Tetra Pak

Åkerlund & Rausing

In 1929, Ruben Rausing and Erik Åkerlund established a food carton company in Malmö. Rausing, who had studied in New York at the beginning of the 1920s, had seen self-service grocery stores in the United States, unheard of in Europe at the time, and realised that pre-packaging was part of the future in food retailing as a more hygienic and practical way of distributing staple groceries. At the time, these were sold over the counter in cumbersome glass bottles or impractical paper wraps in most European countries. At the end of the 1920s, Rausing bought a run-down packaging factory in Malmö together with the industrialist Erik Åkerlund. Åkerlund & Rausing was the first packaging company in Scandinavia and eventually became a leading manufacturer of dry food cartons, producing various paper packaging for dry staple groceries.

Formation

By the early 1940s, Rausing (now the sole owner of the company) began developing dairy packaging that could compete with loose milk. Erik Wallenberg, an assistant in the Åkerlund & Rausing lab, came up with the idea to construct a tetrahedron-shaped package out of a tube of paper in 1944. On 27 March 1944, Rausing filed a patent for the idea. Rausing's wife Elisabeth reportedly came up with the idea of continuously sealing the packages through the milk while filling the tube in the manner of stuffing sausages. In 1946, the company introduced the first prototype tetrahedron-package filling machine.

Operating history

AB Tetra Pak was established in Lund, Sweden, in 1951 as a subsidiary to Åkerlund & Rausing. In May of that year, the new packaging system was presented to the press, and in 1952, the first filling machine producing 100 ml cream tetrahedrons was delivered to Lundaortens Mejeriförening, a local dairy. In subsequent years, tetrahedron packages became more and more common in Swedish grocery stores, and in 1954, the first machine producing 500 ml milk packages was sold to a Stockholm dairy. That same year, the first machine was exported to Hamburg, Germany, soon to be followed by France (1954), Italy (1956), Switzerland (1957), and later the Soviet Union (1959) and Japan (1962).

Rausing strove to improve the Tetra Classic system, beset with many technical problems during the 1950s, and spent enormous amounts on development. The different projects – the tetrahedron, the aseptic packaging technology, Tetra Brik – all demanded large resources, and the company had financial troubles well into the 1960s. Tetra Pak's commercial breakthrough did not arrive until the mid-1960s with the new Tetra Brik package, introduced in 1963, and the development of the aseptic technology. To liberate capital, Åkerlund & Rausing was sold in 1965 while AB Tetra Pak was retained.

International expansion had begun in the 1960s, when the first production plant outside of Sweden was established in Mexico in 1960, soon to be followed by another in the United States in 1962. In 1964, the first Tetra Classic Aseptic machine outside of Europe was installed in Lebanon. The late-1960s and 1970s saw a global expansion of the company, mainly due to the new Tetra Brik Aseptic package, launched in 1969, which opened up new markets in the developing world and sparked an explosion in sales.

Mergers and acquisitions

In 1981, Tetra Pak relocated its corporate headquarters to Lausanne, Switzerland, for tax reasons, but retained all research in Lund, Sweden. For the equivalent of US$2.5 billion, Tetra Pak acquired Alfa-Laval AB in 1991, a Swedish company producing industrial and agricultural equipment and milk separators, world-leading in its industry, in what was at the time Sweden's largest takeover. Since the deal allowed Tetra Pak to integrate Alfa Laval processing know-how, the merger made it possible for Tetra Pak to offer packaging and processing solutions. The deal drew anti-competitive scrutiny from the European Commission, but it was approved after various concessions from both companies. After the merger with Alfa Laval, Tetra Pak announced plans to return its headquarters to Sweden, and in 1993 Tetra Laval Group was created with dual headquarters in Lund and Lausanne. Alfa Laval's liquid processing unit was absorbed into Tetra Pak and the unit specialising in dairy production machinery was organised separately as Alfa Laval Agri. Alfa Laval Agri was later renamed DeLaval, after Alfa Laval's founder Gustaf de Laval, and is still a part of the Tetra Laval group. The part of Alfa Laval that was not directly linked to Tetra Pak's activities – heat exchangers and separation equipment among others – was sold in 2000 to Swedish finance group Industri Kapital. In 2001, Tetra Laval acquired the French plastic packaging group Sidel. The merger was prohibited by the European Commission on the grounds that both Tetra Pak and Sidel were market leaders in their fields and operated in related business areas. The European Court of Justice eventually ruled in favour for Tetra Laval in a high-profile case. The Tetra Laval Group is controlled by the holding company Tetra Laval International, whose board of directors include the three children of Gad Rausing. In 2014, Tetra Pak acquired Miteco, a provider of production solutions for soft drinks, fruit juices and liquid food, which employs 70 people across sites in Switzerland, Italy, the UK and South America.

Operations

Business and markets

As of January 2021, Tetra Pak was operating in over 160 countries through its 29 market companies. Between 2007 and 2010, the company saw growth in emerging markets and opened new plants to meet that demand. Tetra Pak invested €100 million to build a plant in Russia in 2007, and built a €60 million plant in China the following year. In 2009, the company announced that it would invest more than €200 million to build plants in India and Pakistan to serve emerging markets in Asia and the Middle East, where milk consumption was rising, especially of ultra-high-temperature processed milk. At the time, two-thirds of Tetra Pak's global sales came from dairy packaging.

In 2010, Tetra Pak reported a 5.2 percent increase in sales, with an annual turnover of approximately €10 billion. Growth in Asian, Eastern European, and South American markets helped drive the increase. The company opened a €120 million aseptic packaging plant in Vietnam in 2019 to supply countries in the Association of Southeast Asian Nations, Australia, and New Zealand. According to the company, it had total sales of €11.5 billion in 2019. Tetra Pak's most popular product is the Tetra Brik Aseptic, a best-seller since the 1970s.

Competition

In an interview in Swedish business monthly Affärsvärlden in 2006, then Tetra Pak CEO Dennis Jönsson stated that Tetra Pak's main competitor was Swiss manufacturer SIG Combibloc, adding that Tetra Pak's main competition generally no longer comes from companies producing similar packaging but from industries and companies producing other types of packaging with a lower cost of production, like the PET bottle. Jönsson perceived the PET bottle as Tetra Pak's biggest threat in the European market at the time. The Norwegian company Elopak/Pure-Pak produces similar style carton packages and has historically been Tetra Pak's principal competitor. The Chinese packaging company Greatview has begun challenging Tetra Pak, both in the Chinese market and in Europe.

Products

Aseptic technology

Tetra Pak uses aseptic packaging technology. In aseptic processing, the product and the package are sterilized separately and then combined and sealed in a sterile atmosphere, in contrast to canning, where product and package are first combined and then sterilized. When filled with ultra-heat treated (UHT) foodstuffs (liquids like milk and juice or processed food like vegetables and preserved fruits), the aseptic packages can be preserved without being chilled for up to one year, with the result that distribution and storage costs, as well as environmental impact, is greatly reduced and product shelf life expanded.

Controversy

Market Share

Tetra Pak has occasionally been subject to controversy, most notably regarding its near-monopoly position on certain markets for many years. Especially attempts at mergers have been subject to scrutiny. Its merger with French PET-production company Sidel in 2001 drew anti-competition allegations from the European Commission. The court case was drawn out for many years and twice appealed to the European Court of First Instance before the European Court of Justice ruled in favour of Tetra Laval. In 2004, Tetra Pak was accused of using its near-monopoly in China, where it owned 95 percent of the market for aseptic carton packaging. The allegations were contested by Tetra Pak.

Parmalat scandal

In January 2004, Italian dairy giant Parmalat was caught in a multibillion-euro accounting scandal, culminating in the arrest of the owner Calisto Tanzi. Parmalat CFO Fausto Tonna told the Italian business daily Il Sole 24 Ore that Tetra Pak had made substantial payments to Tanzi and his family and to a company in the Cayman Islands belonging to Parmalat. Tetra Pak acknowledged having made payments to Parmalat but stated that the payments had been made as discounts to subsidize marketing operations and pricing, as is usual practice with large customers. Tetra Pak was asked by Italian authorities to provide documentation on the transactions, and found that payments had been made since 1995 as part of regular operations but that no payments had been made specifically to the Tanzi family. Calisto Tanzi was eventually sentenced to eight years imprisonment for fraud by the Italian high court in Milan after several appeals in lower courts.

Tetrahedron legacy

When visiting the Tetra Pak factory in Lund in the 1950s, Danish physics professor and Nobel Prize laureate Niels Bohr allegedly claimed to "never have seen such an adequate practical application of a mathematical problem" as the tetrahedron package and the innovation of the milk tetrahedron. The question of who invented it has been the subject of some disagreements. Erik Wallenberg did not receive any formal recognition until 1991, when he was awarded the Royal Swedish Academy of Engineering Sciences' Great Gold Medal for outstanding achievement for the invention.