Customer Value Of Tinplate

STRATEGIC PLANNING TCIL - a case study Food industry and Safety

2 July, 2009 : New Delhi

1

Value Chain Assess your role in the industry supply chain • Incorporated in 1920

Hot Rolled Coils from Tata Steel’s Hot Strip Mill

• Single product co.

• End Uses of tinplate: • Edible Oil cans

Tin Mill Black Plate Coils produced at the Cold Rolling Mill

Tinplate / TFS Sheets produced at the Electrolytic Tinning Line

• Proc. Food cans • Beverage cans • Aerosols

The Tinplate Company of India Limited

Solution Centre: Print & Lacquering First Step Towards “Metal Packaging Solution Provider”

• Paints & Pesticides cans

Can fabricators/ Closure Makers

• Crowns & Closures

Food Processors / Fillers

• ……. Retailers / Consumers

2

Tinplate belongs to packaging industry Identify the industry where you compete

Available Alternatives • Tinplate •Glass • Bag in Box • PVC / HDPE / PET • Tetra pack / laminates • Aluminium

Criteria of Choice •Product Protection •Shelf Presentation •Usage Convenience •Cost •Design Flexibility •Eco-friendliness • Shape-ability

3

Hard facts…. Know your strengths

• • • • • •

Ultra violet protection Barrier properties / Inertness High shelf life Eco-friendly and WTO compliant Tamper proof / Impermeability / Rigidity Excellent printability

Tinplate has held its niche position in food packaging over the last 200 years

4

Packaging is at heart of Marketing Strategy Assess where you fit into your customer’s business

5

Global Perspectives Define / stretch the boundaries of your business STRUCTURE

•

• •

Demand driven by food & beverage Research in Steel

CONDUCT

• •

PERFORMANCE

•

Steel research with can-maker

•

Cost competitiveness

•

Environmental and hygiene concerns

Light weighting; Shapeablity

Strong Regulatory Mechanism 3.2mtÈ

4.2mt È

1.0mtÇ

Implications for an Indian player

There is growth / consolidation Become World Class

1.0mtÇ

3.3mtÇ

1.4mtÇ

1.4mtÇ

6 World:

15.5 mtÇ

India – interesting consumer trends Are there opportunities / threats in the external environment?

India - Interesting Consumer Trends too

‘Green’ consumers Changing eating habits

Healthy food

Working women

Value - for - Money

ng i ow ods r Shopping Ambience g o s df i g se n Service i l es i a t oc e R pr Choice in

Hygiene Traditional Kirana

Value added Kirana

Self Service Kirana

Single departmental store

Small Organized Retail

Organized Retail

Hyper 7 & Malls Markets

Strategic Planning involves…

Running the Business

a h C

in g n

he t g

w y wa

o d e

ss e in s bu

We have used different tools over the years…..

8

Strategy Map / BSC • Four perspectives of BSC: – How do we appear to shareholders? (Investorfriendly) – How do customers see us? (Customer Perception) •Enables to consider – What must we excel at? cause-and-effect (Strategic focus) relationships between – Can we continue to different key performance improve and create value? (Business Sustainability) indicators (KPIs) of a BSC • Helps with a picture of where the company stands-and 9 where it's headed.

•Link long-term plan or competitive strategy with operational activities

10

Strategic Planning Process

11

Envisioning Evolved over the years: 8 Downstream steel processing unit 9Provide cost effective metal packaging solutions for processed edibles

Vision: We shall offer world class tin mill products at competitive terms and strive for exceeding customer expectations by delivering added advantages

12

Strategy Alignment Process Vision Strategic Element Challenges Competition from Tinplate manufacturers.

Value creation

Servicing packaging needs

Increasing Expectations of shareholders

Cost Competitiveness. .

Strategic Advantages Knowledge base of Indian markets Processing costs HRC from Tata Steel Pan India presence Consistently exporting 25-30%. Largest Manufacturing facility in Asia.

Scale of Operations

Volatility in raw materials

Strategic Sourcing

Sourcing HRC & physical proximity to Tata Steel

Threat from Substitutes

Product range customer retention and Business development.

Full product range manufacturer in India. Downstream presence.

Acquiring and retaining talent

Green future

Key Success Factors

Meet community expectations and changing Environmental requirements.

Core Competency Value added and cost effective

Value added and cost effective

Reliable and cost effective

Creation of World class workforce & retaining talent

Sense of belongingness, allegiance and team work. Tata Brand. Infrastructure (Town, Hospital etc)

Value added

Partnering with community and Climate change initiatives . Interface with Govt Agencies

89 year old relationship with neighboring community. Heading Tinplate promotion council and ITRI

Value added

13

Strategy Alignment Process VISION

STRATEGIC GOALS

STRATEGIC OBJECTIVES

MEASURES

Value Creation

Growth & Competitiveness

•Increase scale of operations •Become cost competitive •Enhanced shareholder value

• • • •

Capacity / Production / Sales Market share(%) Processing Cost(Rs./MT) ROIC & EVA

Service packaging

Supplier of choice

•Develop enhanced value proposition •Increase engagement across industry •Build international markets with a strategic intent

• • •

Downstream Sales % CSI Exports as a % of Operations

Greener future

Exemplar in Corporate sustainability Exciting & safe workplace

•Role Model in Corporate Sustainability

• •

Corporate Sustainability Index MBE Score

•Develop engaged workforce •Attain zero reportable accidents

•

Frequency rate, Severity rate, Severity Index, Near Miss ESI Training Satisfaction Index

• •

Strategic Challenges Strategic Objectives

ws

Corporate BSC Functional BSC KRA

/ e ad nt sc e C a ig n m al

Re vi e

14

KPI

Corporate BSC Stakeholder

Strategic Objectives

Strategic Measures

U O M

Type of Measure

Lag/ Lead

Actual 08-09

Target 09-10

10-11

11-12

Benchmarks/ Comparisons

Result Ref.

Strategic Action plan

Increase engagement across domestic industry (A1)

Customer (A)

Build international markets with a strategic intent (A2)

Develop enhanced value proposition and build consumer mindshare towards tinplate (A3)

Supplier (B)

Ensure raw material availability for sustainability of operations (B1)

Employee (C)

Develop engaged workforce (C2)

Government, Community & Society (D)

Role model in Corporate Citizenship (D1)

Shareholder/ Lender/ Promoter (E)

Enhance shareholder value (E1)

15

Benchmarking • Annual Reports/Published literature • Group companies • Suppliers/Customer interactions

Level of Activity KPM / Processes affected Comparison Industry Increase in speed of DR at Temper Mill CRM / ETP Process cost Industry Optimization of consumption of chemicals at ETP ETL Store-Stock Cost Operation Development of DR-9 for specific Lug Cap New Product / Application Industry applications developed Marketing Competition Develop 5&3 Liter edible-oil consumer pack No. of Packaging Solutions Group HR Leadership assessment and Development Plan Leadership System Companies Group Reduction in procurement rates of A class items CS Suppliers Management companies to be cost competitive Finance Group Cos. Reduction in cycle time for accounts closing Shareholders & promoters Area

Source / Mode Used Unique CORUS Imports at Oriental Cans, Mumbai Market Research / Survey Comparison with Tata Steel Best practices council of Materials management for TIS Group companies Comparison with TIS group companies 16

Building robust operational processes around world class practices To ramp to

Daily Work Management 379,000 MT

400000 350000

180000

WIN (world class workforce)

300000

Total Productive Maintenance (TPM) 250000 140000

De-bottlenecking (Goldratt) & 200000 150000 100000 50000

Growth Plan (Arcelor / Nippon) TOP (McKinsey’s) 100000

90000 Capacity ISO movement, Suggestion Box

60000

0 97-98 98-99 99-00 00-01 01-02 02-03 03-04 04-05 05-06 06-07 07-08

'

Act 08-09

17

People, Sustainability, Controls have been built Workers’ business skills Risk Management process Succession Planning Inclusiveness Affirmative Actions Excellence Assessors BaaN ERP and Lotus Notes Balanced Score Cards Environment Systems Cadre of Business Managers Financial Restructuring Community Development Executive Information Systems 1999 2001

2005

2009 18

Customer and Market focus built on Industry and Company level strategies Marketing refocus

Consumer Mind Space Industry Level

Company Level

TINPLATE PROMOTION COUNCIL (↑ per capita consumption)

Key Account Management (McKinsey’s)

Long term position on exports

Solutions focus

Business development

Business Development Customer intimacy

Tinplate Promotion Council: International seminars and Award Nites Key Account Management (McKinsey’s) 2000

2001

2002

2003

2004

2007

….changing mindsets to industry development and19 international competition

Sales Orientation to Marketing focus Alliance with major can makers Steel Maker

Tinplate Supplier

Can Fabricator

Food Processor / Filler

Industry level marketing initiatives to increase consumption levels on the lines of APEAL (European Mills)

TPC Awards Nite each year..… a landmark in this industry…. To promote innovation and convenience

20

Reaching down the value chain Capabilities:

Solution Center

Solution Center for differentiated value proposition - started with printing / lacquering facilities -next step: convenience features for tin cans or service center capabilities - partnerships with fabricators for improved visibility

Consumer research to understand consumer mindshare on packaging

TATA STEEL

TCIL

Can Fabrication

Food Processing

Retailer / 21 Consumer

The transformation… 1997-98

2008-09

Operations

60000 MT

+185000 MT

Employees

5000

~1700

Market Share

16-18%

~35%

Exports (% of total sales)

NIL

25%

EVA

-ve

+ve

22

Rewards & Recognitions JRDQV Award in 2007

CII-EXIM Prize in 2008

23

Tinplate and Food Safety

24

Understanding food safety ¾Tinplate product: -- The Substrate (Steel base on which tin coating is done) --Tinplate on account of Tin migration in packed food --Lacquered sheets ¾Future Regulatory Challenges Inputs to Strategic Planning

-- Abide by National and International Standards -- Facilitate creation / alignment of national / international standards with BIS / ITRI

25

Steel Substrate

Different grades (chemistry) of steel are used depending on end applications (either highly corrosive foods or not so aggressive foods) ¾Type L ¾Type MR ¾Type D

Tinplate

Standards are defined for allowable level of tin in food on account of tin migration Test are done at CFTRI to ensure tin migration within allowable range as per ATSDR standards (Agency for Toxic Substances and Disease Registry USA), COT (Committee on Toxicity of Chemicals in Food UK)

Lacquered Tinplate

TCIL abides by US FDA Code Federal Regulation Section 21 Use of proper grade of Lacquers is based on requirement spelt out by filler who advises grade that is compatible with their 26 food product

Addressing future Regulatory challenges REACH (Registration , Evaluation and Authorisation of Hazardous chemicals) comes into enforcement in 2011 in Europe: TCIL is partnering ITRI UK to develop an alternate Passivation system to will help omit Chromium passivation without impacting fitness for use

27

Indian Food Processing Industry: Challenges and Food Safety

28

India has potential to be Food Factory to the World • 2nd largest arable land & divers agro climatic zones • Largest livestock population • Largest producer of milk, tea, pulses

Milk

Cattle / buffaloes

Largest Producer 91 Mn T

Largest in the world 283 million

F&V #2 in the world 129 Mn T (FAO) 150 Mn T (NHB) Fisheries Marine: 2.7 Mn T Inland : 3.1 Mn T

• 2nd largest food producer 2nd

• largest producer of fruits & vegetables, rice, sugarcane • 5th largest producer of eggs, wheat

Goat & Sheep 182 million

Food Grains #2 in the world (218 Mn T)

TEA Sugarcane

Largest Producer (0.85 Mn T)

# 2 in the world (245 Mn T)

• 6th largest producer of fish India produces 41% of world’s mango, 23% of Banana, 24 % of cashew nut, 10% of onion, 30% of cauliflower, 36% of Green Peas. India has 53% of world’s buffalo and 17% of goat, 8000 km of coastline 29 Source: FAO / NHB / Department of Animal Husbandry

Though the industry is large in size, it is still at a nascent stage Despite strong raw material base, dismal quantities are processed – – – – –

2 % of the fruits & vegetables 35% of milk 26% of marine 6% of poultry 20% of buffalo meat

Less than 1.5% share in international food trade – main reason is the rejection of food products in the developed countries on ground of environmental & safety standards. 30

Food processing sector – a valuable link between Agriculture & Industry 15000

Vision 2015: Action Plan for Food Processing Industries in India to triple market size (CAGR 10.6%)

13,500

14000

Market Potential (INR bn)

Government’s commitment to Food Processing in its

13000 12000 11000 10000

8,200

9000 8000 7000 6000 5000

4,600

4000 3000 2000 1000 0

2003-04

Food Safety and Standards Act, 2006 unified 15 different food related laws.

2009-10

2014-15

Future growth of the food processing sector depends on adherence to safety and quality standards!!! 31

Food processing industry – various stakeholders Producers of additives / ingredients

Government & institutions

Farmers / Producers / feed producers

Food processors

Consumers

Financial institutions

Fillers / Packers

Food service outlets & caterers

Storage operators

Wholesalers / Retailers

Suppliers of equipment, cleaning & sanitization agents

Producers of pesticides, fertilizers & veterinary drugs Academic & research institutions

transporters

32

Standard Setting & Benchmarking WTO Rules for Standard setting by member countries (Multilateral – public – mandatory for member countries) Sanitary & Phytosanitary (SPS)

United Nations (Multilateral – public – mandatory for signatory countries)

need

WTO Recognized standards (Multilateral – public – reference standards for member countries)

Trade Related Intellectual Property Rights (TRIPS)

We

Technical Barriers to trade (TBT)

to

Codex Alimentarius Commission (CAC) - Internal Plant Protection Convention; World Organization for Animal Health (OIE) International Organization for Standardization (ISO)

upgrade

Collective standards (Sub sector networks, company networks & alike) Global Food Safety Initiatives (GFSI) – recognized standards: HACCP, GAP, GHP, GMP, etc

Organic farming

Corporate standards (individual company codes / specifications) Corporate Social Responsibility (CSR)

33

Stakeholders’ Strategic challenges towards Food Safety & Quality Stakeholders

Food Processors

Packaging Industry Transporters Wholesalers /Retailers Consumers Govt & institutions

Responsibility lies across the Food Chain

Producers / farmers

Strategic Challenges •Skills / awareness (Quality Stds / Good Practices) •Quality inputs (seeds / feed / fertilizers) •Eliminate wastages •Skill development •Quality of raw materials •Regulations •Skills / awareness (Quality Stds / Good Practices) •Connectivity (rail / road / air) •Cold chain infrastructure •Food Inspection •Traceability •Safe & nutritious food •Quality sensitivity & awareness •Compliance to regulations •Traceability

34

Thank You

visit us @ www.tatatinplate.com

35