russia, the aseptic carton soon allowed Russian dairies to distribute their nonrefrigerated products outside their local areas.
In 1998 Aklerlund & Rausing (Sweden) acquired a share of one of Tetra Pak’s flexible converting plants at Timasheusk in southern Russia. The factory produces both folding cartons and flexible laminates.
Amcor Rentsch, a div. of Amcor Europe (U.K.), opened a tobacco packaging factory in Novograd in July 2000., and reportedly, there is a specialized flex-pack production at this plant.
Situated in Volgograd, Sealed Air Corp. has had operations in Russia since 1994. The company, established as a joint venture with Alo Kaustik, produces Cryovac barrier films and bags for the meat and dairy industries. It is estimated that sales in Russia alone are in the range of $20 million.
In late 2000, the Italian firm Ital Film began converting operations in St. Petersburg (formerly Leningrad). The company transferred equipment from its plant in Italy at startup and invested $5 million into expanding production in 2001. A Rotomec press is equipped with eight stations, and a second Rotomec is scheduled for installation with the rated capacity of 6,000 tons/annum. Customers include Nestle, Azart, and Colibri.
With few multinational packaging converters operating in Russia, much of the nation’s flexible packaging requirements are being met by domestic converters now. There are literally scores of Russian converters in full operation, and more are opening up monthly. Huge amounts of material are still being imported—legally and illegally—from neighboring nations such as Turkey, Slovakia, Austria, Hungary, Czeck Republic, Germany, Poland, and Italy.
MIPA (Luxembourg/Italy) is a major exporter to the Russian Federation. The firm supplies Russian plants such as Finsbury and Valinda in the biscuit market. Teich Flexibles (U.K.) supplies aluminum foil for Cadbury chocolates. This volume has decreased recently because of better quality domestic foil coming onto the market from Russian mills.
Labels a Growth Market
The Russian label market is heavily fragmented. The largest-volume Russian manufacturer of pressure-sensitive labels is Limaton-Kamenka; Konturt and Imagency are other leading p-s manufacturers. Polygrafoformlenie (St. Petersburg) is a leading manufacturer of "dry" labels, supplying printed labels to a wide range of food, beverage, and confectionery companies. Other players in the Russian market include Agava and Amipress.
It's estimated Russia has 20 large label companies in full operation. Small companies are starting up rapidly, and there now appears to be more label suppliers than the market requires. Most of the leading Russian label companies prefer to supply the growing new consumer market supplied by foreign multinationals such as Procter and Gamble, Wella, and Unilever. Domestic production is still rather primitive, relying primarily on manual labor—more than 65% of all labels applied on home-produced Russian products are by hand. The vodka industry, a leading user of printed labels, utilizes "dry" as opposed to p-s labels.
Imagency, the Moscow-based p-s label supplier, has an Edale 250 flexo press, a narrow web offset press, and a brand new Gallus R-200 rotary letterpress. The company has seven employees and a complete prepress department.
Label demand is slated to increase dramatically by 2005 based on a recently issued report by PCI (U.K.). The report said growth is expected to top an average of 14%/annum over the next five years. Increased consumption of bottled water, beer, and soft drinks will spur enhanced label demands.
Concerns about the quality of public water supplies and lower birth rates are two of the drivers behind the projected strong growth in bottled water. While all beverages will show increased consumption, leading the way will be bottled water, beer, and fruit juices.
Coupled with the substitution of traditional packaging materials, PET annual growth rates for these applications are expected to reach more than 25% to 2005. Growth in carbonated soft drinks is expected to slow to 7%–9%.
Beer consumption in Russia accelerated by 30% in 1999, boosted by improved quality, availability, and the ability to package the product in PET. The introduction of a 1.5-liter PET beer bottle created a new packaging size, which is proving popular with the Russian public. More investment in PET beer packaging, now for 500-ml bottles, will boost prospects considerably.
Added to this are the factors catalyzed by the newly found religious freedom in Russia. There are presently two certification agencies in Russia for Kosher products. These foods require new labels, causing a rather dramatic demand for label printing.
Many Domestic Flex-Pack Converters
Edas Pak (Moscow) is the leading Russian flex-pack converter. It started production in 1997 and within one year successfully achieved a leading position. Equipped with the latest Windmöller & Hölscher printing press, the firm converts oriented polypropylene, aluminum foil, and paper, supplying global multinationals such as Coca-Cola, Nestle, Mega-Cola (leading bottler in Russia), and RC Cola.
There are many other cutting-edge flex-pack converters in the Russian Federation. Polygrafoformolenie (St. Petersburg) is an old, established Soviet-era converter. The firm is both a leading manufacturer of labels and a large flex-pack converter using W&H equipment.
Conflex (St. Petersburg) is a fairly new company with W&H flexo presses and recently added rotogravure equipment. In Moscow, Multiflex and Polygraph supply flexible materials. Slavnika, also in Moscow, has two W&H flexo presses and one W&H laminator in its plant. The firm supplies to the domestic food industry in Russia. Gotek Enterprises Group (Zheleznogorsk), Ursk region) consists of four independent companies involved in flexible packaging, corrugated, labels, and molded package production. The flexible operation, Gotek Polypack, flexo prints and supplies Nestle confection wrap.
There are an estimated 50 additional smaller flex-pack converters spread over Russia, with the major concentration around Moscow, St. Petersburg, and Volgagrad. Blitz-Flex (Kiev, Ukraine) is the leading flex-pack converter in Ukraine. The firm offers superb flexo printing, running one Astraflex and two Soloflex presses from W&H and slitters from Kampf.
In 1997, Chemosvit (Slovakia), the leading flex-pack converter in the Czech Republic and Slovakia, started up a joint Slovak-Ukraine venture called "Luckplastmas," for the dedicated production of polyethylene packaging films. Located in Luck (Volhynia district, Ukraine), the plant is a major supplier of PE and PP film to Ukraine. Now operating as "Luckchim," the operation produces a wide variety of PE films used in the Ukrainian milk, dairy, and other food industries.
Joint Venture Prizes Quality
Uniflex (Minsk, Belarus) was founded in 1996 as a joint Belarussian-American venture. The firm has W&H Soloflex presses; a DCM Laminaster-2 laminator; CTP laser engraver; and a recently acquired Arsoma EM 280 Gallus printing press. This press has seven flexo stations, two screen printing sections, and options such as laminating, cold/hot foil stamping, and printing on the glue side of the web.
Uniflex’s broady array of equipment includes a DCM Laminaster-2 laminator and a Soloflex press from Windmöller & Hölscher.
The company is ISO-9001-2000 compliant. It has a complete design studio with photopolymer plate production capabilities and and digital platemaking technology. Exporting to Russia, Azerbajan, Armenia, and Kazakhstan, Uniflex produces 500,000 m (squared) of p-s labels and more than 1,500,000 kg of flexible packaging. Nestle is among its list of foreign customers.
Alexander Kachalov, marketing/sales manager at Uniflex, told PFFC, "Our quality is determined by quality management. That is why the decision was made to design and implement our quality management system to meet all international standards such as ISO-9000:2000." Raw materials include OPP from Manuli and ExxonMobil and inks from Akzo Nobel and Siegwerk Druckferben.
The major flexible packaging exhibition in the Russian Federation is Rosupak, held annually in Moscow. This is Rosapuk's sixth year, growing from 215 exhibiting firms in 1997 to 600 in 2001.
It offers both the exhibitor and attendee a view into the packaging industry of the former Soviet Bloc. More than 25 countries exhibited with Polish industry being the major exhibitor. In addition, awards are presented to Package-Star of Russia—2001.
Over the last decade, the Russian flexible packaging converting industry has grown in both sophistication and quality production. From the initial flexo printing of simple OPP/OPP stock for pasta (more than ten pasta plants operating in Russia) to the present manufacture of ISO-approved materials for the multinationals, the converting industry in the Russian Federation is on an upswing. With signs of increasing foreign investment, where it goes from here is anybody’s guess!
Despite the disintegration of its empire, Russia is still huge, stretching from its borders on Estonia, Latvia, Belarus, Ukraine, and Turkey in the west, passing Kazakhstan, Mongolia, and China, to reach the Pacific ocean some 6,000 km later.
The landscape is predomdinatly flat, punctuated only by the Urals, which rise no higher than 1,900 m, and the more substantial ranges of the Far East.
The three major rivers of the Urals—the Dnepr, Don, and Volga—all rise within 400 km of Moscow and flow south into the Black anc Caspia Seas. Russia’s Far East is Siberia, with all its connotations of tundra, steppes, ranges, exile, and mind-blowing nothingness.
Business in Russia is a strange combination of gloom and euphoria, rudeness and hospitality, secrecy and openness, and the overall mystery the typical Russian exudes.
Coming up to international standards rapidly is a national game among businesses in Russia, and success is often measured by international recognition. Yet one can only admire the determination of the Russian people, who after almost a century of socialism, are entering the free-market economy on a steady basis. It’s a true measure of the Russian soul and character.
Belarus (pop. 10.4 million) has been described as a flat, dull piece of land straddling the shortest route between Moscow and the Polish border. It’s flat, but dull is a little strong. Wide stretches of unbroken birch groves, vast forested marshlands, and wooden villages amid rolling green and black fields give Belarus a haunting beauty.
There’s more to see in Belarus than you might suspect. Minsk is a cosmopolitan center and a shining testament to Soviet urban planning. Brest is lively and hectic, Hrodna a cocktail of historical legacies, and Polatsk a sleepy dowager reclining on the chaise lounge of its former glories. All this, and not a tourist in sight.
A country whose state song declares the "Ukraine has not yet died" might not seem the most uplifting destination, but don’t let that deter you. The country rewards travelers with hospitable people, magnificent archtecture, and kilometers of gently rolling steppe.
Ukraine (pop. 49.1 million) is a major player in the region’s economy, though for every smoggy industrial city there are dozens of villages with picket fences, duck ponds, and overloaded horse carts, where time seems to stand still. The capital city, Kiev, is both the city of the author’s ancestors and a gem of architecture and beauty with wide boulevards, cascaded apartment buildings, and a superb highway system.
Akzo Nobel Inks Corp., Plymouth, MN; 763/559-5911; 800/328-7838; aninks.com
DCM, Cedex, France; +33 141 37 5270; dcm.fr
Edale Ltd., Hampshire, U.K.; +44 1794 524422; edale.co.uk
Gallus Inc., Philadelphia, PA; 215/677-9600; gallus.org
Kampf Machinery Div. of Jagenberg Inc., Enfield, CT; 860/253-9660; 800/785-0741; jagenberg.com
Manuli Packaging S.p.A., Milan, Italy; +39.02.673374.1; manulipackaging.com
ExxonMobil Chemical Co. Films Business, Macedon, NY; 800/334-7987; oppfilms.com
Rotomec (Valmet Rotomec SpA); +39 (0)142 4071; valmentconverting.com
Siegwerk Druckfarben GmbH & Co. KG, Siegburg, Germany; +49 2241 3040; siegwerk.de
Windmoeller & Hoelscher, Lincoln. RI; 401/333-2770; 800/854-8702; whcorp.com
Stanley Sacharow has been in the flexible packaging industry for more than 35 years. His company, The Packaging Group, is an organizer of targeted conferences and a consultant to the international packaging/converting industry. He is also the author of PFFC’s "Package Converting" column. Contact him at 732/636-0885; e-mail: email@example.com