SHAPE

A NEW MAGAZINE FROM SCA ON TRENDS, MARKETS AND BUSINESS Nº 1 2006

e signs
D ract s
attsumer
con

BOOM FOR
BIOFUELS
Teresa Presas:
Energy is a
burning issue
Big steps for
diaper
technology
IN TO EAT OUT
IN THE U.S.
KEY TO THE
FUTURE OF
MAGAZINES

RUSSIAN SHOPPING SPREE

From Pravda to Prada

Growth markets in focus Sri Lanka No. 1 in daily newspaper readers
*
EPAHS


SCA’S PRODUCTS and services 4 SHAPE UP
are not just important – they are of- One billion new consumers. 50 million EU citizens
ten indispensable. Hard workers in above the age of 80. Read which worldwide changes

Content Nº 1 2006
the service of everyday life, they are
are affecting SCA.
everything from the paper in your
favorite magazine to napkins, baby
diapers or ingenious packaging.
6 SHAPE COVER
SCA is a consumer-oriented Forget oil millionaires with appetites for luxury.
company with a strong sense of its heritage within the In the new Russia, rapid wage increases have
forest industry. We work in an exciting and dynamic created a sizeable middle class of eager shoppers in
environment where developments in the retail industry Moscow and St. Petersburg.
and demographic changes are affecting consumers and
consequently, our demands on product performance. 14 TRENDS
Shape is about providing a perspective on these issues. Eating out in the U.S. is big business, with 925,000
We want to portray the exciting environments where SCA outlets feeding 130 million stomachs every day.
is present, and how processes and trends are affecting us. The current trend is towards casual dining, which
That’s why Shape has a clear external perspective.
is good news for suppliers of tissue.
Enjoy your reading!
18 PROFILE
BODIL ERIKSSON, PUBLISHER
Shape visits the special-interest magazine company
Future, one of the fastest-growing and most creative
magazine publishers in the world.
Russian consumer habits
are undergoing a revolution. 22 TECHNOLOGY
SHAPE COVER page 6-13. Diaper technology development has taken huge
6 Wine increasingly
ends up in a box
instead of a bottle.
strides in recent years.
26 SCA INSIDE

MOSCOW RESIDENTS SPEND 30 Growth prospects and strategic focus on products

with higher value content were the main topics at

TWICE AS MUCH OF
THEIR DISPOSABLE INCOME ON
SCA Shape An SCA Group magazine Address
SCA, Communications and Investor Relations, Box
7827, SE-103 97 Stockholm, Sweden, Telephone
SCA’s capital market day in September.
30 CAMERA
After the grapes have been harvested, it takes the
right packaging to attract consumers. Corrugated

COMSUMPTION bord packaging – wine-in-a-box – is increasingly

+46 8 7885100, Telefax +46 8 6788130 Publisher
Bodil Eriksson Editor-in-chief Anna Selberg
Editorial management Anna Selberg, SCA and the choice of winemakers.
Göran Lind, Appelberg Design Tone Knibestöl,
34 SHAPING A VIEW
AS RESIDENTS OF PARIS OR
Appelberg Print Sörmlands Grafiska Quebecor
AB, Katrineholm Cover Frans Hällqvist Continuing rises in energy prices in Europe could

LONDON DO
SCA Shape is published in Swedish and English. The con-
tents are printed on GraphoCote 80 g from SCA Forest
become a major reason for moving paper produc-
Products. Reproduction only by permission of SCA Cor-
porate Communications. The opinions expressed in this
tion, says Teresa Presas, managing director of CEPI,
publication are those of the authors or persons intervie-
wed and do not necessarily reflect the views of the edi-
the Confederation of European Paper Industries.
tors or SCA. You can subscribe to SCA Investor Report
or read it at www.sca.com

[ 1 *2006 ] SHAPE SCA *3

 SHAPE UP

eater wo r ld
w i
er
de
EASTERN EUROPE TO
Gr ew sp ap
daily n ership
OUTSTRIP CHINA Newspaper circulation
worldwide increases.
According to Pöyry, the Finnish consult- INDIA THE MOST But in the USA it is tough


ing firm, Eastern Europe will be the scene of
the fastest growth in paper and paperboard.
Through to 2015, the Eastern European mar-
ket is expected to grow by just over 5 percent
per year, somewhat faster, in fact, than in Chi-
na and the rest of Asia.
Within the OECD countries in general, growth
is forecast to be considerably lower. As a conse-
quence, in the world as a whole, the consumption
number one market for
of paper and paperboard will increase by 2.2 per-
ATTRACTIVE
RETAIL MARKET
FOR A RETAIL TRADE COMPANY, India is
the most attractive market in which to establish
a presence. This is what the American manage-
ment consulting firm A.T. Kearney said in its
analysis of retail trade investment attractiveness
India is rated as the in emerging markets in 2005.
foreign retail The analysis takes into consideration a number
read
for daily newspapers.
 Despite the Internet, sales of daily news-
papers are increasing around the world. In
2005, the total global print run increased
by 0.5 percent, and over the last five years,
it increased by 6 percent, according to the
World Association of Newspapers. If free

50
cent through to 2015. The total consumption of
paper and paperboard in 2004 was 358 million
metric tons and this figure will increase to 456
million by 2015.
trade investment. of factors, such as how well developed the market
is, risk levels, the importance of early entry and
growth potential. In second place comes Russia,
which is regarded as the market where the impor-
tance of early establishment is rated highest. Russia
used to be at the top of the table but has dropped
down to second position because of increased
competition. The country enjoying the quickest
growth in market attractiveness is Ukraine.
newspapers are also included, the increase
was 1 percent and the five-year print run fig-
ures increased by nearly 8 percent. Adver-
tising sales improved even more, increasing
by 6 percent in 2005. And, as in many oth-
er fields, it was mainly in Asia where expan-
sion took place.
On the other hand, in the USA, 2005 was
a weak year. During the period from March
to September the greatest decline in print
run was recorded since the beginning of the
1990s, with a fall of 2.6 percent, according
to statistics from Newspaper Association of
America. The main explanation was that an
increasing number of Americans read their

million EU citizens over news on the Internet. During the same period
the number of visits to the newspaper’s Web

the age of 80
sites increased by 8 percent.

A billion new
PHOTO: FOLIO

 Older and, in time, fewer citizens. This is

By around 2050, almost
50 million EU citizens will
be aged 80 or older.
what the future has in store for the EU, ac-
consumers TOP 10 READING COUNTRIES
cording to a Eurostat forecast. It is estimat-  Over the next 10 years, according to DAILY READERSHIP, NEWSPAPERS
management consultants McKinsey, Country. % of adult population
ed that the total population of the present
nearly a billion more people will be able 1 Sri Lanka 90%
EU states will increase slightly to about 470 to afford more than just the basic essen-
million around 2030, then decline to just 2 Costa Rica 89.7%
tials of life. Estimates are based on the
under 450 million by 2050. number of households with a yearly in-
3 Sweden 88%

However, the really dramatic change will come of 5,000 dollars or more, seen as 4 Finland 86%

be in the structure of the age pyramid. In the threshold where people start to buy 5 Norway 86%

2004, there were 75 million EU citizens over commodities that are not purely neces- 6 Singapore 82.9%
the age of 65. By 2030, this figure is expect- sary for survival. 7 Hong Kong 80.4%
The majority of the new consumers will
ed to rise to 116 million. 8 Japan 80.4%
be found in Asia. Today, Asia excluding
PHOTO: ISTOCKPHOTO

And aging in the EU will continue. Today, Japan creates around 13 percent of the 9 Germany 78%
there are nearly 20 million people aged 80 global GDP as opposed to Western Eu- 10 Latvia 76%
or older. By around 2050, almost 50 million rope’s 30 percent. In 20 years’ time, their SOURCE: WORLD ASSOCIATION OF NEWSPAPERS, PARIS; NEWSPAPER ASSOCIATION OF AMERICA

people will be in this venerable age group. respective parts will be roughly equal.

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 t
SHAPE COVER

oday, young Russians in particular are
choosing beer over vodka to an ever greater
extent. Between 1998 and 2002, beer con-
sumption doubled to 48 liters a year per per-
son. Winners include Carlsberg, which has
33 percent of the market through Baltic Beverage Hold-
ing. At the same time, international coffee chains like
the American company Starbucks and the Swedish firm
Wayne’s Coffee are making inroads as cosmopolitan
Russians switch from samovars to espresso machines.
Beer and coffee are two examples of the revolution in
consumption habits and commerce that has transpired
in Russia over the last decade or so. And it is often young
people who lead the way. Ivan, the “average Joe” of Rus-
sian advertising, has numerous brothers and sisters in
real life. Moscow, the capital, is home to 33 billionaires
in US dollar terms – more than London or New York.
It’s also home to 103,000 US dollar millionaires.
Russia has the world’s fastest growth in the number
of people who are extremely wealthy, according to a
report on the world’s wealthiest by investment group
Merrill Lynch.
FOR EUROPEAN MANUFACTURERS of luxury
cars, Moscow is the leading market today for their
most expensive and exclusive models. Russia is the fast-
est-growing market for German producer BMW, which
saw sales increase 44 percent last year.
Nowhere else in the world has consumption of ex-
pensive designer clothing from Dolce&Gabbana,
Gucci, Fendi and Chanel grown faster than in the Rus-
sian capital. A stroll down the shopping thoroughfares
of St. Petersburg or Moscow is enough to see how the
pendulum has swung from programmed restraint to an
unabashed orgy of luxury and display.
“There is a group of people in Russia who are very fu-
ture-oriented and who’ve made a lot of money on all the
 “The established world” – cautious, conservative
consumers whose focus is on safety and security when
they shop.
 “The authentic world” – quality-conscious, critical
consumers who look at content rather than form. They
do not care about fashion and prefer shopping for their
home or garden.
Despite a strong trend toward fashion and extreme
shopping in the West as well, there is an overrepresenta-
tion of Eastern consumers in the first group. Western
consumers are overwhelmingly predominant in the
group that wants security, while Eastern consumers
constitute a majority in the realistic group, with its fo-
cus on function and quality.
Moscow
residents PEICHL OBSERVES THAT many of these charac-
spend teristics can be explained by different attitudes and
twice as backgrounds. The most obvious one is pent-up de-
mand after many decades of imposed shortages in the
much of East, which consumers are now compensating for. By
their dis- contrast, Western consumers, after decades of social
posable welfare, can indulge themselves in a more distanced,
income aristocratic attitude toward material goods.
It may seem odd that Russians, of all people, have
on con- become icons of the hungry super consumer in the East.
sumption A quick look at the statistics shows that Russia is one
as resi- of the poorest countries in the former Eastern bloc.
dents of The average Russian salary is only about 300 dollars a
month, compared to the average Polish monthly salary
Paris or of close to 800 dollars.
London But as is often the case when Russia is involved, the
spend. statistics show only part of a dynamic, disjointed reality.
MORE SHOPPING IN MOSCOW THAN PARIS
Size of retail market, USD

From worker hero to

changes and the new, more open economy. It’s a coterie
��
of materialist careerists who want to be recognized as

SUPER CONSUMER
stars and use labels from the West to give these signals ��

Oil millionaires with an unbridled passion for luxury and ost-
entation are the predominant image of the new Russian consumer.

to people around them,” notes Thomas Peichl at the ��
German market research institute GfK, which has in-
��
terviewed 12,000 consumers in Western Europe and the
former Eastern bloc to analyze and compare attitudes.
��
“Family, friends, success and materialist values are ��
stronger today in the East. The West has a stronger
inclination toward individualism, the single life and ��

But as salaries rise rapidly, a middle class with serious spending post-materialist values, where self-actualization is im-
portant,” says Peichl. In their analysis, GfK has divided
�
�

power is growing in Moscow and St. Petersburg. consumers into three groups:
 “The magical world” – populated by extreme shop-
Warsaw
5.4 billion
Paris
34.5 billion
Moscow
39 billion

pers with an enormous interest in fashion whose iden- SOURCE: EAST CAPITAL

BY MATTIAS ANDERSSON PHOTO OLEG NIKISHIN tity is determined by the labels they buy.

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 o
SHAPE COVER

Russia is not merely gigantic in geographic terms. The Relatively low costs for basic outlays like housing, ur growth-oriented busi-
economic gaps are likewise vast. electricity and telephones, high inflation and low ness strategy will contin-
Turbulent economic growth, first with wide-scale saving rates have helped make urban Russians major ue to focus on Eastern
privatization and now enormous profits from ex- consumers. Moscow residents spend twice as much of Europe, including Rus-
ports of gas and oil at record prices, has produced their disposable income on consumption as residents of sia,” says Dr. Hans-Joach-
many newly wealthy individuals. The gaps between Paris or London do. im Körber, managing director of the Ger-
the big cities, especially Moscow and St. Petersburg, Despite significant opportunities, many internation- man trading giant Metro AG.
and the countryside are enormous. al players in consumer goods are still hesitant to break Together with fellow countrymen at
The threefold rise in GDP over the last six years has into the Russian market. Spar, the French Auchan Group, the
largely ended up in these cities. For people in business,
The East “It’s odd that many companies that don’t hesitate to Turkish Ramstor chain and the Swed-
Moscow today is the world’s most expensive city to and West enter India or China are reluctant when faced with the ish furniture giant Ikea, Metro is one of
live and work in. are great opportunities in Russia,” says Suominen. the pioneers in retail trading to invest
moving Yet even though Russia belongs to Europe in terms heavily and reap substantial benefits in
IN THE HOT ZONES of this rapidly expanding eco- of its history, culture and religion, the country today the rapidly growing Russian market.
nomy, growth has now begun to trickle down to broa-
toward is in many ways more exotic and divergent from a po- Among the domestic players are chains
der groups. The average salaries of skilled workers in one litical and economic perspective – even compared with such as Pyaterochka, Perekrestok and
Russia have increased between 10 and 20 percent over another. countries that have traditionally been seen as more ex- Semj Kontinentov.
the last few years. Foreign companies are experiencing otic from a strictly Western point of view. In 2005, Metro Cash & Carry in-
major problems hiring and especially retaining talen- RUSSIA India has an established middle class of 300 million creased its sales in Russia by 63 percent,
ted employees in the Russian capital. FACTS people, or almost a third of the country’s population of Metro’s growthorien- its turnover reaching nearly 2 billion dol-
ted strategy focuses
“Salaries in Moscow are twice as high as here in St. Population: one billion. According to the Carnegie Foundation, the on Russia. lars. The number of supermarkets in Rus-
Petersburg, but we’ve noticed the change. There’s con- about 143 mil- Russian middle class still only constitutes 7 percent of sia doubled during 2005 and the increase
lion
siderable pressure for people who have skills that are the population. But the rate of change in Russia is fast, in Russian retail food sales was the fastest
Moscow:
in demand,” says Harri Suominen, president of the bus 10.4 million and with the exception of political democracy, which in the world. Continued growth is forecast
manufacturer Scania Peter. Area: has generated anxiety, the country is moving toward in- for the coming years, and according to the
Economic growth in general and oil revenues in par- 17,075,200 sq clusion in the community of global market economies. market research company RNCOS Re-
kilometres
ticular have filled the Russian state’s coffers – a badly “But what is most astonishing is how the East and search the retail food market will double
Average life
needed addition given that a large part of the Russian span: Women West are moving toward one another. Since 1995, by 2008. Development like this makes
economy still operates outside the law. This means that 74 years their values and attitudes have become increasingly trade giants in mature Western markets
many Russians have more money at their disposal than Men 61 years similar. More things unite them than divide them,” put their hopes in Russia and the rest of
is indicated in official statistics. Peichl says.  Eastern Europe for future growth. The
rapid increase in the number of modern
supermarkets, hypermarkets and retail
RAPIDLY GROWING ECONOMY chains has opened up distribution chan-
GDP, USD billion nels for a number of foreign suppliers.

TRADING GIANTS
SOURCE: MINISTRY FOR ECONOMY DEVELOPMENT AND TRADE OF RUSSIA, WORLDBANK

���
744

“WE HAVE GROWN by between 25

702

HUNT FOR RUBLES

��� and 30 percent over the past few years,”
says Christina Hedström, export man-
573

���
ager at Semper, the Swedish baby food
company. “Fundamental to this has been
432,2

���
close and excellent collaboration with
The oil-driven Russian economy has our distributors in Russia.”
345,6

���
306,2

Semper is a veteran in the Russian mar-

made the country an interesting target for ket, where it has been established since
251,6

���
foreign retail giants looking for new 1997, the year before the so-called Rus-
sian crisis gripped the country and thor-
��� markets and rapid growth. The risks are oughly cooled off the economy
��� A new middle
great but, in return, growth is many times Even though foreign products often
cost considerably more than domestic
�
class is emerging
in Moscow.
higher than in the mature home markets. ones, many customers are prepared to


Year 2000 2001 2002 2003 2004 2005 2006*
*FORECAST
BY MATTIAS ANDERSSON pay the price.

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SHAPE COVER

Tissue paper
“Russians will now gladly pay for good
quality,” says Viktoria Gileva at the Swed-
ish Export Council’s office in Moscow.

in short supply
“There is also an element of prestige in
what you buy, just as in the West.”
Ikea is one of the most highly profiled for-
eign players in Russia and a few years ago
was the driving force behind building East-
ern Europe’s largest mega-mall in Moscow,
to the tune of 250 million dollars.
“Russia is the only country in the world
in Russia
where we can start to build a production
plant before all the permits have been After decades of using Pravda for
granted,” says Per Kaufman, CEO Ikea
Russia. “In most cases, the local authori- bathroom tissue, Russians now
ties greet the establishment kindly. We
usually invite the mayor to participate in
find demand for tissue paper is
the groundbreaking ceremony so there greater than supply. Still, despite
won’t be any trouble.” Then, citing what 90 percent of Russian
increased consumption over the
has become a truism for those who have
chosen to establish themselves in the Rus- last few years, Russians use only a
consumers are familiar with
sian market, he says, “If you’re going to do
business in Russia, then you have to take third as much tissue paper as SCA’s Zewa brand.
risks. And if you do, there are huge profits
to be made.”
Bulgarians or Poles.
BY MATTIAS ANDERSSON PHOTO OLEG NIKISHIN
LAST YEAR the company had a 1.65-
billion-dollar turnover in Russia, running
eight stores and planning for continued
rapid growth. Profits have been returned
since 2004. Ikea has taken a risk and won,
partly thanks to its founder and principal
owner Ingvar Kamprad’s well-known per-
sonal engagement in the country.
Other major companies still hesitate
when it comes to crossing into the Russian
market. For a number of years now there
has been wide speculation as to when and
where the American giant Wal-Mart –
now the largest company in America – will

establish itself in Russia. Even the global
Swedish clothing giant H&M has decided
to wait and see, although the Spanish com-
petitor Zara has made major investments
in the Russian market.
Wal-Mart and H&M have deemed
China to be safer ground for their invest-
ments. “Ikea has succeeded well thanks to
their willingness to take risks. But they can
do that because Ikea is a private company
and Kamprad is risking his own money”,
comments a senior manager of a global
d
uring the Soviet era, respect, you could say that propagan-
Russians did not have da was useful.”
access to bathroom During years of short supplies, the
tissue as a daily com- Russians adapted their consumer habits
modity,” says Urban and this is still noticeable today. Ivan
Lundberg, the Vienna-based head of and Olga consume on average 3.5 lbs
SCA Tissue’s expansion in the East. (1.6 kg) of tissue paper a year, compared
“They used the daily newspaper Prav- with the average American who uses 46
“There is a clear link between GDP
and consumption of tissue paper,” Lund-
berg says. “But even taking into account
that the Russians are poorer, they still lag
behind other countries. For example, in
Poland they use three times as much tis-
sue paper. This is a tradition that we are,
of course, trying to change.”
focus on Russia, he sees this low con-
sumption as an opportunity for good
business rather than an obstacle. “Over
the past few years we have seen double-
digit growth,” he says.
SCA’S VENTURE into the Russian
market has been far from smooth. When
Svetogorsk, close to the Finnish border, it
was a daring step to make into a high-risk,
turbulent market.
Only a few months after SCA had
established itself on Russian territory,
the Russian crisis hit the country with
full force. Numerous companies and
industries were paralyzed, and several


company operating in Russia.  da or whatever was available. In that lbs (21 kg). Together with others at SCA with a the company bought a factory in 1998 in lost years of negative growth followed.

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“But we managed reasonably well, and only buying more, but they’re buying greater number of consumers, Russia is by

Customers in the East

with hindsight it was a wise decision and
one that has benefited us,” Lundberg says.
TODAY, SCA IS THE dominant player
with 40 percent of the Russian market
in the 23 largest cities. Ninety percent
of Russian consumers are familiar with
SCA’s Zewa brand – the same brand that
is used in Germany.
“We have been successful in creating
not only high growth but also a very high
value increment,” says Timofei Sokolenko,
head of SCA’s division for tissue paper
in Russia.
“This means that customers are not
SCA is the dominant player on the Russian tissue paper market.

more expensive tissue paper.”
The goal is to grow as much in volume,
measured in tons, as the market itself,
which has a yearly volume growth of
9 percent, and this is something that
Sokolenko and his colleagues in Russia
can easily meet. Pure volume growth rates
are double-digit, while the products them-
selves are commanding even better prices
than before.
“Our margins are among the best in the
whole group,” Sokolenko says from a cell
phone in Siberia, seven time zones east of
Moscow, where he was on a business trip.
Even though there are markets with a
far the greatest when it comes to size. And
that puts great demands on logistics and
priorities.
“We have chosen to concentrate on
Russia’s 23 largest cities,” Lundberg says.
“The advantages gained by being first on
the market and having efficient produc-
tion in our own factory formed the plat-
form for success. In fact 44,000 of the
50,000 metric tons of tissue paper sold in
Russia are produced locally.”
OTHER IMPORTANT ingredients in this
recipe for success are good, well-nur-
tured relationships with our partners, to
a great extent the fast-growing major
domestic and foreign retail chains that
are now starting to replace traditional
markets and stalls. Even here the com-
pany has succeeded well. In 2004 and
2005, SCA won an award that Lundberg
describes as the Russian retail trade
equivalent of an Oscar.
Growth has been so rapid that demand
today is greater than supply. “Demand
now exceeds production, which means
that we are forced to prioritize,” Soko-
lenko says.
PRIORITIZATION MEANS THAT deli-
veries to so-called modern trade partners –
often large domestic or foreign retail chains
– are guaranteed. But consumers who shop
at traditional markets may miss out.
SCA intends to start a new factory near
Moscow, the company’s largest invest-
For consumer product manufacturers, the term outsourcing was
the buzzword of the 1990s. Today, the next chapter in the his-
tory of globalization is being written, as new consumers in the
East are now a more important driving force than cheap labor.
BY MATTIAS ANDERSSON
“FOR US, IT HAS ALWAYS been a scale in many of the former Eastern Euro- ris: SCA Packaging was already engaged
question of following our customers, the pean states. China, however, has not only at the planning stage regarding a new
majority of whom are manufacturers of cheap labor but also 1.3 billion potential production plant in 1997. Since then
consumer products,” says Jarmo Varjo- consumers. Even in Poland, Russia and SCA and Philip Morris have worked
salmi, director for the operations in the other former Eastern European states, together to improve the packaging they
Baltics and Russia at SCA Packaging. investors are attracted to a large extent need, including the service level.
Striving to follow its customers, SCA by growing domestic consumption. Today, SCA has two plants in Russia
over the past 10 years has established op- “If many companies previously used – in the north close to the dynamic city
erations in Poland, the Czech Republic, to look mainly for cheap manufacturing, of St. Petersburg and in the south in the
Hungary and China, among other coun- it is the closeness to new markets and Krasnodar region near the Black Sea.
tries. Manufacturers of consumer prod- consumers that is the driving force to- “Our growth in volume is keeping step
ucts, from computers to bookshelves, have day,” Varjosalmi says. He mentions two with the market, between 7 and 8 percent
relocated their businesses to countries of- food giants, Kraft Foods and Nestlé, as per year, which is excellent compared to
fering the lowest production costs. examples of companies investing in new the situation in many of the countries in
The upside of this for Western con- plants in Russia and focusing on the Western Europe,” Varjosalmi says.
sumers has been cheaper products in the Russian market. Just like many other companies that
shops. The downside is that growth in Foreign food giants and coffee chains have experienced business on a market
many companies with roots in Western have worked hard to get Russians to that swings like a pendulum between
Europe has taken place in low-cost coun- drink coffee. That Nestlé has just com- intensive turbulence and clashes with
tries. But now it now seems that some of pleted the second-largest coffee plant in different cultural and administrative
the driving forces behind this relocation south of Russia in Timashevsk is a sign structures, Varjosalmi preaches patience
phenomenon have begun to change. that these efforts are bearing fruit. and respect.
It can hardly have escaped anyone that For SCA, it is important to be present “Russians are often proud of their
the trend to outsource has contributed to at an early stage when customers start to country and their traditions,” he says.

STRONG POSITION IN PERSONAL CARE
 SCA’s sales in Russia are not lim-
ited to tissue. The company al-
ment in Russia to date. However, Lund- double-digit growth rates in China, and expand on new markets. An example of “You have to play by local rules. We are
berg emphasizes that having patience and the same thing is happening on a smaller this is our collaboration with Philip Mor- the ones who have to adapt.” 
working for the long term are the two
Eastern Europe is still far below
levels in Western Europe. One ex-
golden rules for anyone who wants to do

so has a strong position with in-
creasing market shares in the
fast-growing market for personal
care. SCA has a No. 2 or No. 3 po-
sition in all three market segments
– incontinence, baby diapers and
feminine hygiene.
The market potential in Russia
and the rest of Eastern Europe is
seen as substantial. The consump-
tion of personal care products in
ample is baby diapers, where the
average consumption in Eastern
Europe is 400 diapers per child
per year, while in Western Europe
the average consumption is 1,500.
The use of incontinence products
is almost 10 times higher per capi-
ta in Western Europe, and women
in Western Europe use three times
as many feminine hygiene prod-
ucts as those in Eastern Europe.
business in Russia.
“Russia is special: it requires patience,”
Lundberg says.
“And corruption is a big problem, espe-
cially in Moscow. We are consciously
looking for an area with little corrup-
tion. Even if Russia in some ways is
much more risky and complicated than
Western countries, the opportunities
are much greater. In a mature market,
growth is 1 or 2 percent per year. Here
it is 10 times higher.” 

New consumers in the East
are now the driving force for
Western investments.
NOKIA ON THE CLIENT LIST
 Local presence is a cornerstone in
SCA’s packaging operations. Due to this
strategy, SCA has established operations
in many Eastern European countries, fol-
lowing in the footpaths when SCA clients
have entered new markets. The first op-
eration was started in Hungary in 1996. In
the following year Poland, Czech Repub-
lic and Slovakia were added to the list.
Operations have also been started in
Estonia, Lithuania, Russia and Romania.
Three business segments are top priority
for SCA’s continuing growth in Eastern
Europe: consumer electronics, cars and
high-quality consumer packaging.
Today, SCA is cooperating with a number
of well-known brands in Eastern Europe,
such as Nokia and Philips.

12* SCA SHAPE [ 1 *2006 ] [ 1 *2006 ] SHAPE SCA *13

TREND
BY JONAS REHNBERG
Eating out in America is big business, with
925,000 outlets serving 130 million daily.
But the present weakening of the economy
actually favors suppliers of tissue, bringing
a shift towards more casual dinner options.
FROM THE JUNGLE OF fast-food out-
lets lining the boulevards of Los Ange-
les to the 1950’s-style coffee shops of
Small-Town America’s Main Streets,
the windswept freeway diners along the
Interstates, and Manhattan’s world-
class restaurants – with such a wide
range of taste-bud temptations, it’s no
wonder Americans have more meals
outside their homes than is the case in
most European countries.
Statistics show that 58 percent of
household spending on food in the US is
devoted to eating out and only 42 percent
ends up in grocery store cash registers.
“To SCA and other suppliers, this
obviously translates into major opportu-
14* SCA SHAPE [ 1 *2006 ]
CHEAPER MEALS FEED
TISSUE MAKERS
nities in the Away-From-Home (AFH)
tissue segment,” notes Don Lewis, Se-
nior Vice President Sales and Market-
ing at SCA Tissue North America. The
company has a 39-percent share of the
market for the food services business in
North America, with wash-room towel,
tissue and table napkins being the major
product categories.
THIS YEAR, THE COUNTRY’S 925,000
establishments will serve more than 70 bil-
lion meals annually and on a typical day
welcome some 130 million patrons. Lewis
believes the nation’s love of eating out – a
love affair that seems to grow stronger ev-
ery year – is a part of the American way of
disposable napkins, Lewis notes that the present weakening of the
economy has brought a shift towards the more casual dining op-
tion, which in turn favours suppliers of tissue.
The American food services industry feeds more than hung-
ry mouths; it also offers jobs and helps keep unemployment at a
rate that most European countries can only dream about. With
12.5 million employees, the restaurant industry is the largest
employer in America outside the government, and nearly half
of all adults have worked in the restaurant industry at some
point during their lives. Statistics show that 58
Enjoy your meal! You’re certainly not the only one…  percent of household
spending on food in
Source: The National Restaurant Association of America. the U.S. is devoted to
eating out.
PHOTO: GETTY IMAGES
HI-TECH TISSUE
 SCA tissue is one of the ness, SCA works hard to re-
three largest producers of main an industry leader with
Away-From-Home tissue the help of innovative towel,
products in North Ameri- tissue and napkin solutions.
ca. Its highly segment-driv- One example is Xpressnap, a
en solutions include napkins,
towelling, bath and facial tis-
sue, specialty wipers, inno-
new food service napkin that
fulfills a number of needs
and is based on a unique
vative dispenser systems
and soap systems.
With nearly 50 percent of
dispenser that is more us-
er friendly and also saves on
napkin usage for the restau-
the restaurant napkin busi- rant owner.
life: “It goes with the fast-paced lifestyle.
Many people spend a lot of time on the
road, and the number of multi-job house-
holds is growing all the time.” heating plants and combined heat and
Research also indicates that as income
levels rise, consumers eat out more fre-
quently and spend a greater proportion
Boom for biofuels power plants.
“Wood pellets are a relatively young
fuel that is only now gaining recogni-
of their food dollar away from home. tion. In the early 1990s they weren’t
used at all, but their use in Sweden is
LEWIS SAYS ONE of the biggest chal- expanding rapidly with both production
lenges for the restaurant owners is to try and consumption growing by leaps and
PHOTO: SCA
and keep up with the trends and come bounds,” says Tomas Isaksson, chair-
up with innovations in terms of menus man of the Swedish Association of Pellet
and services in order to keep attracting Producers, PIR.
people. The relentless rise in oil prices and con- are one of the fastest-growing biofuels In 1992, PIR members delivered
“The trends affect our business very cern about carbon dioxide emissions and offer a popular alternative to oil 5,000 tons of wood pellets. In 2005
dramatically,” says Lewis, explaining and climate change have prompted a and wood for homeowners as well as the figure was up to 1.07 million tons.
that SCA has divided the restaurant growing number of homeowners and local governments, businesses and en- Isaksson estimates that the industry as a
market into three segments – fine din- energy producers to switch to heating ergy companies. whole will deliver between 1.7 and 1.8
ing establishments, with white linen and with wood pellets. Sweden has also Heating with wood pellets releases metric million tons this year.
sit-down service, more casual dining of moved to the forefront in this market. no more carbon dioxide than a tree “The demand for biofuels is driven by
the pizzeria and sandwich shop variety consumes as it grows, and only a small many factors,” says Stefan Rönnqvist,
and the genuine fast-food outlets. “We ONE OF THE EU’S GOALS is to have amount of sulfur is produced. As a re- president of SCA BioNorr in Härnösand.
spend a lot of time researching the needs member countries double their use of re- sult, heating with pellets contributes to “This rate of growth will continue,
of the various segments,” Lewis adds. newable energy by 2010, to 12 percent neither increased carbon dioxide emis- and the industry predicts a sustained in-
While the fine dining segment con- of consumption from about 6 percent to- sions nor acidification. The fuel is used crease in total volume over the next few
sumes relatively fewer paper towels and day. Wood pellets made from sawdust in wood-burning stoves, home furnaces, years of between 20 and 25 percent.”

[ 1 *2006 ] SHAPE SCA *15
TREND

Government grants for converting to heating that uses renew- In addition, modern shoppers have a similar to the originals, which places shelves a main challenge to the retail trade.
able energy have helped accelerate the rate of conversions, but more postive approach towards retail tough demands on packaging design if “Despite their proficiency in logistics
Rönnqvist thinks fuel prices alone offer an incentive to switch. brands. the shopper and the store staff are to be and supply chain management, retailers
“The cost of heating with pellets is two to three times lower “Traditional brands are being serious- able to distinguish between the products still fail in getting all the right product to
than the cost for oil or electricity,” he says. “It rarely takes more ly challenged by the retail brands, which and to increase the chances of a success- the place on the shelf where the shopper
than two years to recoup the investment of converting to pellets.” are no longer seen as low-quality, un- ful launch. is looking for it,” Blomström concludes.
emotional copy cats,” states Blomström. Another trend is the demand for shelf-
HOUSEHOLDS THAT SWITCH their heating from direct elec- ready packaging, which serves as an ac- THESE LAST percentages are big money
trical heating to heating with biofuel can get a subsidy of up to BLOMSTRÖM ALSO TESTIFIES to the tive sales and marketing tool on the store in a market valued at more than 900 bil-
SEK 30,000 for the conversion. Moreover, pellets are signifi- increased focus on price and promotions shelf and aids retail staff in quickly get- lion euros.
cantly cheaper for heating, compared to oil and electricity. as key tools to attract buyers and says ting the right product to the right place. Being in the retail market today is cer-
Isaksson at PIR thinks that Swedish exports of wood pellets SCA BioNorr in Härnösand, Sweden that discount retailers are frequented by “The transport packaging often trans- tainly a complex operation compared
produces 160 000 metric tons of
will increase. “Swedish pellets have an advantage in quality, and wood pellets per year.
what’s more, the European market is growing at an extraordi-
nary rate right now. Europe today is where Sweden was five years
TOP SALES OF WOOD PELLETS
Most shoppers don’t treasure shopping for
ago. The potential for the future is fantastic,” Isaksson said.
SCA BioNorr produces wood pellets for energy production
Market sales in Sweden , metric tons. groceries as such – they just want
from sawmill by-products.
The raw material in pellets is pure sawdust from pine and
to find the goods they came for
spruce with no additives or binding agents. and then get out and do something else
“SCA’s strength is access to our own high-quality raw mate-
rial and the fact that we control the entire supply chain,” says
with their precious time.
Stefan Rönnqvist.
SCA was among the first companies to offer FSC-certified
wood pellets.
“Many foreign customers are asking for pellets that use FSC- DESIGN DRIVES DEMAND
certified raw materials and, for BioNorr, it was value added to be  Trends like line extension offer a formidable opportu-

c
able to offer FSC-certified pellets”, Rönnqvist says. nity for SCA to introduce creative packaging solutions
that help shoppers and retail staff find the products
they are looking for.
JONAS REHNBERG
To create packaging solutions that are able to pro-
tect, yet at the same time facilitate speedy and ef-
ficient handling by store staff and easy recognition

PACKAGING
ompetition in the retail sec- by shoppers, SCA Packaging Europe draws on the

PHOTO: GETTY IMAGES

tor is tougher than ever. graphics and packaging construction skills of its de-

DESIGN
The trends and character- sign community working across Europe.
SCA has also developed software called Imagine by
istics prevailing in different
SCA, which is unique in the packaging industry. It is a
market segments and geog- virtual in-store category tool that lets key customers
raphies obviously vary a great deal, but simulate ideal packaging solutions for different store

HELPS BOOST
there are a number of common trends Modern shoppers have a more postive
environments and shelf configurations – without any
approach towards retail brands.
that run across borders. One of these (or prior to) costly investments and complex research.

SALES
trends is understanding and building on
actual shopper behavior at the point of
purchase.

“THAT PEOPLE today are pressed for
Packaging design has become more and time and demand convenience, speed and
simplicity from their shopping experience.
more important in the retail sector. Most shoppers don’t treasure shopping for
Competition is tough as a modern supermarket groceries as such – they just want to find
the goods they came for and then get out
carries 20,000 articles. and do something else with their precious
time,” says Peter Blomström, Market Ma-
nager Europe at SCA Packaging Europe.
shoppers from all income brackets.
“Nobody wants to pay more than they
have to,” he concludes.
Between 70 and 80 percent of all new
products fail within a year of their launch.
To play it safe, manufacturers practice
line extension, or launching modified
versions of existing products.
These modified versions are often very
forms to a shelf-ready packaging, and the
graphics and functional features used on
this new multi-purpose packaging are be-
coming highly sophisticated,” he says.
To SCA, this means new packaging
demands and stronger participation in
the in-store sales process of products.
A modern supermarket carries 20,000
articles, which makes availability on the
with the days of the local mom n’ pop
corner store, but there is still money to be
made in a stagnating market, and SCA is
well equipped to support the growth am-
bitions of its customers.
“Many of the current trends in global
retail business speak in our favor,” says
Blomström.
JONAS REHNBERG

16* SCA SHAPE [ 1 *2006 ] [ 1 *2006 ] SHAPE SCA *17

PROFILE
THE KEY
small editions, small Internet
sites, small trade fairs. We
have titles selling fewer than
TO THE
3,000 copies that we still
make money on.”
FUTURE
MANY TITLES ARE sold to
a small, passionate group of
readers who are willing to
pay high prices. In 2005, the
average price of a magazine in
The special-interest maga- Britain was £1.56. The aver-
zine company Future is not age price of a Future maga-
zine was £4.87. “Our adver-
only one of the world’s tisers also pay a high price per
reader because we reach the
fastest-growing magazine most active customers in their
publishers, it is also one of market,” Price says.
Future also makes money
the most innovative. on the Internet and through
cell phone services, by helping
Interactive communication advertisers reach readers di-
rectly, and through text-based
is the watchword in an search services. Future says it
was the first in the world to
industry that has undergone attach CDs and full-length
major structural changes DVDs to their covers, known
as cover mounts, a move that
in recent years. also creates reader loyalty.
“Total Guitar is an exam-
o
BY PER ÖQVIST PHOTO PHILIP BLYTHMAN ple of good integration,” says
Jim Douglas, who has edi-
torial responsibility for the
company’s English-language
titles. “There are pages in the
ur philosophy is to de- magazine with chords to songs, mixed
liver content, regardless with interviews where the readers’ idols
of the medium. Someone talk about their favorite riffs and show
reading about cars will how to play them. On the CD, there are
also want to attend auto songs with the guitar parts taken away,
shows or perhaps exhibit their own car,” so that people can play their idol’s part.”
says Robert Price, who heads Future’s op-
erations in Britain, the company’s largest THE HOTTEST THING on the Internet
market with roughly half of sales. right now is “reader-created content,”
“Today in Britain, we’re doing 20 with Web sites like MySpace or YouTube,
events. That’s less than 1 percent of our where readers upload texts, songs and
sales, but it’s important to our readers and movies. The stars of tomorrow are found
something that generates a healthy profit. here. Future has quickly learned how to
As a special-interest magazine publisher, use reader-created content. “Readers send
we have to be good at making money on in photos, articles, movies and computer
18* SCA SHAPE [ 1 *2006 ]
programs,” Douglas says. “Sometimes
we include one of these in our magazines.
This creates an interactiveness which
makes the magazine come alive, and
that’s good for us, the advertisers and the
readers.”
Future has grown quickly, with an an-
nual rate of growth above 10 percent even
over the last few years. The purchase of
Highbury House in 2005 for SEK 410
million added 37 new titles, although,
along with the rapid rate of growth,
Future’s profits have declined recently.
The company has also hired a new CEO,
Stevie Spring, with 16 years’ experience in A newspaper is like a
the advertising industry. She worked most
recently as CEO of Clear Channel. better-informed
friend, a wiser older
TODAY, FUTURE IS THE fifth-largest
magazine publisher in Britain but the brother or the voice
second largest in special-interest maga-
of a group you
zines. It is the 10th-largest publisher in
The most important
the US. “The goal is to be number one in belong to. Reading
Britain and one of the top five in the US,”
a really good
thing is how loyal
the readers are, says
Price says. “Over the next few years, we’ll Jim Douglas.
consolidate the company, further expand magazine creates a
our mission and increase our focus on the
Internet and other new media.” feeling you can never
In all, there are some 3,300 magazines get on the Internet.
in Britain. Special-interest magazines
represent 45 percent of total sales. “From JIM DOUGLAS
here on out, it’s likely the number of titles
will decline,” Price says. “The market
can’t sustain such an extremely large
number in every field that there is today.”
Douglas agrees that there is a con-
solidation in the works and thinks this is
STARTED BY AN OUT-OF-WORK EDITOR
driven more by consumer behavior than
 Future was started in 1985 by enough time to make improve- cars and life/living. Future also has
by the strategic decisions of people in Chris Anderson, an out-of-work ments to the magazine and come 65 Web sites and a growing number
publishing. “The most important thing editor with £1,000 in the bank and up with an innovation that would of events. There are some 10 mil-
is how loyal the readers are, how far we an idea for a computer magazine change the entire magazine ind- lion unique visitors to the publish-

can penetrate the market and what ad- called Amstrad Action. ustry – mounting a computer pro- er’s Web sites each month. Last
vertising opportunities this creates,” he After three months, Anderson gram on the cover of the magazine. year, Future had sales of £212 mil-
says. “I usually talk about our readers as found a garage in the back of a gas Today, just over 20 years later, lion, with Britain its largest market.
a dot within a dot. It’s not just about the station in Bath, England, which be- Future is listed on the London Stock Future has offices in four markets:
came his office. He also finally ma- Exchange and is one of the fastest- Britain, the US, France and Italy. A
largest number of potential readers.
naged to get a £10,000 bank loan. growing magazine publishers in the hundred local editions of Future’s
“We have three guitar magazines – one The first edition had 100 pages, world. The publisher puts out more magazines are also published in 30
for learners, one for somewhat more ex- and 40,000 copies were printed than 150 magazines in computers/ countries. In addition, 3.6 million
perienced players and one about specific but only 16,000 sold. Before these technology, games, music/ magazines were exported last year
guitar techniques. If we only published figures leaked out, there was entertainment, sports/hobbies, to 98 countries around the globe.
[ 1 *2006 ] SHAPE SCA *19
PROFILE
one guitar magazine that included every-
thing, we would lose readers.”
Even though the underlying trend for
print media is negative in the British
market, there are signs that magazines
will fare better than newspapers. For
instance, advertising revenues for maga-
zines increased slightly last year while
the newspaper market declined overall.
“Despite the decline for magazines,
we have managed much better than the
news-based dailies,” Price says. “News is
something that you can get quickly on the
Web. The morning papers now have to go
into more detail. The news is rarely what’s
important anymore. Nor have newspa-
pers been as innovative or competitive as
magazines. For instance, only in recent
years have newspapers understood that
they have to change their format so that
they are easier to read. It’s amazing they
didn’t understand this a while ago.”
FOR AN INTERNATIONAL publisher
like Future Publishing, national differ-
ences in the magazine industry are also
important. In Britain, France and Italy,
more than 80 percent of magazines are
sold on newsstands. In the US, two-thirds
are sold by subscription. Readers in the US
want shorter texts than readers in Europe,
although the trend in Europe is moving to-
20* SCA SHAPE [ 1 *2006 ]
ward texts that are easier to read as well.
“For us, the future is a multi-channel
environment,” Price says. “The change
we’re seeing now is dramatic. Young read-
ers in particular want fewer words, texts
that are easier to understand and more
graphics that quickly explain what’s most
important. I’m not saying that young
people are reading less – they’re prob-
ably reading as much overall, but many
short texts in many different areas. In-
stead of one long article, they read per-
haps 20 short ones. We shouldn’t see
the change as a threat but rather as an
seeing now is dramatic.
opportunity for us.”
DESPITE ALL THE NEW technology,
there are still great advantages to the
traditional magazine. “A magazine is
portable,” says Price. “It doesn’t need
batteries. You read it differently – more
slowly and with greater reflection.”
“And nothing can even come near to
the close relation a magazine has with
readers who buy it every month,” Doug-
las maintains. “A newspaper is a better-
informed friend, a wiser older brother
or the voice of a group you belong to.
Reading a really good magazine creates
a feeling you can never get on the Inter-
net. And that creates added value for the
advertisers.” 
The change we’re ENVIRONMENTAL

CONCERN IMPORTANT
Young readers in  Every year, 800,000 tons of paper are sold to
particular want fewer magazines, catalogs and commercial publications
in Britain. SCA has roughly 10 percent of the market.
words, texts that are SCA produces publication paper. In newspapers
and magazines, LWC (light-weight coated print-
easier to understand ing paper) and SC (uncoated super-calendered
publication paper) are the main sorts used. All pa-
and more graphics. per is bleached without any form of chlorine ( To-
tally Chlorine Free, or TCF). A significant portion
ROBERT PRICE
of SCA’s publication paper is sold as FSC-certified
paper. The Forest Stewardship Council is an inter-
national organization that works to develop re-
sponsible forest management. FSC-certified paper
is produced from timber grown in forests that have
been managed responsibly.
One important customer is the special-interest
magazine publisher Future.
“SCA is a good supplier,” says Future’s Robert
Price. “What we look at are paper quality, deliv-
ery times and service, degree of whiteness and of
course price – but also their environmental concern,
which is becoming increasingly important to us.”
SCA has delivered paper to Future for some 10
years and has developed a relation that has grown
over the years. “We deliver 60 to 65 percent of all
paper that Future buys,” says David Lucas at SCA
in Britain. “What I like is that they take environ-
A magazine is portable
and it doesn’t need batteries,
mental issues very seriously.”
says Robert Price.
[ 1 *2006 ] SHAPE SCA *21

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Blissful and dry
with super absorbents.
d iaper technology development has
NEW TECHNOLOGY FOR
A NEW
GENERATION
This product is loaded with high-tech
material, smart functions and hyper-
modern design solutions. No, it’s not a
PHOTO: GETTY IMAGES
new automobile – we’re talking about
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the latest generation of diapers.
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TECHNOLOGY
advanced remarkably in recent
years. One major technological
shift was the introduction of su-
per absorbents at the end of the
1980s. Super absorbents are petroleum-
based products that can absorb five to
six times more than wood fiber-based
materials, or so-called fluff pulp. Today,
super absorbents have replaced a consid-
erable part of the fluff pulp content in
diaper products.
“When super absorbents came on the
scene, diapers could be made much thin-
ner without manufacturers having to
give up absorption capacity,” says Bir-
gitta Ihrfelt, director development Baby,
SCA Personal Care. “In turn, this meant
that diapers became more comfortable
for babies to use.”
A WHOLE SERIES OF other technical
changes have also made life easier for
both babies and parents. An elastic waist,
Velcro fasteners and improved materials
both inside and out are all product devel-
opments that have made the diapers bet-
ter, simpler for parents to use and more
comfortable for babies to wear. One
major step in diaper development was the
diaper pants that can be put on just like
regular underwear.
The modern baby diaper is a complex
product in which several layers of different
materials with different properties com-
bine to give the best possible function.
Today product development focuses on
much more than just the basic properties
of the diaper – to be dry and leak-free.
Now, it is just as important to adapt dia-
pers to a baby’s different stages of devel-
opment, and to see that the product is easy

to find in a store and easy to carry home.
[ 1 *2006 ] SHAPE SCA *23
TECHNOLOGY
The design of the diaper has become in-
creasingly important, and not just in terms
of its function. One example is the use of
exterior printing, such as with pictures, to
help stressed parents distinguish between
the front and the back of the diaper.
Another area that has increased in im-
portance over recent years is patent pro-
tection of products and innovations.
“It’s important to make sure that we
protect our own products and ideas as
well as keeping an eye on our competi-
tors, to make sure that they don’t infringe
our patent rights,” Ihrfelt says. 
RETAILERS’ PRIVATE
BRANDS ARE GROWING
 For diaper manufacturers today it’s
a question of adapting to the grow-
ing market for retailers’ private brands.
SCA sells its diapers under its own
brand names, such as Libero, Drypers
ILLUSTRATION: LEIF ÅBJÖRNSSON
and Treasures, but it also supplies com-
panies that want to sell diapers under
their own brands.
“It’s a question of being flexible as
different customers target different
market segments,” Ihrfelt says. “We
need to adapt the total product offer in
quality and price.”

MADE TO FEEL LIKE UNDERWEAR
 Fit is a key concept in SCA’s dia-
per design. And development work
doesn’t just take place in the labo-
ratory – focus groups and custom-
er meetings are of great importance
when diapers are being developed.
SCA has two targets for its baby
diaper product development – a
product vision and a product range
vision. The product vision is that a
diaper should resemble, feel like and
be just as comfortable as a baby’s
underwear. The product range vision
is to have products that are suitable
for all stages of a baby’s develop-
ment. A key word that keeps turn-
24* SCA SHAPE [ 1 *2006 ]
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FUNCTIONAL DESIGN � � � � � � ��� � � � � � ��� � ���
�� � � ��� � ��� �
Topsheet and barriers Back sheet
Fastening system
6 1
7
Acquisition
layer (loft)
5
Leg elastics
2
4
Absorption core
3
Waist elastics
1. A breathable back sheet prevents leakage and gives a soft feel.
2 and 3. Leg and waist elastics also help to prevent leakage.
4. The absorption core absorbs everything that lands in the diaper. In modern
diapers, the absorption core mainly consists of super absorbents.
5. The acquisition layer, or the loft, helps to quickly transport the diaper’s
contents to the absorption core.
6. Topsheet and barriers contribute to a dry feel.
7. New Velcro fastening system makes it easier to fasten the diaper.
ing up in SCA’s diaper design is fi t. aper in 2005. A new pattern on the
“We have a legacy to uphold when surface of the diaper creates a capil-
it comes to fit, and this goes back to lary effect that gives quicker absorp-
the 1970s when we introduced the tion and thereby a drier feel.
first body-shaped diaper on the mar- This year two new products have
ket,” Ihrfelt says. been launched, a pant diaper for
In today’s SCA diaper, the T-shape slightly older children for when it’s
has been enhanced with an anatom- time for potty training, and dia-
ically shaped absorption core and per pants for older children who are
elastic leg openings. prone to bedwetting.
Development work is often carried SCA’s development work is carried
out in project form, the primary con- out not only in the laboratory but al- �������� � ����� ��������� ������� �������� �� ��� ���� �� ���
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nities. An example of this is the new er meetings, where children and par- ��� �� ���� ����� ������ ��� ������� ��� ���� ���� ���� ������
absorption technology that has been ents are given the opportunity to try
developed to upgrade the Libero di- out new products.
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
SCA INSIDE
Focus on growth markets at
SCA’s Capital Market Day
 Good opportunities for higher op-
erating surplus margins and expan-
sion in the world’s growth markets
were the main message at SCA’s Cap-
ital Market Day in September.
Price pressure and stagnating growth
in consumption in the OECD region,
plus rapid growth in developing coun-
tries with an expanding middle class –
add to these an aging world population
and you have a few of the internation-
al trends affecting SCA, which served
to start off the presentation when SCA
held its Capital Market Day in early
September at Moderna Museet, Stock-
holm’s Museum of Modern Art.
THE INTERNATIONAL overview al-
so clarified the major challenges for
SCA: creating value in mature mar-
kets and growing profitably in devel-
oping markets, all while facing great-
er competition.
SCA’s CEO Jan Åström and other
members of senior management had
a positive message to convey based
on these challenges: SCA sees good
26* SCA SHAPE [ 1 *2006 ]
SCAs CEO
Jan Åström believes
there are great
opportunities
in growth markets.
opportunities for growth and im-
proved margins in the years ahead.
This applies to all business areas –
forest products, tissue, personal
care and packaging.
“We can strengthen our market
positions considerably through
strategic investments, selective
acquisitions and divestments with-
in the framework of our business
areas,” Åström said. “We also see
very substantial growth opportu-
nities in three regions outside our
traditional main markets.”
ÅSTRÖM REPORTED that SCA’s
operating surplus margins improved
during the last 12 months to over 14
percent. At the same time, SCA sees
potential for improvement of 2 to 3
percentage points over the next few
years from the present level, an es-
timate that Åström called relatively
conservative.
“For instance, we have not includ-
ed compensation for the dramatic
rise in energy prices in recent years.
INVESTMENT ON THE SCA IN CANARY
WAY IN MOSCOW ISLANDS
“WE CAN  SCA intends to start a facility for SCA IS ACQUIRING the Canary
manufacturing and converting tis- Islands tissue converting company
STRENGTHEN sue in the growing Moscow region. MAPACASA, with a converting
OUR MARKET This investment is expected to
capacity of 9,000 metric tons of
amount to about EUR 54 M.
POSITIONS finished goods.
Provided the necessary permits
CONSIDERABLY are obtained, production can start “The deal gives us the opportuni-
ty to improve service to our custom-
THROUGH at the beginning of 2008.
STRATEGIC The reason for the investment ers thanks to local production and
is the growing market for tissue in increased efficiency in the supply
INVESTMENTS, Russia, with annual growth of 7 to chain,” Ole Terland, president of
SELECTIVE 9 percent. SCA’s Zewa brand has a
SCA’s European tissue operations,
leading position in tissue in Russia,
ACQUISITIONS said at SCA’s Capital Market Day
with about 40 percent of the mar-
AND DIVEST- ket in Moscow and an even higher in Stockholm.
MENTS WITHIN share in St. Petersburg. MAPACASA has two tissue con-
THE FRAME- verting lines with a focus on both
the consumer goods and Away-
WORK OF
from-Home markets as well as
OUR BUSINESS
AREAS.”
logistics facilities in Gran Canaria
and Tenerife. Sales in 2005 totalled
EUR 9.7 M. The company is locat-
ed in Las Palmas on Gran Canaria
and employs around 40 people.
That said, there is an upside in the “With a combination of syner-
form of a continued improvement in gies, we reach a stronger position
in the tissue market in the region,”
PHOTO: GETTY IMAGES
the market situation.”
Terland said. “SCA has strategic
THE STRONG MARGINS are the partnerships that will further
result of cost-savings program, fur-
benefit from our MAPACASA
ther efficiency enhancements in the
value chain and new product inno-
acquisition.”
vations and offerings.
Tree stumps tested as biofuel
A separate item on the program,
“Opportunities in Growth Markets,”
underscored the importance of the
world’s developing countries for  Growing demand for biofuel has led tree stumps on a clearing in Västernorr-
growth at today’s SCA. Growth mar-
SCA to now test tree stumps as a fuel. land County. The stumps were removed
kets still account for a small share of
Group sales, but the percentage is
“We estimate that tree stumps from all using an excavator with a special attach-
rising steadily, increasing from 8 per- around Sweden could give as much as 5 ment and will be used as a biofuel for a
cent in 2000 to 14 percent in 2005. terawatt hours of fuel each year,” says trial period at Ortviken Paper Mill.
Åström said SCA sees growth op- Bertil Leijding, head of Norrbränslen. “We want to investigate whether we
portunities primarily in three mar- “Stumps are clearly an interesting op- can use the resource that stumps rep-
kets: Eastern Europe, Latin Ameri- tion in order for us to meet the demand resent,” says Per Anders Hedström,
ca and Asia, mainly China.
from internal and other fuel customers, head of development at Norrbränslen.
“For the Group, we expect annu-
al organic growth of 3 to 4 percent,
but also obviously so we can avoid us- “We will evaluate the technical, eco-
which will be driven, among other ing industrial raw materials for fuel.” nomic and environmental aspects of
things, by high growth within Per- At the start of the summer, SCA handling stumps. We have great hopes
sonal Care,” Åström said. Forest Products tested the harvesting of that stumps are something to invest in.
[ 1 *2006 ] SHAPE SCA * 27
 
SCA INSIDE


GREEN HEADQUARTERS
SCA Americas headquarters, in
Tork replaces


t
Philadelphia’s Cira Center, was the

oduc first mainstream corporate head-

Mexican brands
ENA pr
quarters to be LEED Commercial

New T
Our man in

er
Hongkong Mathias

g
Interiors (LEED CI) certified and

l ar
Fridholm.

h
awarded with the LEED-CI Gold

to reac p
plaque. These distinctions came in

gr ou recognition of more than 30 sustain-

target
able strategies implemented in the
completion of the interior space proj-
ect. LEED-CI is the recognized stan-
dard for certifying high-performance
green interiors that are healthy, pro-
ductive places to work, are less costly
to operate and maintain, and reduce
the environmental footprint.
“The SCA headquarters truly
does set the standard for innovative,
sustainable workspace design in the
Philadelphia region, emphasizing
inclusiveness and social responsi-
bility,” says Jill Kowalski, Delaware
Valley Green Building Council ex-
ecutive director.
NEW PAPER GRADE
 SCA Packaging Aschaffenburg in
Germany is producing a new, inno-
vative paper grade called Herculight.
The clear trend within the corrugated
SCA TIMBER’S MAN
IN HONG KONG
 With annual growth of about 10 percent,
China is an expanding market, to say the least.
One of the many companies in the country
to benefit from this growth is SCA Timber,
whose man in China lives in Hong Kong and is
named Mathias Fridholm.
“We work with processing wood, among
other things,” says Mr. Fridholm. “My job is to
develop and coordinate these projects. We’re
also exploring opportunities to buy wood
products in China to supplement our product
program.”
SCA Timber also sells sawn wood products  Since this spring, SCA Mexico’s away-from-home brands
from sawmills in northern Sweden to furniture Floresta and Bénefit have been replaced by Tork. The brand
manufacturers in China, Vietnam and Thailand. change is part of SCA’s strategy of aiming to increase the
AFH market share from 11.9 percent in 2005 to 18 percent by
2010. The Mexican AFH market is currently estimated to be
Thermoformed worth 158 billion Mexican pesos (EUR 11 billion). SCA Mexi-
co’s new product portfolio now covers all quality segments

Tena Lady Mini

 The incontinence product TENA
Lady now has a little sister –
TENA Lady Mini Magic. The prod-
uct, geared to consumers with minor
urine leakage problems, is the small-
est product of its type. It has been
launched in several countries in Eu-
rope and in the U.S. and is sold main-
ly in retail stores and drustores.
“Three-fourths of all women with
minor urine leakage do not use spe-
cially adapted protection,” says
Bengt Eriksson, brand manager for
Magic is sporting a new
discreet packaging.
TENA at SCA. “The new product
meets these women’s need for
security, dryness and discretion. Mini
Magic is eight times drier than nor-
mal protection. Our aim is to reach
this target group, in part by play-
ing down the problem. We’ve also
made the packaging more discreet,
with the product information on a
detachable plastic strip around the
package. Without the strip you get
an attractive and discreet package
for the bathroom shelf.”
market for lighter-weight and higher-
performing papers was the driver for
SCA Containerboard to rebuild its
paper machine in order to produce
Herculight, a new fluting in the lower
weight range. Using the latest paper
technology, this new grade has been
designed to provide the optimum ra-
tio between box strength and paper
substance involved.
Herculight is a flexible solution for
a wide range of packaging solutions
such as presentation packaging,
standard boxes or complex die cuts.
It has an excellent runnability on all
corrugators, from traditional ones to
the latest high-speed technologies.
plastic debut
 SCA Packaging Pila in northwestern
Poland is the home of SCA Packaging’s
first thermoformed plastic plant in
Europe. “The main focus of the new
thermoformed facility at Pila is to be-
come the preferred supplier to the many
consumer product manufacturers in
Europe that have a big need for blister
packs in their product lines,” says Brian
Price, project manager for the initia-
tive. “We have a list of more than 20
companies that we would like to have
– budget, value and premium. The brand switch was kicked
off with a big launch party in Mexi-
co City. At the party, 300 guests en-
as customers, and we are working hard
joyed a unique fashion show with
to get there, especially through existing models wearing dresses made from
relationships in the US and Europe.” Tork Premium, Tork Advanced and
One thermoforming machine is cur- Tork Universal qualities.
rently in place at Pila, but there are am-
bitious expansion plans for the future. logically we expect our thermoformed
“Thermoformed plastic travels well,” plastic business to grow substantially
Price says. “It is a light, compact pro- in the next few years.”
duct, and therefore a large number of The new facility in Pila already has
units can be shipped in one truck. From an important customer on the books –
Pila we will be able to make shipments the American chewing gum producer
across Europe at competitive prices, so Wrigley.

28* SCA SHAPE [ 1 *2006 ] [ 1 *2006 ] SHAPE SCA * 29

 CAMERA

PHOTO: GETTY IMAGES

A box full of sunshine


Easy to carry
Once the grapes are harvested, winemakers
need to find the right packaging to attract
consumers to purchase the finished product.
In the last few years, there has been a
strong increase in different kinds of corru- Package made with
SCA’s soft paper handle,
gated board packaging at the expense of tra- Champion Handle.

ditional wine bottles.

SCA’s products include a package that can
hold one, two or three bottles of wine
equipped with a special handle made of pa-
PHOTO: GETTY IMAGES

per, Champion Handle. This handle is more

environmentally friendly and softer on the
hand than handles made of plastic.
ERIK ARONSSON

30* SCA SHAPE [ 1 *2006 ] [ 1 *2006 ] SHAPE SCA *31

 CAMERA

Grape harvest in St. Tropez

on the French Riviera.

Above: SCA’s packaging solutions

can be adapted to the special needs of
its customers. Below: Vineyard in
autumn raiment in Bordeaux, France.

PHOTO: GETTY IMAGES

PHOTO: GETTY IMAGES

32* SCA SHAPE [ 1 *2006 ] [33 * SCA]SHAPE

1 *2006 SHAPE[SCA *33]
1 *2006
SHAPING A VIEW
e
nergy developments will have a profound im-
pact on the EU pulp and paper industry and
will set the agenda for the years to come. The
costs of energy for our industry have in many
places surpassed the costs of personnel, being
second only to raw materials costs. They vary
from mill to mill and grade to grade, having on average a
share of 15-20 percent of all production costs. The current
increasing energy bill explains many recent corporate re-
structuring announcements. They influence today’s profit-
ability, but also the investment climate of tomorrow.
IF ENERGY COSTS CONTINUE TO SOAR in Europe,
and to higher levels than in competing regions of the world,
they will become one of the prime allocation factors of paper
production capacity. Europe’s energy policies are therefore of
critical concern. A clear signal is needed from the European
Union, to keep and attract investments in the energy inten-
sive industries, as well as short-term measures to limit the
consequences of energy costs increases. The energy-inten-
sive industries constitute one of the pillars of the European
economy, playing a fundamental role in meeting the growth
and employment objectives of the Lisbon Strategy. Market
and regulatory conditions must therefore create a predict-
able business environment to stimulate investments both in
energy production and in the energy-intensive industries.
The pulp and paper industry is addressing these trends.
Efficiency programs are run in every European paper mill to
reduce costs and to achieve the optimum energy mix.
Companies and paper industry associations, such as the
34* SCA SHAPE [ 1 *2006 ]
Teresa Presas
Managing Director
CEPI Confederation of European
Paper Industries
“AS EINSTEIN SAID, ONE
CANNOT SOLVE THE PROBLEMS
OF TODAY BY THINKING
IN THE SAME WAY AS WHEN
THEY WERE CREATED.”
ENERGY
A BURNING
ISSUE
Swedish Forest Industry Federation, are stepping up their
efforts to draw political attention to the needs of the in-
dustry. In Brussels, the Confederation of European Paper
Industries (CEPI) works with the EU institutions toward
the best policy solutions.
An EU-wide innovation programme, the Forest Based
Sector Technology Platform, has been set up and has a fo-
�����������������
cus on improving energy efficiency and renewable energy
production. Three issues are central to the energy problem:
 The European energy markets – a radical change from a
sellers’ to a balanced supply-demand market is needed.
 The EU emission trading system – a combination of the
Emission Trading Scheme and an ill-functioning power
market has even further increased electricity prices.
 Bio-energy and raw materials – subsidies should not dis-
���������������
courage the use of wood for value-added industrial prod-
ucts.
The European Commission has created a special High
Level Group on Competitiveness, Energy and Environ-
ment that aims at ensuring positive synergies in those
three areas, and contributing to better regulatory coher-
ence among the related policies.
No small task indeed. Four national ministers, four EU ������������������������
commissioners and a select number of CEOs of compa- ���������������������������������������������������������������������������������������������
nies and civil organizations form this High Level Group. ��������������������������������������������������������������������������������������������
SCA’s CEO Jan Åström is one of the invited members of �������������������������������������������������
this group. Experts from SCA, SFIF and CEPI provide the
�������������������������������������������������������������������������������������������
support from the European pulp and paper industry.
���������������������������������������������������������������������������������������������
Energy and energy-impacting policies are at the top of
��������������������������������������������� �������������������������������������������������
CEPI’s agenda.
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