Poligof CEO Luca Parolari discusses how, from a family company established in 1980, his company is today one of the three main backsheet suppliers in EMEA region and outlines its plans and strategies for 2022-2024 plans and strategies to positively ride recent and future changes due to Covid-19 pandemic.
Nonwovens Industry: How has the hygiene industry performed recently?
Luca Parolari: The hygiene market has been considered very resilient with a balanced supply/demand, stable volumes, no volatility, no remarkable seasonality, strong growth potential in less developed countries, long-term relations with customers and suppliers, breakthrough, but not frequent, technology changest. In few words: a valuable stability and limited entrepreneurial risk.
The outbreak of Covid pandemic in the first quarter 2020 has dramatically changed the worldwide economy and the way to do business.In our industry, we had to deal with roller coaster demand due to huge inventories variations, limited and in some cases unpredictable capacity reductions due to Covid restrictions as well as a lack of workforce, unprecedented raw material shortages combined with prices that were 100% higher than the end of 2019, new lifestyle trends and uncertainties imposed by Covid. This is not bad for a resilient, steady market. It was a new situation for all of us, requiring strong roots and a very fast and dynamic strategy, also in terms of Capex and return on investment.
NWI: How has Poligof been able to grow its role in the hygiene industry?
LP: Poligof wasfounded in 1980 by Giovanni Gatti and was dedicated to production of backsheet and diaper bags for absorbent hygiene products. The founder’s daughter Barbara and son Cesare, who recently retired, are well known in the market.The company has progressively grown, continuing to focus on backsheet and investing in printing and lamination technology. In 2013, Poligof acquired Pansac International, one of the two biggest backsheet material suppliers in Europe.In 2015, the group was acquired by 21 investment, an Italian Equity Fund belonging to Alessandro Benetton and this even has reingforced the growth plan also boosting the internationalization strategy creating two new production plants: Poligof India and Poligof Russia, to serve local markets and global customers.
In December 2020, 100% of Poligof was been acquired by Portobello Capital, who is further on fueling a challenging our growth through a huge investment plan in capacity, innovation and further internationalization in new geographies.
NWI: You mentioned an investment plan for future? Can you offer more details?
LP: Today this no longer a plan. It is reality, since it has been signed by the board some months ago and its execution has already started.It is based on a simple concept—to offer the market more capacity in order to better manage demand ups and downs, following the growing request of high performing, cost efficient breathable backsheet film.
In numbers, we will increase our capacity by 15%, through two new lines, capable of producing 11-13 gsm breathable film, synchro printed in eight colors. This technology was developed together with Windmoeller & Hoelscher, the most advanced machinery supplier for this kind of products, both in terms of film production and printing technology. We know indeed that machines alone are not sufficient alone to reach the investment objectives without a strong technical know-how and organization. For this reason, the group has empowered the research and development and process engineering teams with new skilled resources and reinforced its regulatory department to better respond to the growing demand for environmental and process certifications.
The first result is Poligof’s sustainable backsheet films and laminates portfolio, representing today the most growing category in our product mix. The regulatory department is also actively working to obtain ISCC+ certification by October.
NWI: Sustainability has been a key point for our industry: NWI, EDANA, INDA and their stakeholders are dedicating huge resources. What is your view?
LP: Just a couple of years ago, the answer to this question would have been something like:“This is a very serious and important point, which we are working on”
Today the world is changing and—at least in more developed countries - sustainability concept is superseding other concepts, and has become the absolute priority in any marketing strategy.” The hygiene industry has understood that—in addition to protection which has become very clear to everybody especially in the last 18 months—it must promote and implement sustainability, offering a less impactful production process and overall creating products which can be part of a circular economy. Our task - as an industry - is to show that a single-use product does not only offer an outstanding protection but can also be environmentally neutral.
In this regard, Poligof has developed a specific strategy and product portfolio and is in advanced phase with all its customers to validate a tailor-made solution to each of its customers.
NWI: Where is the market going? What is Poligof’s strategy?
LP: The market has not clearly decided a sole direction for sustainable diapers. There is still some uncertainty. Talking only about backsheet, Poligof uses raw materials coming from renewable sources (plants and their derivatives), with a further differentiation between primary, secondary and tertiary sources; these materials mostly represent drop-in solutions, so virtually preferred by our customers. Unfortunately, availability is still for the time being limited.
An alternative to these products is represented by so-called mass-balance approach, if all the supply chain belongs to a system where the amount of material from renewable/recycled sources is traced, measuring exactly how much of oil or carbon-dioxide equivalents are saved.
Last but not least, laws and environmental regulations are not clear or defined homogeneously, making any strategic decisions and consequent investments still to be finalized by all the players in the market
Because Poligof is a supplier to main diaper producers, we cannot direct this process alone. So, a few years ago we have simply decided to develop all this kind of products, devoting a lot of efforts and resources to R&D activities and today we have all of these products in our standard portfolio. As previously stated, we are in co-development phase with all our customers. They identify which product better fits their environmental strategy and once is identified we work to fine tune the industrial solution.
NWI: Luca, you were talking about last market changes and end-user attitudes. Poligof has decided to invest during this phase: don’t you think it could be dangerous?
LP: I believe that the hygiene industry is not used to this new situation. Major backsheet suppliers have been used to working with big groups, in a stable market, dominated by brand dynamics. Contracts used to last two or three years. No major headaches….
Poligof has increased sales 300% from 2013 granting customers additional capacity when they asked it for growing, at the same time flexibility, determinant for a customer who is facing new challenges.This attitude has been a winning factor in branded products market and especially in private label and is part of Poligof DNA: we deem that - in this fastly changing situation - it will be a key success point.
NWI: Can you be more precise? What is your plan?
LP: We have reinforced our research and development, engineering and regulatory structures and created a consistent portfolio of sustainable products.We are offering starting in the second quarter of 2022 an increased capacity with a state-of-the-art new investment and a more flexible production scheduling to better manage peaks in demand from our existing customers.We will further on reinforce our international presence in a new geography where all our customers are already present and focusing their activity, in order to be door-to-door with them offering same quality and service.
NWI: How customers will be involved in this process?
LP: Covid-19 pandemic has changed business rules: more local approach, quick reaction to predictable but also unpredictable changes, necessity to create a robust and consistent supply chain.In other words, branded products manufacturers must have more flexible service from their suppliers in order to be more reactive to market changes. Private label manufacturers must abandon the “hit and go” strategy, which gives results in very short term but doesn’t allow to have solid supply in turbulence and doesn’t allow any win-win strategy. If objectives are commonly identified, each player can bring the best energies and any reaction to changed conditions will be faster and more effective. As a result of this “lesson learned” we are closer and closer to our customers, offering a tight key accounting system, covering all their needs: logistics, research & development innovation