Shujaat Alvi is the Country Manger of the Novozymes Pakistan office as well as the Industry Sales Manager for the textile industry for EMA (Europe Middle East Africa). He has a background in textiles and has completed his masters in polymer surface modification from Clemson University in South Carolina USA.
BR Research met up with Alvi to learn more about industrial enzymes which operate within the bio-innovation sector. Here are edited excerpts of the conversation.
BR Research: Let’s start with a background on enzymes and the history of Novozymes in Pakistan.
Shujaat Alvi: Novozymes A/S is part of Novo group, which has two main companies: Novo Nordisk and Novozymes A/S. Globally, Novozymes A/S was established as an independent company in 2001 and since then has been operating in Pakistan as Novozymes A/S Liaison office Pakistan. It must be clarified that prior to the de-merger in 2001, Novozymes A/S has been operating in the field of bio-innovation for the past 70 years under the Novo name.
Keeping a margin of error in mind, three major companies dominate the industrial enzyme market globally and of that Novozymes A/S have a share of nearly 48 percent across industries and 130 countries. In the textile Sector of Pakistan, Novozymes A/S has an approximate 65 percent market share.
BRR: What exactly are enzymes and how are they used?
SA: The easiest way to describe enzymes is that they are proteins that act as catalysts. Completely found in nature and they are everywhere, starting from the human body itself where they for example help to convert sugar to energy to plants where they enable photosynthesis. This is nature’s own way of kick starting biological processes.
A common misconception is that enzymes are living. This if of course not true; they are proteins that are extracted from micro-organisms. These extracted enzymes, combined with Novozymes A/S expertise have been developed to be used in multiple industrial applications such as (but not limited to) manufacturing detergents for home laundries, processing of leather, paper manufacturing, waste water treatment and of course my area of textiles.
While the use of enzyme is fairly technical its use is primarily for deriving higher production output, saving of raw materials, water and energy, overall have a cleaner safer, smarter and finally a more environmentally friendly production.
Just to give you an example our customers cut their CO2 emissions by an estimated 60 million tons in 2015 by using our solutions. This is equivalent to taking 25 million cars off the road.
BRR: Which sectors does Novozymes A/S supply enzymes to?
SA: We have more than 700 products serving 30 industries including bio-energy, detergents, agriculture, food & beverage, textiles, water treatment, paper and leather just to name a few. We are an innovation driven company and while we hold more than 7000+ patents and invest 13-14 percent of our revenue on R&D we believe that we have just begun to scratch the surface.
In Pakistan, the numbers of sectors we work with are currently limited but as the industrial sector matures so do we. The major sector/industry we work in Pakistan is the textile industry followed by the detergent industry.
Having said that we are making excellent headway in the food and beverage sector and expectations are that we shall continue the current trend of double digit growth.
BRR: So this implies that there is a huge market for enzymes since they can be used in a myriad of industries. How big is the market in Pakistan?
SA: The market in Pakistan is difficult to identify because we are still in the business development phase. Our current estimate is that the overall market size is about €13 to 14 million. The growth possibilities are fantastic because in a number of industries/sectors the penetration levels are still very low.
As an example for the textile industry the overall penetration level is 30 percent. Within the textile industry, we work in seven different segments. Some have high penetration levels, such as denim abrasion, and others have low penetration levels, such as bio-scouring.
So, growth can come in two ways in Pakistan. It can come through increase in penetration levels in low penetrated segments and/or through expanding the number of offerings we have for fibers other than cotton (which for the time being are limited).
BRR: Does Novozymes A/S offer only cotton solutions because Pakistan’s market is cotton based or because there aren’t any polyester solutions?
SA: We are working on commercializing our solutions for polyester. We have some solutions for wool and silk but these aren’t big industries in Pakistan.
What we foresee is that by 2050, the use of polyester fiber in the textile industry globally will be three times the size of cotton. So we know we need to build solutions for polyester. We need to be ready for the challenges of tomorrow.
Right now, nobody in the world has solutions for polyester.
The use of polyester in Pakistan is growing but mainly in blends. The manufacturers of 100 percent polyester are there but limited.
BRR: Why is the trend shifting away from cotton and towards synthetic fabrics?
SA: Many factors play a role at the same time, globally. Synthetic fibers are exactly what you hear “synthetic” and therefore can therefore be modified to have any properties one wants. Synthetics are easy to standardize and give uniform properties batch after batch whereas cotton on the other hand is natural and therefore variable. Some synthetics are also cheaper and have preferred properties which are why the use is growing especially in blends for apparel.
Another factor is land utilization. If we would replace cotton fields with staple foods then problems such as huger, high food prices etc could be addressed.
Another thought is that it takes 2,700+ litres of water to make one t-shirt. Most of this water is consumed in the cotton fields. If we are able to produce apparel that did not have cotton in it, or at least low amounts or cotton, or cotton that would last longer then we could save millions of liters of water.
A good example is that M&S together with Novozymes A/S launched the “Stay New” initiative. Through “Bio-polishing” clothes, they don’t develop fuzz and look good longer so instead of changing a sweater every year, a new one can be bought once every two years. The benefit is that the amount of cotton needed to produce those sweaters goes down year on year.
The feel, touch, and comfort of cotton is still some of the best. There is also a huge movement towards organic cotton but the biggest issue with it is that its yield per acre is very low compared to normal cotton. This means more water, more time, and more land is used to grow such cotton. My personal opinion is that organic cotton will not last. Polyesters, or synthetics which includes regenerated fibers such as viscose, as a group, will definitely grow.
BRR: Why is Pakistan not moving towards polyester when the world is moving towards it?
SA: It will be a challenge to break the mould though we do have a number of small polyester manufacturing textile companies. It is not easy to change practices. If you take the example of any large vertically integrated textile group they might have 10-12 huge factories and they are all geared towards production of cotton based goods. Production of polyester based goods would require a completely different set up of factories, machines, and expertise. I am not saying it’s impossible but the definitely the external drivers would need to very strong to convert such big operations into 100 percent synthetic plants.
Local manufacturers have invested years and years of resources and expertise in building their cotton businesses. So what will happen is that the big guys will remain with cotton and polycotton. Small guys with factories have cropped up with polyester factories. They could potentially be the first movers in setting up Pakistan’s polyester sector. This is especially applicable for knitwear factories that are making stuff like sports jerseys and sports shorts.
What I have observed it that it is the SMEs that are moving towards polyester, not the big guys yet.
BRR: Is the textile sector the main market driver for Novozymes A/S?
SA: In Pakistan it is the biggest driver business for us, yes.
Retailers of the textile industry are also important drivers. So if they insist on the use of enzymes, our sales grow. The M&S success story as mentioned previously is a good example.
Initially the “stay new” was only for sweaters but they have started doing this for all their apparel because it got a huge response from end customers. M&S started insisting that all their suppliers use enzymes from Novozymes A/S which drove up sales. So that was a driver to business.
Other drivers can be the benefits that we can show them. For example we have a solution called “fresh keeping” in the baking sector. Bread can stay fresher for longer through the use of our enzymes so this positively impacts their distribution network and waste is reduced. If a loaf of bread can last from three days to seven days, without preservatives, it lowers distribution costs. This was a patented product for us for many years. So value propositions such as this become market drivers.
We work in many different sectors so there are many different drivers, depending on sectors. Given Pakistan’ scenario, processes that require smaller amounts of water or lower temperatures are in demand because we have a water and energy shortage. So those problems become drivers as well.
BRR: Let’s circle back to the importance of enzymes. Why would companies opt from them over chemicals in the first place?
SA: The way it works is that enzyme per kilo may cost more than chemicals but the effect per kilo is much higher than chemicals. Speaking about the example of clothes washing powder earlier, the use of enzyme can significantly improve the performance of the detergent by working on a larger array of stains, at lower temperature, without soaking and in a single wash. You may recognize some of these points highlighted in the advertisements of the large brands of detergents in Pakistan. All of these with no increase in cost makes the use of enzymes the smarter choice.
Enzymes are healthier and more environment friendly. We have a process of Life Cycle Assessment (LCA). We do an end-to-end LCA analysis which is extremely time-consuming and costly but gauges environment impact in producing, transporting, storing, and using these enzymes in lieu of the chemicals normally used. We also present this analysis to customers to let them know how much more environment friendly enzymes are as compared to chemicals.
Overall, use of enzymes has many benefits over their chemical counterparts.
BRR: Are companies in Pakistan really that environment friendly to opt for enzymes over chemicals?
SA: Yes. Every company we supply to has a sustainability policy, whether it is a textile company or a detergent company. While the benefits such as higher production yields, lower consumption of raw materials, lower utilities cost etc. are definite advantages but enzymes are the only option industries have to improve their sustainability profile.
For example, if you want to wash denim with chemicals and stones then it can only be done at 60 degrees Celsius and you have to use tons and tons of stones. With enzymes, it can be done at 30 degrees Celsius and 70 percent less stones. This means that the impact on environment from using less stones and lower processing temperatures is much less.
If companies can use an environment friendly process without a significant increase in costs, they opt for it.
BRR: Are there any government regulations that Novozymes A/S has to adhere in Pakistan?
SA: There are a number of regulations globally and most of the producers that we supply to produce a lot for export. And those export regulations apply to us as well. So we have to provide the certifications. Let me give you an example.
There is a big textile group called Inditex. It’s a Spanish based company with many brands, one of which is Zara. They have a list of chemicals that cannot be used in the production of their clothes. Similarly, in the denim space Levis and many other retailers have a similar RSL (Restricted Substance List).
RSLs exist to ensure that suppliers, be it Novozymes A/S or any other company, do not use these chemicals controlled by foreign regulations. So, it is not the Environment Protection Agency of Pakistan regulating us, it’s the global regulatory system.
Another example is of the sugar industry globally. The sugar industry requires a maximum amount of starch it should have if you are exporting sugar. Those who are exporting sugar buy an amylase from us to degrade the starch from sugar and allow them to meet international starch requirements.
Acrylamide is a known carcinogenic and is produced in many things when they are heated consistently over a certain temperature. It is present in a lot of snack foods like chips and biscuits. There are ways to remove acrylamide. One easy way is to use our patented enzyme Acrylaway.
Global snack producing companies follow regulation and ban acrylamide and use Acrylaway. But this is in the West. The same companies operating here do not use Acrylaway because there is no such regulation that is implemented.
BRR: Since your business is completely import based, what has the impact of devaluation been?
SA: We quote to all our customers in US dollars so definitely, if dollar devalues as it has been doing over the last six seven months, then customers have to pay a lot more out of pocket. We as Novozymes get the same amount of money.
The biggest challenge is the presence of our dear friends, the Chinese. China’s regulations are much lower than international regulations and therefore there costs are a lot lower and are cheaper. This makes their quality and consistency lower than ours but makes them more competitive.
Chinese companies were offering enzymes at one-third of Novozymes A/S price before the devaluation. We were leveraging quality and compliance to international regulations to sell our products. But, now our enzymes will be one-fourth the price of Chinese manufacturers which means that the challenge to retain our customers will be even greater.
BRR: What is the tariff structure like?
SA: Enzymes face 10 percent duty which used to be zero-rated. In my opinion it should still be zero because Pakistan does not have any local enzyme manufacturing unit. We are not competing with a local producer; we are supplying to local producers, making them more export-worthy as well as increasing environmental sustainability. Being environmentally sustainable also makes some local manufacturers eligible for tax breaks and rebates in some cases.
BRR: As regards to industrial enzymes, how advance is biotechnology in Pakistan?
SA: Biotech is definitely growing in importance. As far as academia is concerned, various universities are working on it. Information and awareness regarding importance and use of enzymes is increasing in the food and beverage sector.
Sectors such as animal feed are quiet advanced in their usage of industrial enzymes. The textile sector too is well aware. A layman may not know what enzymes are but ask any person in the textile sector and they will at least be aware of usage of industrial enzymes.
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