Jan. 8, 2010, Toronto – Forest, paper, and fibre-based packaging companies face
a changed world requiring fundamental transformation within the industry,
according to a recent PricewaterhouseCoopers (PwC) survey of 33 industry CEOs
worldwide. The report, Global Annual Forest, Paper & Packaging Industry Survey - 2009 Edition,
indicates that although some North American and European
CEOs believe the worst is over, they anticipate a long road ahead and a slow
recovery. All CEOs in the mature markets agree that it’s unlikely that demand
will return to pre-financial crisis levels due to the rise of digital media and
other factors.
In contrast, emerging markets such as China face continuing strong growth for wood
and paper products. All Asian CEOs interviewed were optimistic about the
future. Executives reported that demand is already recovering somewhat, and
they see forest products as a growing industry in their regions.
“The economic crisis exacerbated structural market declines in the paper sector and
precipitated steep drops in demand in lumber and panel markets,” says Bruce McIntyre,
leader of PwC’s Canadian forest, paper, and packaging
practice. “In Canada, a fundamental condition for success is to position the
industry to generate financial returns in line with the cost of capital, which
it has not done for many years. It’s not about shrinking your way to success;
the industry needs to innovate and grow.”
Executives need to look beyond short-term survival to the long-term future of their
companies and the new challenges ahead. For instance, every forest, paper, and
packaging company needs a strategy to capitalize on the sustainable nature of
forests and the growing global demand for renewable products.
The industry also needs to consider new partnerships and business models. For
example one CEO described wood fibre as representing about 60% of his production
costs. In contrast, human resource costs, a frequent focus of cost-reduction
programs, made up only about 12%. In Canada, where 95% of the fibre supply is
controlled in some way by government, an opportunity exists for industry and
government to collaborate on innovative ways to reduce the cost of fibre
inputs. Reduced costs and enhanced revenue streams resulting from new or
alternative uses of fibre and biomass could fundamentally alter the structure
of the entire industry.
PwC’s survey reveals that the industry has perhaps over-invested in physical assets
and underinvested in markets, stakeholders, and other players along the value
chain. CEOs reported that too many people still have a negative perception of
the industry’s environmental effects, when in reality, the overall footprint is
significantly less than is popularly believed. The industry needs to invest in
communications to positively influence key stakeholder groups such as policymakers,
customers, and consumers to position the forest products sector as a sustainable
industry that derives the most value from every tree.
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