Asia Pulp & Paper (APP) has become a global powerhouse in tissue from its base in Indonesia. APP Tissues International and APP China’s tissue operations have one of the largest combined capacities of tissue production in the world.

Nishant Grover has been in the role of CEO of APP’s Tissues International for the last two years. With a background in private equity in various consumer industries, his experience has been focused on looking at companies with high potential and transforming them to meet ambitious goals.

“APP is very strong in the upstream areas of its integrated business, including forestry, pulp, paper and board, but downstream it’s a different animal,” says Grover. “Tissues International is a consumer business within APP, therefore we are putting a lot of focus on consumer preferences across the individual markets.

“This is why I joined APP. I can see a lot of potential in developing the individual consumer markets, and we are already seeing some great success with our new approach. Last year we made huge progress, and this year we are well on track with our intended goals.”

CONCENTRATION ON DEVELOPED MARKETS

The company has 11 tissue production plants producing jumbo rolls, 10 in Indonesia and one in Australia; and 18 converting plants, six in Indonesia and 12 in other countries overseas producing the final finished products for the local markets. The US is Tissues International’s largest market, followed by the Far East and Australasia.

“Our current focus is on the largest tissue markets of the world, with an aggressive acquisition strategy targeting most popular brands in the countries,” says Grover. “Our largest market in terms of market share is Indonesia, and we have expanded internationally by acquiring well-known brands—what we call “local jewels”—for instance, Sorbent in Australia and Cottonsoft in New Zealand.

“Our Sorbent brand in Australia is truly a local heritage product which was first launched in the 1950s and acquired by APP in 2019. The brand is ingrained deeply in the consumer psyche of Australia—it was the largest selling consumer product in the 1990s,” says Grover.

In its latest move, APP Tissues International plans to acquire a group of six companies in South Korea along with iconic brands in the country. The acquisition is currently subject to regulatory approval.

The company has three converting plants in the US, which are located in California, Oklahoma, and the latest greenfield plant in Virginia. APP Tissues International operates as Solaris in the US.

“The US market is very important to us,” says Grover. “The country accounts for 25 percent of the global demand at 10 million metric tpy and we are expanding our footprint there. We are already a significant player in AfH and in retail we are growing both in private label and in retail products. With our converting plants located in the east, west, and central areas of the country, we are in an ideal position to serve American consumers and customers coast to coast.”

The company markets and manufactures the Fiora brand in the retail segment, Livi and Locor brands in the AfH segment, and is also a supplier of various private label brands.

“In terms of our plans for the future, we are committed to both acquisitions and organic growth, and with our strategic approach there is always something exciting in the works at APP,” adds Grover.

TISSUE PREFERENCES—‘JUST LIKE WEARING CLOTHES’

APP Tissues International largely supplies jumbo rolls from its mills in Indonesia and China to its converting locations globally, except some local production. Grover says, “Despite global logistics challenges such as we have recently seen with COVID and the various ongoing conflicts, we have high supply chain resilience with our multiple supply options—with the right mix of local and international.

“The US is a good example of supply chain resilience where we have a nationwide footprint supported by imports as well. We are able to provide the most cost efficient supply and uninterrupted supply to our customers, even during adverse times.

“In the case of our Asian customers, we tend to ship a lot of finished goods to the countries due to the advantageous local logistics, although we also ship jumbo rolls to our converting plants in the region,” he adds.

Grover continues, “While Jumbo rolls in themselves tend to be a commodity, it’s in the converting area where tissue really comes to life. Converting is a mix of art and science, and one needs to fall in love with the product to get the desired outcome (I tell this to my country heads every day!) There can be so many different permutations in paper making and converting to deliver the preferences for the market we are operating in.

“Tissue products are just like wearing clothes, people have very personal preferences. This is where our consumer behavior focus is reaping dividends, as we dive deep into what the customers want in their daily tissue, and then provide it.”

The company produces the full suite of tissue products at its converting plants, including, bathroom and kitchen rolls, wipes, facial tissue, wet wipes as well as supplying the full gamut of products to the B2B markets.

THE IMPORTANCE OF SUSTAINABILITY

APP has had its controversy in the past when it comes to environmental issues, but it seems to have made substantial progress as it addresses sustainability issues across its operations from forestry to production. The company has recently released its Sustainability Roadmap Vision 2030 where it aims to conserve over half a million hectares of forests and reach a 30 percent reduction in carbon footprint at its manufacturing facilities.

“APP has been very serious about the topic of sustainability over the last 10 years,” says Grover. “It could be said that in the years before that sustainability was not the main focus, but there has been significant progress over the last decade.

“You only have to look at our latest Sustainability Roadmap 2030 to see that environmental issues are now at the forefront and part of our mainstream strategy. There are huge investments being made on the sustainability front—from forests to carbon footprint reduction—across all our operations. Sustainability is definitely no longer an afterthought at APP.”

Grover highlights the fact that well managed forestry and environmentally focused production can be a much more sustainable option to produce tissue products when compared with the recycling process. “Tissue made from well managed virgin forests and produced in a sustainable way is a much better option for the planet than recycling, which adds chemical agents and uses excessive amounts of water for its production.

“We have, in fact, recently launched a new carbon neutral tissue product which is made from sustainable fiber at our OKI pulp and tissue mill in Indonesia. The site is completely self-sufficient in energy and the pulp is fed directly from the pulp mill to the tissue machines, dramatically reducing the carbon footprint.”

DIGITALIZATION AND TECHNOLOGY

Digitalization is all the rage across the pulp and paper industry, and at APP this is no exception. Grover comments. “We are a very advanced manufacturer, and we already have some existing forms of digitalization; however, we are currently in the process of a large exercise in modernization on this front. We have teams both in Indonesia and China who are concentrating on digitalization across mills, plants, and processes, looking at managing data to improve processes and efficiency and save costs.”

And what about preferences for tissue machine suppliers? “If we include APP China, we have a lot of tissue and converting machines—into the hundreds,” says Grover, “So the latest technology is obviously important to us. However, it seems there hasn’t been a lot of advancement in the actual tissue making process over the years; innovation has taken place that mostly makes it easier for the operator, and for energy reduction, but the processes are basically the same.

“We have a large number of tissue machines from European suppliers, including Valmet, Toscotec, and A.Celli. Added to this we also have some machines from Asian manufacturers.”

Grover says that APP has a very intense, detailed approach to making decisions on the tissue machines it installs, including workshops with the suppliers. “We have a very effective process when it comes to choosing a supplier of mill technology, with the insistence that they must listen to our needs and deliver exactly what we want.”

On the converting front, Grover stresses that innovative technology is more important than ever. “There has been a lot of advancement in converting technology for the tissue industry, again mainly from the Europeans. I am currently evaluating Perini’s Constellation (recently acquired by Valmet) and Gambini’s Airmill, which seems to be a step forward in the converting process. We are actively looking for such solutions to address consumer demands.”

ULTIMATELY, IT’S ALL ABOUT THE CUSTOMER

Grover concludes that APP is always looking out for innovative new technology that improves quality and enables flexibility, and above all results in customer satisfaction. “As a very large company,” he says, “we have to bring efficiencies in across all processes, and this effort has two priorities: innovation and cost management.

“Innovation is a priority so we can satisfy our customers when it comes to the products they want, and the management of cost is especially important during these times of high inflation. If we can reduce operational cost, we can absorb inflation and give most of the benefits to customers in cost savings.”

Sustainability in Production, Forest R&D, People, and Animal Conservation

After visiting APP’s offices in Jakarta, Tissue360° then went on to view the company’s forestry, conservation, and production facilities on the island of Sumatra.

Our visit began at APP’s headquarters in Jakarta with a presentation on the extensive sustainability work the company has been engaged in since 2004 when it first established its Environment Division. Joining the UN Global Compact Network in 2008, the first real milestones on the sustainability journey arrived in 2012 with the launch of its Sustainability Roadmap Vision 2020 (SRV), quickly followed by the company’s commitment to zero deforestation in 2013.

The zero-deforestation commitment was by no means a small one; the company has a 1.6 million hectare concession area in Indonesia as well as 39 wood suppliers in Sumatra and Kalimantan. The roadmap for 2020 also covered a number of other sustainability areas, including reforestation; conservation and biodiversity; human rights and indigenous peoples; and production areas of water management and emissions.

“The zero-deforestation commitment involved communicating with a lot of people at ground level, which not only concerned our own plantations, but also all our suppliers as well,” says Ian Lifshitz, APP’s head of sustainability and public affairs, the Americas.

Having achieved most targets in its SRV 2020, APP launched in the same year its next ambitious program, SRV 2030, in which it aligned with the UN Sustainable Development Goals and the Paris Agreement on Climate Change. The vision and goals for 2030 are focused on three main pillars: production, forestry, and people.

• Production—To achieve a 30 percent reduction in carbon footprint by increasing the share of renewables in the energy mix, reducing energy consumption, reducing water consumption, and zero waste to landfill. The company has already made significant progress since 2018, with an 11 percent reduction in carbon intensity, an increase to 58 percent of its renewable fuel mix, a 6 percent reduction in energy use, and a 17 percent reduction in water use.
• Forestry—To conserve over half a million hectares of natural forests as well as source only from certified sustainable sources. APP pulpwood suppliers’ concession areas in Indonesia are certified under the mandatory Sustainable Forest Management Certification (PHPL -VLK) and are compliant with the PEFC scheme.
• People—To improve the lives of millions, APP has created programs such as the DMPA community business model, which has been designed to reduce land conversion for agricultural purposes through the use of fire, improve the welfare of local communities through capacity building, enhance community access to markets, and respect the rights of local communities and indigenous people through increased multi-stakeholder engagement.

THE TOUR

Tissue360° visited the island of Sumatra to have a look at some of APP’s initiatives in action, starting with a visit to one of its R&D centers at one of 80 nurseries variously located in its concession areas in south Sumatra and Kalimantan. The nurseries combine to produce some 500 million seedlings per year for its 1.2 million ha of production forests, with a ratio 700,000 ha of acacia plantations and 500,000 ha of eucalyptus plantations.

APP’s nurseries produce some 500 million seedlings per year.

The R&D center at the nursery is dedicated to research on cloning species of both acacia and eucalyptus to obtain maximum yield by using biotech and AI to find and monitor the very best combination of hybrid species. There are some 9,000 ha of land dedicated to R&D on clone types. They are all planted from seed to monitor the best result as they grow to be harvested, usually in four or five years. APP has enlisted Brazilian eucalyptus forestry experts in its efforts to obtain the best yields, and are seeing yield improvements of up to 35 percent by using various clone combinations.

FIRE PREVENTION

Next was a visit to the fire tower and to experience firefighter training in one of APP’s forest concession areas in Sumatra. Fire prevention is of massive importance to the company, and it has invested heavily in dedicated resources and systems, including its Integrated Fire Management Systems (IFM). The company has committed to maintaining fire affected areas of less than 2 percent in its concession areas as well as those of its suppliers.

The company’s Integrated Fire Management Systems include prevention, early detection, and rapid response.

APP has invested more than US $250 million since 2015, and its ongoing resources include 2,697 dedicated firefighters, 221 fire towers, 16 helicopters for water bombing, 92 speedboats and 103 drones. The IFM includes management of prevention of fires, early detection, and rapid response and uses infrared detection cameras and is also trailing satellite technology.

PEOPLE AND COMMUNITIES

As part of our journey around Sumatra, we visited one of APP’s Desa Makmur Peduli Api (DMPA) programs, a 1.1 ha smallholding which is supported by the company in local areas in and around its concessions. This smallholding allows the farmer to grow produce including melons, green beans, and bananas to sell at local markets. The DMPA assists the farmer by supplying equipment and tools for planting and harvesting as well as advice on marketing and selling products.

Most forest fires in Indonesia start with the local communities clearing land to grow food, or to create an income. In 2015, APP launched the DMPA program, based on the integrated forestry and farming system concept as a means to tackle the issue of forest and land fires. The program aims to lessen the pressure on forest land by providing alternative livelihoods for the communities living in and around forest areas. The program has seen a huge success since its inception, with 441 villages now involved benefiting more than 80,000 local people. The DMPA program is in the process of being expanded to 30 more villages.

APP’s Desa Makmur Peduli Api programs assist local farmers in growing produce by providing equipment and advice on marketing.

ELEPHANT SANCTUARY

APP has programs for the protection of indigenous wildlife living in and around its concessions, including the Bornean orangutans, Sumatran elephants, and Sumatran tigers. As part of the tour we visited an elephant sanctuary, the Arboretum, where there are six elephants: Nando, Ivo, Libo, Mali, Bonita, and Bubu. Four elephants were originally adopted by the Arboretum and the number has risen to six as two calves have been born over recent years.

Elephant sanctuary.

To mitigate the human-wildlife contact, APP monitors animal distribution within all its concession areas, including its suppliers maintaining wildlife maps, and natural paths where the animals roam. As part of its program on wildlife and habitat, APP has 296 Sumatran elephants 77 Sumatran tigers and 190 orangutans under its protection.

TISSUE MILL VISIT

Our final visit on the tour was to APP’s Pindo Deli Perawang tissue mill in Sumatra. The existing overall capacity at the mill is around 650,000 metric tpy; however, this can be raised to 720,000 metric tpy when orders dictate.

The mill has numerous tissue machines in operation with the latest installations being from, A.Celli, Toscotec and China Gold Sun. Products the mill makes include jumbo rolls for export and converting in-house, where it converts to make facial and bathroom tissue, napkins, kitchen towel and hand towel as well as MG (machine glazed) paper. Some 80 percent of the finished products are sent for export.

Pindo Deli Perawang tissue mill.