SCA Looks at India in Global Hygiene Acquisition Strategy

Svenska Cellulosa AB (SCAB), Europe’s largest paper-tissue maker, has dispatched a team to India to scour the market for possible acquisition targets as part of a worldwide strategy to add to its hygiene-products business.

SCA is looking for purchases to expand its baby-diaper, feminine-care and tissue operations, particularly in China, India and Latin America, where industry sales are growing at about 15 percent a year, Chief Operating Officer Mats Berencreutz said in an interview today.

“In the markets where we are present, we want to be No. 1 or 2, or have a plan for getting there,” Berencreutz, 57, said at SCA’s Stockholm headquarters. “There’s still enormous growth potential.”

SCA, also Europe’s biggest private forest owner, has increased its focus on consumer-hygiene products, enabling it to skirt the decline that has gripped much of the Nordic paper industry. Since June, SCA has completed acquisitions of Georgia- Pacific LLC’s European tissue operations, to add brands including Lotus, and Everbeauty, which sells diapers and incontinence products in China and Taiwan.

About 80 percent of SCA’s business is in hygiene, a proportion that will rise as “the strategic investments are on the hygiene side,” Berencreutz said in the Sept. 19 interview. Growth at the division has included an exclusive contract won recently to supply napkins to Burger King Worldwide Inc. (BKW)’s U.S. restaurants, expanding on smaller-scale supply agreements.

Global Market

The global hygiene market, including diapers, feminine care, tissues and incontinence products, is about 77 billion euros ($100 billion), including 45 billion euros in mature markets such as North America, Europe and Japan, Berencreutz said. The team charged with looking for acquisitions in India has been there since the start of this year, he said.

SCA, the maker of Tempo tissues and Libero diapers, wants to increase its presence in North America, where it’s the third- biggest tissue supplier to hotels and restaurants, and No. 3 on retail incontinence products. SCA will provide Burger King with Tork-brand napkins and dispensers for the eating areas and restrooms at the New York-based fast-food operator’s 12,000 outlets in the U.S.

“We had some Burger King restaurants before, but now we’ve got sole rights to the whole chain in the U.S,” said Berencreutz, who declined to disclose the contract’s value.

Retail Strategy

Part of SCA’s North American strategy is to expand in hygiene products targeted at consumers, Berencreutz said.

“Today, the only retail we have there is incontinence care products,” he said. “How we get in there is written in the stars. We’ll look at different business cases.”

Breaking into the region’s “fully penetrated” consumer- tissue market, led by Procter & Gamble Co. (PG) and Kimberly-Clark Corp. (KMB), will be tough, the executive said.

“To get in there you have to buy something, and it isn’t inexpensive,” Berencreutz said. “It might be better for us to look at regions with bigger growth opportunities.”

SCA is talking in Europe with about 15 parties, including industrial companies and private-equity firms, about selling 260 million euros worth of tissue assets to meet terms of the European Commission’s antitrust approval for the Georgia-Pacific deal in July, the executive said. The disposals must be completed by Jan. 5 and include two paper mills in England and one in Norway, he said.

To contact the reporter on this story: Ola Kinnander in Stockholm at okinnander@bloomberg.net

To contact the editor responsible for this story: Benedikt Kammel at bkammel@bloomberg.net

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