If you are ever in need of proof that big things come in small packages, look no further than Essentra. The global manufacturer and distributor of simple, yet essential, components for an array of industries currently sits proudly on the FTSE 250 index, testament to the fact that even the smallest parts have a big role to play across all industry.
While the name Essentra may be less than 5 years old, the company is one that is accustomed to reinvention. Its roots lie in Europe, where the Austrian company Bunzl established its manufacturing operations in the northern English town of Jarrow in 1940. Acquisitions in the 90s saw the company foray into markets like pipe protection and self-adhesive tear tape, but it was the 1997 acquisition of filter technology firm American Filtrona Company that created the largest impact, including the adoption of the name Filtrona. It was an identity the business kept until 2013, when Essentra was deemed a more fitting title.
“The name change reflected our growing commitment to areas beyond filters,” PT Sreekumar explains down the line from Essentra’s regional headquarters in Singapore. Today our interests lie across health and personal-care packaging, component solutions and filter products,” he continues, naming its 3 global divisions in the order of revenue each contributes to the group. Essentra may supply a broad industrial base of customers across its 3 business pillars, but it is united by one common theme: each provides small yet vital components to the industries they serve. It’s clear that Sreekumar, who has been with the company since the pre-Filtrona days, has enjoyed the ride.
From flagging to flagship
A tobacco-industry veteran who previously worked for Indian tobacco manufacturer Godfrey Phillips, he joined the company in 1995 as CEO for its joint venture in India and hasn’t looked back.
Currently he is the managing director of the Filter Products division, and has extensive broader business experience in the Asia region (including the Pacific and the Middle East). “It has definitely been a period of immense change, and there have been
a lot of highlights along the way,” he says.
One of the first to come to mind is the incredible turnaround he achieved in Indonesia. “In 2001, I was given responsibility for Indonesia — partially, I think, to test my capabilities in a role outside of India.” he explains.
Presented with a loss-making unit, Sreekumar recalls how it took a good 3 to 4 years of hard work to reverse the facility’s fortunes. “The best way to describe our Indonesian filters operation today is that it is one of the largest in the group, both in terms of revenue and margin. Since 2005, it has been seen as one of the company’s flagship facilities,” he explains, with more than a hint of pride in his voice.
A key initiative that Sreekumar introduced was to recruit and mentor a local general manager with not only relevant language skills but also an understanding of Indonesia’s unique cultural sensitivities. Previously, the operations had been run by employees who had relocated from the UK. “The general manager really was the gentleman who made the impossible happen, and I am happy with the role I played in mentoring and working with the team to achieve that,” he says. It is hardly surprising to learn that the very same year the Indonesian operation became profitable, 2005, Sreekumar was appointed to his current role.
As The CEO Magazine continues the conversation with Sreekumar, it becomes obvious that Indonesia has been a microcosm for the fortune of Essentra’s operations in Asia–Pacific as a whole. “Asia was previously a very small part of the group,” he explains. If we go back to 2002, the region was only contributing around 10% of the revenue of the global Filter Products business by origin. Today, Asia accounts for more than 70% of global Filter Products revenue,” he states. Sreekumar and his team have worked tirelessly over the past 15 years to expand the business in the region.
“I think we are an example of how a committed focus can really support fast growth in a market,” he says. Along with organic expansion, which has seen the company spread its reach into new opportunities and new markets, with a focus on improving existing products, Sreekumar also identifies acquisitions as an important element of the strategy.
Its most recent acquisition in the region, the 2016 purchase of the pharmaceutical packaging assets of Indian company Kamsri Printing & Packaging was, for him, a return home. “Kamsri provides us with an entry point into the attractive pharmaceutical and healthcare industries in India,” Sreekumar comments. With major transformation comes restructure, and Essentra has been no exception. “There has been a large-scale revamp of our business model,” he acknowledges. “The way that we approach the market has changed.”
Innovative thinking in filters
No longer what he calls “a simple manufacturer”, today Essentra is an innovator, and proudly so, with 4 strategically located R&D centres, including one in Surabaya, Indonesia. “With a focus on innovation that simply didn’t exist previously, we’ve been able to move into business partnering, which offers so much more than just manufacturing. It’s what I think of as a consistent solutions provider to create substantial value for all stakeholders. We’re not perfect and there’s more we can do, but it represents a real step-change from where we were in the past,” he elaborates.
This fundamental shift has helped drive the filter business on a global platform, as well as the business in Asia overall. Clearly, Sreekumar is relishing the challenge of hitting targets across his realm of responsibility.
We have really worked on fostering a very open, honest and transparent relationship with our clients, emphasising our ability to add substantial value.
Innovation now echoes through the corridors of Essentra’s offices around the globe, and Sreekumar is proud of the role he’s played in making this a reality. “Thanks to our research and development capabilities and innovative thinking in filters, we are able to work in partnership with our clients to develop new products and deliver them to market,” he says. While client confidentiality prevents him from delving into too much detail, he does admit that this transformation has allowed Essentra’s Filter Products division in particular to buck an unwanted trend.
“The tobacco market is declining, and in this declining market we have actually managed to grow the business,” he says. In 2016, the company reported a global filter market share of 5.5%. “We have really worked on fostering a very open, honest and transparent relationship with our clients, emphasising our ability to add substantial value,” Sreekumar says, explaining just how this has been achieved. “Our role as one of the leading filter suppliers has provided enormous support to the tobacco industry, in launching new products and processes which help the manufacturers fulfil a large part of the regulatory requirements along with the changing expectation of their customers,” he says.
Challenge & change
Filters are an industry segment where Essentra is positioned as the only independent supplier in the world, and Sreekumar is more than aware that its biggest competition is actually its customers themselves. The fact that Essentra has managed to win business that tobacco companies previously did in-house is a source of enormous pride. That said, 2016 was a year of challenge and change for Essentra, and the Filter Products division was not immune to these issues.
As Sreekumar explains: “On the one hand, the acknowledged capabilities of our filters business continued to be successfully commercialised, and we maintained our track record of supporting customers in the development of bespoke solutions to their specific needs. On the other, we were impacted by certain short-term issues, including the maturing of a sizeable innovative filter contract and de-stocking in the Chinese market.”
Following the appointment of a new group chief executive in January 2017, Essentra is currently undertaking a wholesale strategic review of the company to provide a clear and objective assessment of the current status and positioning of the various business activities within the organisation, together with its future potential.
The output of this review will be a clear corporate strategy aligned to a 3-year plan, which provides a data-driven view of how Essentra intends to drive future growth and thus sustainable value for its shareholders. Declining to pre-empt the outcome of the review, Sreekumar is nonetheless enthusiastic about the possible strategic options for both the filters business specifically, and for Essentra’s presence in Asia more generally, where he sees “3 potential pillars.”
Pillars of potential growth
“Look at all the favourable factors that are occurring at the moment. Economic development, the fast pace of growth, the increasing disposable income of consumers, the improving life expectancy, the diversifying socioeconomic demands, the changing educational and market outlook; all of this contributes to improving our business potential in the region,” he explains.
There are a lot of people in the world who are smarter than us and we must acknowledge this.
The second pillar is Asia as a manufacturing base. “It’s hardly a secret that we are in a business that is rather cost-intensive,” he admits. “The cost of manufacturing in a lot of countries in Asia is much more economical than their Western counterparts. In addition, in the region today the employees are equally competitive, equally educated, and equally passionate. Substantial employee productivity is an advantage when operating a manufacturing inventory business,” he says.
The third and final pillar is Asia as a sourcing centre. “There are a lot of people in the world who are smarter than us and we must acknowledge this,” he says. “We don’t necessarily need to manufacture absolutely everything. When others are far superior in the manufacturing of certain products, rather than continuing to produce the products ourselves, we can go to market and source them instead.”
Of course, should further opportunity for a smart acquisition or two present itself in the future, Sreekumar and his team “would be very open to that also,” he acknowledges.
A shared vision
On the subject of ‘team’, Sreekumar is focused on building employee engagement and developing people behind a set of core principles that he believes are fundamental to a winning organisation, thus making the most of the considerable talent that Essentra has. He views these principles as key to binding Essentra cultures, and emphasises just how important a role such values play in his leadership philosophy.
“I am a great believer in shared vision, values and goals because without any of this, nothing goes smoothly. And, obviously, this needs to be achieved through a shared language. Our company is very diverse and operates in a variety of different environments. So this vision becomes our common working language,” he explains.
He identifies openness, honesty and humility as important characteristics for a leader to possess as he navigates relationships with both external and internal stakeholders. “In a global company, you are able to give the team a lot of freedom to operate and, at the end of the day, it is the team that wins the game. So that is the underlying philosophy by which I operate the business,” he says.
Do a quick search and you’ll be inundated with synonyms for ‘simple’. Basic, easy, plain, straightforward, uncomplicated, and the list goes on. Even ‘easy-peasy’
and ‘child’s play’ make the list, suggesting something that requires little effort or a rudimentary understanding. By creating the simple yet essential parts that make the world go round, Essentra is proving that ‘simple’ is a word worthy of a much more profound definition.
Essentra at a glance
Health and personal-care packaging
With evolving regulatory requirements, and an ever-increasing awareness surrounding the authenticity of pharmaceuticals, Essentra’s health and personal-care packaging solutions range from cartons to pressure-sensitive tapes, leaflets, foils, labels and brand protection technologies, which offer consumers peace of mind that the end product they receive is genuine. More than 1.5 trillion products carry Essentra brand protection technologies every year.
Percentage of overall group revenue: 42.8%
Component solutions
Europe and Africa generate more than half of the revenue for Essentra’s component solutions division (56.1%) and the electronics, fabrication machinery, electronics,
and oil and gas sectors are its largest clients. It manufactures and distributes plastic injection moulded, vinyl dip moulded and metal items, and promises same-day dispatch of more than 2 million products via an operating network that spans 29 countries.
Percentage of overall group revenue: 30.2%
Filter products
Along with standard filters, Essentra Filter Products is a global name in the supply of special filters for the tobacco industry and has also diversified into e-cigarette products. Its customer base includes the principal multinational tobacco companies. Currently, Essentra Filter Products has 45 patents and 13 registered trademarks.
Percentage of overall group revenue: 27%