How is the war in Ukraine affecting companies with producer responsibility for packaging?

The effects of the war also extend to the daily running of Finnish companies, and they are also felt in the operations of two Rinki member companies with producer responsibility for packaging, Fredman Group Oy and Myllyn Paras Oy.

“The prices of packaging materials have risen dramatically,” says Per-Henrik Hagberg, CEO of Fredman Group.

Per-Henrik Hagberg, CEO of Fredman Group.

Fredman Group manufactures kitchen products for amateur cooks and professionals for cooking, storage, transportation and cleaning. The company’s products that consumers are most familiar with are Elmukelmu cling film, baking sheets and coffee filters.

“There have also been problems with the availability of packaging materials. Companies hoarded materials at the beginning of the war, which sometimes made deliveries uncertain; it was a situation similar to the hoarding during the Covid pandemic,” says Miska Kuusela, CEO of Myllyn Paras.

Myllyn Paras manufactures flour, flakes, groats and pasta as well as frozen dough and pastry products in Hyvinkää and Tammela. Its most popular products are cookie dough, pasta and oats.

Myllyn Paras has had no business operations or exports or imports in Russia, so the war has not had a direct impact on the company. The same applies to Fredman Group, which receives practically all its raw materials from Finland, other EU countries or the UK.

The costs have risen in many categories

The logistics challenges in the global market have affected the companies’ operations.

“They started with the ship getting stuck in the Suez Canal last summer. The prolonged Covid pandemic and now the war in Ukraine have made them worse. The prices of materials and transportation have increased, but there has been no impact on availability,” says Fredman Group’s Hagberg.

“The rise in grain prices has been unprecedented, while the price of energy has also gone up. We have back-up power systems, which means that we can continue to operate even if the gas supply stops,” says Miska Kuusela of Myllyn Paras.

“Our current challenges are the increase in the cost of energy and raw materials,” says Hagberg.

The rising costs have been slow to be reflected in prices

The war in Ukraine has also affected the companies’ sourcing strategies. Fredman Group has had to look for alternatives and switch suppliers for some purchases. Myllyn Paras has increased its stock levels to higher than usual.

“There may be difficult decisions to be made if the situation gets worse.”

The sharp rise in costs across the board has forced Fredman Group to rethink the sales strategy for some of its products. Unprofitable products are not a sustainable business in the long term, so there may be difficult decisions to be made if the situation gets worse.

Myllyn Paras operates in the food market in Finland, where the amount of food consumed each year has been quite constant. The company has realised that transferring the dramatically increased costs to sale prices in a sensible way is relatively slow.

The outlook is uncertain

The future is even more difficult to predict at the moment as the situation is changing all the time.

“There will continue to be supply chain issues, costs will keep rising, and inflation also seems to be accelerating,” says Kuusela of Myllyn Paras.

“At least it’s good to have most of the purchases done in Finland. At least for the moment, there are no issues with availability,” says Fredman Group’s Hagberg.

The older generations are likely to remember the economy in which inflation was rampant. This appears to be the case again after a long period of zero interest rates and no inflation.

Fredman Group

• Fredman Group is a Finnish family-run business that manufactures kitchen products for amateur cooks and professionals for food preparation, preservation, transportation and hygiene purposes.
• Its best-known products are Elmukelmu cling film, baking sheets and coffee filters as well as the Chefstein service, which helps professional kitchens to streamline their operations and reduce waste.
• The company was founded in 1997, but it has roots in Satakunta dating back to 1937.
• Fredman Group has a factory in Rauma.
• The company employs 86 people in Finland.

Myllyn Paras

• Myllyn Paras manufactures, sells and markets flour, flakes, groats and pasta as well as frozen dough and pastry products.
• Its most popular products are cookie dough, pasta and oats.
• The company’s history goes back to 1928, when farmers in the Hyvinkää region set up an oat mill.
• Myllyn Paras’ mill and frozen food factory are located in Hyvinkää, and the company also has a production facility in Tammela.
• The company employs approximately 110 people in total.