'Pakistani consumers aren't afraid to try new alternatives' an interview with Kamran Khan, MD Ecolean Pakistan

BR Research recently had a conversation with Kamran Khan, Managing Director of Ecolean Pakistan (Pvt.) Ltd., a Swedish based packaging company. Kamran is a veteran in the packaging industry of Pakistan and has previously held positions at Tetra Pak Pakistan Ltd. and KSB Pumps Company Limited. He did his mechanical engineering from the Ghulam Ishaq Khan Institute of Engineering Sciences and Technology. We discuss Ecolean's alternative approach to conventional packaging solutions and his views on the local packaging industry in Pakistan.
Below are edited excerpts from the conversation.
BR Research: Please tell us about Ecolean.
Kamran Khan: Ecolean is a Swedish company that provides aseptic packaging solutions with a long shelf life. Our approach is different to conventional aseptic packaging where we use a different material base that focuses on being environmental friendly. We consider ourselves to be a more futuristic alternative to conventional packaging. As a packaging producer and supplier, we give alternatives that are easier to use from a consumer perspective and easier to produce as well.
We started operations in Pakistan in 2013 as the country is one of the biggest aseptic markets in the world. Engro became our first customer where we did packaging for its 250ml Olpers pouch pack. Soon, we added Fauji Foods tea whitener, Dostea to our portfolio.
Our growth in Pakistan has been impressive, and Ecolean is geared to sell 750 million packs this year. In our third year of operations here, Ecolean's board decided to invest in a manufacturing facility. We are building that right now and it is almost 40 percent complete. We plan to commission by it by the end of next year's first quarter. That will enable us to produce all our packaging material locally, which at the moment we're importing from Sweden.
BRR: Can you please explain how Ecolean is more environmental friendly compared to conventional packaging solutions?
KK: Ecolean's mission is to provide the world with safe and convenient packaging solutions for liquid food with minimal environmental impact. We have taken a lightweight packaging approach where the focus is on doing more with less. An Ecolean package weighs 50-60 percent less than a conventional liquid food carton package or bottle. The plastic used in a one litre Ecolean Air package weighs only 10 grams. By using fewer raw materials, we save energy during production, transport and waste handling. Our packaging is also more easily recyclable compared to other packaging solutions.
BRR: What factors played a part in your rapid expansion?
KK: The major driving force has been the consumer in Pakistan who is bold and willing to try new things. That's what we learnt. Producers were much more apprehensive about trying out a new packaging solution as compared to the consumers. The only thing a brand can fully control in the store is the packaging type and the design on the packaging. A standout package can certainly be the difference between failure and success. Once we got the consumer on board, the rest was easy.
BRR: How much is cost difference between your competitors' packaging solutions and yours?
KK: There isn't much difference when it comes to the cost but the end product is more convenient to use and has a much smaller environmental footprint.
BRR: Who are your main competitors in this space?
KK: Our main competitor is Tetra Pak and to a lesser extent some Chinese brands as well.
BRR: How is the market share divided?
KK: I think Chinese brands would be around 10 percent while Ecolean would have 15 percent and the remaining is all Tetra Pak. However, this is an approximation.
BRR: So currently you are importing your packaging material. Are there any duties on its import?
KK: There is a general duty of 22 percent and a regulatory duty of 10 percent has recently been imposed as well. I think the government needs to revisit this duty imposition. No investor would be willing to come to Pakistan if there are barriers even at the initial stage of market exploration.
The reason there is only one dominant player in the packaging industry because of high import duty barriers in the first place. So, in order to attract foreign investment in to the country and break a monopolistic environment, the imposition of duty on our packaging material should be reconsidered by the FBR.
BRR: Which products are your packaging solutions being used for?
KK: In Pakistan, it is predominantly dairy based especially milk. But internationally it is being used for juices as well as for ready to drink soups. Our packaging has another advantage as well that it is microwavable
BRR: What would be the capacity of your manufacturing facility in Pakistan and the size of the investment?
KK: If we produce only portion packs our capacity would be around 5 billion packs per year. Currently our local consumption stands around 1 billion packs per year. The reason we are investing in a factory, which will have five times our current consumption is because we have kept in mind both potential growth in the domestic market as well exports. The cost of this factory is approximately $150 million and we plan to start production by June, 2019.
BRR: What are Ecolean's future plans in Pakistan?
KK: When it comes to the dairy sector, packaged milk is the way forward. Household buying patterns are changing on the back of increased urbanisation. If you combine this with increased regulation that tackles adulteration, there will definitely be substantial growth in packaged dairy products. We plan to work intensively with producers to revive consumer perception on packaged milk and make it more convenient. I believe in five years, we would be doing somewhere around 3.5 billion packs a year. In addition, we also plan to partner with brands with interesting products that require innovative packaging solutions.
BRR: What methodologies will you use to grow consumer awareness?
KK: I think before growing consumer awareness, the product needs to be made better. We were very keen to collaborate with Prema milk because their product is good and it felt good to make it more convenient to use for consumers.
BRR: How do you see the packaging industry in Pakistan evolving over the next five years? Do the smaller and medium sized players such as yourself gaining traction?
KK: Absolutely. We have hit the billion pack mark in four to five years already. In our initial years of operation our sales doubled almost every year. With the kind of positive response Ecolean has gotten in this market especially due to the willingness of consumers to switch to more conveniently packaged goods, I am confident the momentum will continue in the years to come.