Abstract
In January 2009, Hudson Lee, President of Tetra Pak China, was looking over a cliff. The company had invested €65 million to expand its packaging plant on Hohhot, the capital city of Inner Mongolia, China, on top of its initial 2004 investment of €50 m. The expansion plan was based on the inexorable rise in milk consumption in China – growing from 16 to 23 million tons between 2005 and 2012. This was a market with huge opportunities for growth, and powerful domestic brands to reach out to China’s 1.4 billion consumers. The plant initially designed to produce 20 billion cartons a year now had the capacity to process 60 billion cartons.
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Notes
- 1.
UHT milk is the sterilization of milk by heating it for an extremely short period, around 1–2 s, at a temperature exceeding 135 °C (275 °F), which is the temperature required to kill spores in milk, giving it a long shelf life of around 9 months. Pasteurization is a process of heating a food, usually liquid, to a specific temperature for a predefined length of time and then immediately cooling it. This process slows spoilage due to microbial growth in the food. Unlike sterilization, pasteurization is not intended to kill all micro-organisms in the food. Instead, it aims to reduce the number of viable pathogens so they are unlikely to cause disease. It has a refrigerated shelf life of 2–3 weeks.
- 2.
The scandal, also known as the ammonium hydrogen dimmer crisis, caused widespread distrust of all domestic dairy brands including Mengniu and Yili. Facing rapidly growing demand for dairy products in China, some dairy farmers and raw milk collection stations adulterated the raw milk with melamine in order to boost protein levels, and hence the collection prices. Melamine contains 66% nitrogen but is toxic to humans. Like most other countries, the State and Provincial Food and Drug Administration in China used the level of nitrogen as an indicator of the level of protein, which is difficult to measure directly. This practice had apparently been widespread amongst dairy farmers for some time due to their lack of knowledge about the toxic effects on humans, especially when the milk was used in formula for infants. In autumn 2008 six infants died from kidney damage, and more than 800 were hospitalized. It is estimated that adulterated milk products affected over 300,000 people, and consumers switched to more expensive but trusted international brands.
- 3.
When the paper pulp is removed from the waste, a mixture of plastic and aluminium remains. This use to fetch a rice of around 1200/ton. In 2007, Tetra Pak cooperated with Shandong Tianyi Plastic Co. Ltd. and Shangdong Liaocheng University to develop a Chinese version of PolyAl, the technology to separate the plastic and aluminium. In 2009, PolyAl separation technology was commercialized in China. As a result, the aluminium and plastic components can be separated with a purity of 99.5%. The separated plastic grains can be sold at a price of about RMB 2000/ton, and the aluminium can be sold at about RMB 9000/ton.
- 4.
HB clad plate technology: HB clad plate is made by crushing used Tetra Pak cartons and processing the material with thermo-compression. HB clad plate can be manufactured into various products, such as rubbish bins, said to be nice looking, endurable and low in cost.
Acknowledgement
We would like to acknowledge the financial support of WWF and University of Exeter Business School, and a number of interviewees with special thanks to Carol Yang in Tetra Pak China. We also acknowledge the writing support of Dr. Anna Trifilova and Mrs. Yu Huang.
Disclaimer
This case is written, presented and intended to be used as the basis for class discussion rather than to illustrate either effective or ineffective handling of a management situation. It is currently under development as part of a wider research project. The authors disclaim all responsibility should this case or its contents be used for any purposes other than its classroom use.
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Appendices
Appendices
Exhibit 4.1: Sales Volume of the Four Major Dairy Producers in China (2001–2010)
Data source: annual reports for Yili, Mengniu, Bright and Sanyuan
Exhibit 4.2: Dairy Supply Chain Structure in China
Exhibit 4.3: Packaging Made by Tetra Pak
Exhibit 4.4: Milestones for Tetra Pak in China
- 1979:
-
The first Tetra Pak filling machine was put into use in Guangzhou.
- 1985:
-
Tetra Pak (China) Co., Ltd. was established in Hong Kong.
- 1987:
-
The Beijing Plant started production.
- 1989:
-
The China Sweden Training and Product Development Centre was established
- 1991:
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The Foshan Plant started production.
- 1993:
-
Two offices were established in Shanghai and Beijing.
- 1994:
-
Three offices were established in Guangzhou, Chengdu and Xiamen.
- 1995:
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An office was established in Harerbin.
- 1996:
-
The Kunshan plant started production.
- 1997:
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The Kunshan plant was opened formally. The Foshan plant got the ISO14001 certification. The Beijing plant got the ISO90021 certification.
- 1998:
-
Two offices opened in Nanjing and Xi’an. The Kunshan and the Beijing plants got the ISO14001 certification.
- 2000:
-
Tetra Pak (China) Co. Ltd. was moved to Shanghai.
- 2003:
-
The Shanghai Pudong Processing Equipment centre was established.
- 2004:
-
The second plant in Beijing was opened formally.
- 2005:
-
The 1000th filling machine was put into use.
- 2011:
-
The Tetra Pak China beverage R&D centre was opened formally in Shanghai.
- 2012:
-
Phase two of the Hohhot plant was accomplished and put in production.
Exhibit 4.5: Tetra Brik and Tetra Fino
Exhibit 4.6: Structure of a Tetra Pak Carton
Exhibit 4.7: Location of Tetra Pak China’s Recyclers
Technology | Application of renewed materials |
|---|---|
Hydro-pulping | Renewed paper, materials for plastic and aluminum items |
Wood Plastic Composites | Garbage bin, Indoor furniture, gardening, industrial |
pallets Chip-tech | Garbage bin |
PolyAl de-lamination | Plastic granular and aluminum power |
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Jia, F., Wu, Z., Gosling, J. (2019). Tetra Pak: Sustainable Initiatives in China. In: Lenssen, G.G., Smith, N.C. (eds) Managing Sustainable Business. Springer, Dordrecht. https://doi.org/10.1007/978-94-024-1144-7_4
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