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STRATEGIC PLANNING TCIL - a case study

Food industry and Safety

2 July, 2009 : New Delhi

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Hot Rolled Coils from Tata Steel’s Hot Strip Mill

Tin Mill Black Plate Coils produced at the Cold Rolling Mill

Tinplate / TFS Sheets produced at the Electrolytic Tinning Line

Can fabricators/ Closure Makers

The Tinplate

Company of India Limited

Food Processors / Fillers

Value ChainAssess your role in the industry supply chain

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

Retailers / Consumers

• Incorporated in 1920

• Single product co.

• End Uses of tinplate:

• Edible Oil cans

• Proc. Food cans

• Beverage cans

• Aerosols

• Paints & Pesticides cans

• Crowns & Closures

• …….

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Available Alternatives Criteria of Choice

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

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

Tinplate belongs to packaging industryIdentify the industry where you compete

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Hard facts….Know your strengths

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

Rigidity• Excellent printability

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

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

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STRUCTURE CONDUCT PERFORMANCE • Demand driven

by food & beverage

• Research in

Steel • Strong

Regulatory Mechanism

• Light

weighting; • Shapeablity

• Steel research

with can-maker • Cost

competitiveness • Environmental

and hygiene concerns

There is growth / consolidationBecome World Class

Implications foran Indian player

Global PerspectivesDefine / stretch the boundaries of your business

World:

4.2mt 3.3mt

1.4mt1.4mt

3.2mt

1.0mt

1.0mt

15.5 mtWorld:

4.2mt 3.3mt

1.4mt1.4mt

3.2mt

1.0mt

1.0mt

15.5 mt

7Traditional Kirana

Value added Kirana

Self Service Kirana

Single departmental store

Small Organized Retail

Organized Retail

Hyper Malls & Markets

Value - for - MoneyShopping Ambience

Service

Hygiene ChoiceRetailin

g is growing

in processed foods

India - Interesting Consumer Trends too

Changing eating habitsWorking women

Healthy food‘Green’ consumers

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

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Strategic Planning involves…

Running the Business

Changing the way we do business

We have used different tools over the years…..

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

•Enables to consider cause-and-effect relationships between different key performance indicators (KPIs) of a BSC

Strategy Map / BSC

• Four perspectives of BSC:– How do we appear to

shareholders? (Investor-friendly)

– How do customers see us? (Customer Perception)

– What must we excel at? (Strategic focus)

– Can we continue to improve and create value? (Business Sustainability)

• Helps with a picture of where the company stands-and where it's headed.

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Strategic Planning Process

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Envisioning

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

Evolved over the years:Downstream steel processing unit

Provide cost effective metal packaging solutions for processed edibles

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Strategy Alignment Process

Value added

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

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

Meet community expectations and changing Environmental requirements.

Value added

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

Creation of World class workforce & retaining talent

Acquiring and retaining talent

Green future

Full product range manufacturer in India. Downstream presence.

Product range customer retention and Business development.

Threat from SubstitutesServicing packaging

needs

Reliable and cost effective

Sourcing HRC & physical proximity to Tata Steel

Strategic SourcingVolatility in raw materials

Value added and cost effective

Largest Manufacturing facility in Asia. Scale of OperationsIncreasing Expectations

of shareholders

Value added and cost effective

Knowledge base of Indian marketsProcessing costs HRC from Tata SteelPan India presence Consistently exporting 25-30%.

Cost Competitiveness. .

Competition from Tinplate manufacturers.

Value creation

Core Competency

Strategic Advantages

Key Success Factors

Strategic Challenges

Vision Element

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Exciting & safe workplace

Exemplar in Corporate sustainability

Supplier of choice

Growth & Competitiveness

STRATEGIC GOALS

• Frequency rate, Severity rate, Severity Index, Near Miss

• ESI• Training Satisfaction Index

•Develop engaged workforce•Attain zero reportable accidents

Greener future

Service packaging

Value Creation

VISION

•Role Model in Corporate Sustainability

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

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

STRATEGIC OBJECTIVES

• Corporate Sustainability Index• MBE Score

• Downstream Sales %• CSI• Exports as a % of Operations

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

MEASURES

Strategy Alignment Process

Strategic Challenges

Strategic Objectives

Corporate BSC

Functional BSC

KRA

KPI

Cascade /

alignment

Reviews

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Enhance shareholder value (E1)

Shareholder/ Lender/ Promoter (E)

Role model in Corporate Citizenship (D1)

Government, Community & Society (D)

Develop engaged workforce (C2)Employee (C)

Ensure raw material availability for sustainability of operations (B1)

Supplier (B)

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

Build international markets with a strategic intent (A2)

Increase engagement across domestic industry (A1)

Customer (A)

11-1210-1109-1008-09Strategic Action planResult

Ref.Benchmarks/Comparisons

TargetActualLag/Lead

Type of Measure

UOM

Strategic MeasuresStrategic ObjectivesStakeholder

Corporate BSC

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Benchmarking

• Annual Reports/Published literature

• Group companies

• Suppliers/Customer interactions

Area Level of Comparison Activity KPM / Processes affected Source / Mode Used

Industry Increase in speed of DR at Temper Mill CRM / ETP Process cost Unique Industry Optimization of consumption of chemicals at ETP ETL Store-Stock Cost CORUS OperationIndustry Development of DR-9 for specific Lug Cap

applications New Product / Application developed Imports at Oriental Cans, Mumbai

Marketing Competition Develop 5&3 Liter edible-oil consumer pack No. of Packaging Solutions Market Research / Survey

HR Group Companies Leadership assessment and Development Plan Leadership System Comparison with Tata Steel

CS Group companies

Reduction in procurement rates of A class items to be cost competitive Suppliers Management Best practices council of Materials

management for TIS Group companies Finance Group Cos. Reduction in cycle time for accounts closing Shareholders & promoters Comparison with TIS group companies

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90000 Capacity

0

50000

100000

150000

200000

250000

300000

350000

400000

97-98 98-99 99-00 00-01 01-02 02-03 03-04 04-05 05-06 06-07 07-08 ' Act08-09

60000

100000

140000

180000

TOP (McKinsey’s)

De-bottlenecking (Goldratt) &

Growth Plan (Arcelor / Nippon)

Total Productive Maintenance (TPM)

WIN (world class workforce)

ISO movement, Suggestion Box

Daily Work ManagementTo ramp to 379,000 MT

Building robust operational processes around world class practices

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Workers’ business skillsRisk Management processSuccession PlanningInclusivenessAffirmative Actions

Excellence AssessorsBaaN ERP and Lotus NotesBalanced Score CardsEnvironment Systems

Cadre of Business ManagersFinancial RestructuringCommunity DevelopmentExecutive Information Systems

People, Sustainability, Controls have been built

1999 2001 2005 2009

192000 2001 2002 2003 2004 2007

Customer and Market focus built on Industry and Company level strategies

Key Account Management (McKinsey’s)

Tinplate Promotion Council: International seminars and Award Nites

Business DevelopmentCustomer intimacy

Solutions focus

Consumer Mind Space

Key Account Management(McKinsey’s)

Long term position on

exportsBusiness

development

TINPLATE PROMOTION COUNCIL(↑ per capita consumption)

Company Level

Industry Level

Marketing refocus

….changing mindsets to industry development and international competition

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Can Fabricator

Steel Maker

TinplateSupplier

Food Processor /

Filler

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

Alliance with major can makers

Sales Orientation to Marketing focus

TPC Awards Nite each year..… a landmark in

this industry…. To promote innovation and

convenience

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Reaching down the value chain

Capabilities:Solution Center for differentiated value proposition

- started with printing / lacquering facilities

-next step: convenience features for tin cans or service center capabilities

- partnerships with fabricators for improved visibility

Can Fabrication

TATA STEEL TCIL Food

ProcessingRetailer / Consumer

Consumer research to understand consumer mindshare on packaging

Solution Center

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1997-98 2008-09

Operations 60000 MT +185000 MT

Employees 5000 ~1700

Market Share 16-18% ~35%

Exports (% of total sales) NIL 25%

EVA -ve +ve

The transformation…

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Rewards & Recognitions

JRDQV Award in

2007

CII-EXIM Prize in

2008

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Tinplate and Food Safety

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Understanding food safety

Tinplate product:

-- The Substrate (Steel base on which tin coating is done)

--Tinplate on account of Tin migration in packed food

--Lacquered sheets

Future Regulatory Challenges

Inputs to Strategic Planning

-- Abide by National and International Standards

-- Facilitate creation / alignment of national / international standards with BIS / ITRI

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Steel Substrate

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

Type L

Type MR

Type D

Standards are defined for allowable level of tin in food on account of tin migration

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

TCIL abides by US FDA Code Federal Regulation Section 21

Use of proper grade of Lacquers is based on requirement spelt out by filler who advises grade that is compatible with their food product

TinplateLacquered

Tinplate

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Addressing future Regulatory challenges

REACH (Registration , Evaluation and Authorisation of Hazardous chemicals) comes into enforcement in 2011 in Europe:

TCIL is partnering ITRI UK to develop an alternate Passivation system to will help omit Chromium passivation without impacting fitness for use

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Indian Food Processing Industry: Challenges and Food Safety

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India has potential to be Food Factory to the World

MilkLargest Producer

91 Mn T

F & V#2 in the world

129 Mn T (FAO)150 Mn T (NHB)

Food Grains#2 in the world

(218 Mn T)

Cattle / buffaloesLargest in the world

283 million

TEALargest Producer

(0.85 Mn T)Sugarcane# 2 in the world

(245 Mn T)

India produces 41% of world’s mango, 23% of Banana, 24 % of cashew nut, 10% of onion, 30% of cauliflower, 36% of Green Peas. India has 53% of world’s buffalo and 17% of goat, 8000 km of coastline

Source: FAO / NHB / Department of Animal Husbandry

Goat & Sheep182 million

FisheriesMarine: 2.7 Mn TInland : 3.1 Mn T

• 2nd largest arable land & divers agro climatic zones

• Largest livestock population

• Largest producer of milk, tea, pulses

• 2nd largest food producer

• 2nd largest producer of fruits & vegetables, rice, sugarcane

• 5th largest producer of eggs, wheat

• 6th largest producer of fish

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Though the industry is large in size, it is still at a nascent stage

Despite strong raw material base, dismal quantities are processed -– 2 % of the fruits & vegetables – 35% of milk– 26% of marine – 6% of poultry– 20% of buffalo meat

Less than 1.5% share in international food trade – main reason is the rejection of food products in the

developed countries on ground of environmental & safety standards.

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Food processing sector – a valuable link between Agriculture & Industry

Future growth of the food processing sector depends on adherence

to safety and quality standards!!!

Government’s commitment to Food Processing in its

Vision 2015: Action Plan for Food

Processing Industries in India -to triple market size (CAGR

10.6%)

Food Safety and Standards Act, 2006

unified 15 different food related laws.

4,600

8,200

13,500

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

10000

11000

12000

13000

14000

15000

2003-04 2009-10 2014-15

Mar

ket

Pote

ntia

l (IN

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n)

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Food processing industry – various stakeholders

Farmers / Producers /

feed producers

Food processors

Fillers / Packers

Consumers Wholesalers / Retailers

Storage operators

Food service outlets & caterers

Suppliers of equipment, cleaning & sanitization agents

Producers of pesticides, fertilizers & veterinary drugs

transporters

Producers of additives / ingredients

Government & institutions

Financial institutions

Academic & research institutions

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WTO Rules for Standard setting by member countries(Multilateral – public – mandatory for member countries)

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

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

Technical Barriers to trade (TBT)

Sanitary & Phyto-sanitary (SPS)

Trade Related Intellectual Property Rights (TRIPS)

United Nations(Multilateral – public – mandatory

for signatory countries)

International Organization for Standardization (ISO)

Collective standards (Sub sector networks, company networks & alike)

Standard Setting & Benchmarking

Global Food Safety Initiatives (GFSI) –recognized standards: HACCP, GAP, GHP, GMP, etc

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

We need to upgradeOrganic

farming

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Stakeholders’ Strategic challenges towards Food Safety & Quality

•Compliance to regulations•Traceability

Govt & institutions

•Safe & nutritious food•Quality sensitivity & awareness

Consumers

•Food Inspection•Traceability

Wholesalers /Retailers

•Connectivity (rail / road / air)•Cold chain infrastructure

Transporters

•Regulations•Skills / awareness (Quality Stds / Good Practices)

Packaging Industry

•Eliminate wastages•Skill development•Quality of raw materials

Food Processors

•Skills / awareness (Quality Stds / Good Practices)•Quality inputs (seeds / feed / fertilizers)

Producers / farmersStrategic ChallengesStakeholders R

esponsibility lies across the Food Chain

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Thank You

visit us @ www.tatatinplate.com