And what I want to do next is really share with you 3 examples of how we co-create with our customers, while also strengthening and deepening our relationships. Here’s the first one. So Kraft Heinz came to us with a challenge. How do you make a convenient microwave food, deliver the crispness of a long-time family favorite, the grilled cheese sandwich? With our innovation teams, deep knowledge in microwave science, which — yes, that’s a thing, which I didn’t know until I came to Graphic Packaging, but a really great team of microwave scientists, along with strong capabilities and overall packaging science, we were able to develop a carton that allowed the grilled cheese to be cooked in all the right places, allowing it to have the perfect bite throughout the sandwich.
Our accelerated process, this is to be one of the more impressive things of this example is from the time that we got the challenge from Kraft Heinz to a commercializable product, it was 9 weeks. That’s the kind of speed we need to drive these innovation platforms. This is another great example of a Boardio innovation, and this was in partnership with a co-packer, Club Coffee, OFI, who helped support private brands for retailers in coffee lines. Their retail partner came to them with a challenge. They wanted to increase recyclability, while maintaining a high-quality, easy-to-use coffee canister. Ultimately, we worked very closely with Club Coffee to develop a Boardio solution that gave them the recyclability, the reclosability, paperboard package that also enhance branding on the shelf.
And in fact, this retailer was so excited about the Boardio package that they dedicated advertising time to talk specifically about the Boardio package. Even more exciting was — that was the second time that a brand owner has done that in a matter of months where dedicated precious time and money to do nothing but highlight the Boardio package in advertising. Lastly, I want to highlight a product that many of you have consumed at some point in your life. The beloved Nissin Cup Noodle. This was a challenge that we got from Nissin Cup Noodles. Actually I’ll walk through 4 challenges that they asked us to try to solve, as part of looking for a new package. One is they needed to meet the foam replacement. So for many of you who’ve consumed it, you know that today or historically, it’s come in a foam cup.
Secondly, they wanted this cup to work seamlessly in their current manufacturing filling facility. Obviously, to drive cost and efficiency in time. The third thing was that they wanted it to be microwavable. So that was something that we had to work on, and they wanted to provide, obviously, that convenience for the consumer. And then lastly, they wanted all that work to help to ensure they are maintaining their B Corp status as a company. Our team was able to work on all of these challenges and overcome. And our custom design cup just hit retail and beloved Nissin Cup Noodles will be microwavable for the first time in 50 years. So I’ve shared with you our exceptional innovation capabilities, but at the end of the day, it’s our customers vote that matters and will change the trajectory of our growth.
At Graphic Packaging, we take the voice of our customer very seriously, and we consistently go out and survey our customers to understand how we can get better. So we’ve recently done one, where we went to hundreds of contacts across our global customer base. And what you see here is an excerpt of the area where we specifically wanted to understand what they thought about our global innovation capabilities. Just to be clear, these quotes are from well-known global brands and national brands, that you would know. One thing that I think is very clear with all of our customers is they have 2 big challenges in front of them right now. One is they need to grow. And the second is they have to respond to the consumers’ demand for more sustainable packaging.
We believe our innovation and our capabilities are critical to helping them solve some of their biggest challenges. In summary, demand for sustainable packaging is accelerating. We are uniquely positioned with unmatched scale and capability to take advantage of those opportunities. With a $15 billion, addressable opportunity, we are confident in our ability to deliver the 2% innovation growth to achieve our Vision 2030. We are creating more value for our customers than ever before, and we are getting paid for that value. I’m very excited about the last 7 years of the journey, that Graphic Packages — that, see it’s the P thing again. Graphic packaging is on, but I’m even more excited about what’s ahead. And with that, we’re going to take a 10-minute break, and we’ll return to have a fireside chat with Mark Connelly and Jean-Francois.
Thank you. [Break]
Mark Connelly: Okay. Let’s get started. So I’m Mark Connelly. I’m with Jean-Francois Roche, who is our Head of International Sales at Graphic Packaging. Jean-Francois spent most of his career at AR Packaging or Graphic Packaging. He’s also, as Mike said, the Chairman of the European Carton Manufacturers Association. So welcome Jean-Francois.
Jean-Francois Roche: Thank you, Mark. Good morning to everyone. Good morning to everybody on the webcast and [Foreign Language] If there are any French speaking person in the audience or on the webcast.
Mark Connelly: So what I’d like to do, Jean-Francois is start off, which is, give us an overview of the European business and where Graphic fits in?
Jean-Francois Roche: Yes. Thank you, Mark. So in Europe, we’re roughly a — So in Europe, we’re roughly a $2.2 billion in the paperboard market which is in the range of $15 billion. If we look at the total consumer packaging market. I think the size of the European consumer packaging market is in the range of $100 billion. So this gives us plenty of room to grow. We operate in 18 different countries, which include Indonesia, Australia and New Zealand, where some market patterns and customer base are the same. And we operate as well across 6 segments, which are food, health care, beauty, beverage, foodservice and what we call household. And that’s quite a benefit for us because you might have some volatility and some seasonality in those segments, and that helped us to balance out a bit those market fluctuations.
Mark Connelly: So when you think about the difference between the U.S. business and Europe, we have a very well-established health care and beauty business in Europe, relationships with all of the major pharmaceutical companies there and, of course, a much smaller foodservice component than we have here in the U.S. Jean-Francois, you show us the sales progression, and it was looking pretty good up until 2022. But can you give us a sense of what recent performance is going on there?
Jean-Francois Roche: Yes. So if we step back a bit and look at who was the market before something called COVID happen, it was pretty much straightforward. And I know it’s a European view of the things. But for Western European part of Europe, we were looking at GDP growth and somehow the market was performing like a clock on the GDP growth. If we look at developing countries in Europe, which was more the Eastern part, because of the way the market was getting structured, we were looking at twice the GDP growth for the market development. Then 2020 happened, COVID came on stream. Consumer behavior went all over the place. Petro-polymer substitution started as well at that time. So you can see on the graph, the market went up pretty dramatically, specifically in 2022.
That was driven as well by further things because we saw finished good stock increasing raw material stock increasing because people were wondering, we have seen our customers as well, increasing the good stock from 6 to 9 months, and then we — the price went up a bit, and we were just wondering at the end of ’22 when the pendulum will bounce back because that’s the way it works. So in beginning of ’23, we saw clearly — we saw some resilience in the first quarter, but then we had to unwind all what was in the pipe. So in ’23, the performance of the market was in the range of minus 7%, minus 8%, but that was compensated as well by innovation and what I would call petro-polymer substitution, which is the beginning of what I will discuss later on, which is the packaging and packaging waste regulation.
And that brought a bit of bonus to the market. So we end up in the range of minus 2%, minus 4% on the total market. For ’24, I think we just consider that ’23 will be the base, and we go back a bit to the basic. So I looked at the number from the European Central Bank, what is the forecast of GDP for ’24. It’s roughly 0.91%. So this is how the base market will evolve, but we see a strong — strong trends still on innovation and what I call the petro-polymer substitution. And we believe because as Mike said, we have a pipeline which is already filled. We believe that this will drive a 3% to 4% growth. So we are fairly confident about ’24.
Mark Connelly: So Jean-Francois, you spent 24 years at AR Packaging, you left, then you joined — later you joined Graphic Packaging, then Graphic Packaging, bought AR packaging — so there’s probably nobody out there who understands the impact of AR Packaging on Graphic better than you do. And I know that when I was sitting out here in the audience, I didn’t really appreciate the impact. So can you walk us through what the real impact was?
Jean-Francois Roche: And this was all planned, by the way, when I moved to Graphic. No. So before we went through the — we made the acquisition of — in ’21. We were the third operator on the market. We were operating through 14 different converting facilities. We were operating in food, in convenience and in beverage. We were quite successful on the beverage — on the beverage side of the business. And we were what I said, embracing the European channel between U.K. and the rest of Europe and as well the Iberian Peninsula. And then we made the acquisition of a company called [indiscernible] and that was — we were adding 30 facilities. It was what I call a game changer for us. We entered into new markets, which were health care, duty and household as well.
We entered into new technology. We enter into paper canister, we entered into [indiscernible] technology because they had a flexible division, which was highly knowledgeable about [indiscernible] technology. And just for the history, this is where Tetra Pak was developed in 1968, but they had an immense knowledge in [indiscernible] technology, which is being quite a loss right now. And they — as well, they had a good knowledge of finishing capability because of the beauty market and as well of security device on the health care market. So clearly, that was a game changer, and then we supply no multinational customer, regional customer, local customers across 50 different countries. The good about that merger is that there was very little overlap on the customer base.
And when it comes to the footprint, it was perfect nearly a perfect match. So it was something which was really good, and we became #1 on the market in Europe after that acquisition.
Mark Connelly: So Maggie talked quite a bit about changing customer relationships, and it’s been less than 2 years, but how our relationship starting to change in Europe?
Jean-Francois Roche: It’s a very interesting point you made. So I remember right after the acquisition, so I stepped back to my choice of [AR] I want to meet some of the large health care and beauty care company in Europe. And I had a bit of cold feet the first time I met them because they told me, why do you care and what are you doing here? — where does that make sense? And I said, guys, so we take time to listen to their expectation, to understand the market trends and to set up the strategy. And we moved radically our position with those customers because for most of them, we are seeing the partner for the future. So it was a very big change in the way they were approaching us…
Mark Connelly: Over period of time.
Jean-Francois Roche: In a relatively short period of time as well, one thing which is a bit unique and Mike was involved not lately, we have been chosen by Danone. We are 1 of 5 suppliers worldwide, which will help them to drive their transition and their strategy towards packaging, which is quite of an achievement. It is what we call a joint business — business development plan. And I just recall one thing which was said by my friend, who is the CEO of Danone and the CEO made echo on that when he said, even though you are a large multinational company, you have kept an entrepreneurial pivot, which is a bit unique, and this is what we are looking for. And that was a bit of a complement as well for us. So we were…
Mark Connelly: You said 1 of 5 suppliers or 1 of 5 packaging companies…
Jean-Francois Roche: 5 suppliers worldwide.
Mark Connelly: Not — so how many packaging companies are on that list of 5.
Jean-Francois Roche: None. We are the only one. And then one thing which has changed a bit dramatically. And so we have seen the number of applications for people to join the company, increasing dramatically over the last 18 months. And then you just wonder because are we becoming attractive because of we are #1? Are you becoming attractive because of all the amazing innovation we are launching on the market or it’s just because you want to be a bit selfish, — you’re getting a lot attractions because of the amazing management that we are in Europe. And I suspect it’s a bit all of that. And it’s really something which has been — which is a very big change because it’s coming not from one specific company, but the number of applications we had from the industry was — is clearly interesting. And we have taken on board some people because at the end, it’s all about people, and it’s all about talent, and this is what makes the company successful.
Mark Connelly: So as Chairman of the European Carton Makers Association, you’re right in the middle of all of the regulatory swirl and there’s a lot going on. What is the most important thing for investors to be thinking about in terms of European regulation right now?
Jean-Francois Roche: Yes. I think that’s just — so let’s just talk about the green deal, and I won’t go into the detail because it’s rather complex, but it’s something which is made out of 11 initiative, and you have a lot of [indiscernible] initiatives, law regulation directive, which will be set. But the aim of the green deal is to aim for carbon neutrality by 2050 in Europe. By the way, some of the large food and consumer goods company in Europe are already aiming for carbon neutrality on the Scope 1 and 2 emissions in 2035 or in 2040. But let’s focus on the 6 which are on the screen, one back Yes. So let’s focus on the 6 which are there. This is what will have an impact for our industry. There are 6 out of the 11. And out of the 6, we will just focus on the one, which is what we call the packaging waste regulation, okay?
That’s the one which is important for you to understand. So where are we right now on the packaging waste regulation? There — we have had several iterations about the law and what would be the implication. I think what you have to understand, there are 3 governing bodies in Europe. One is a commission. The other one is a parliament and the third one is a Council of Europe. They have all had a sort of different appreciation of what should be the packaging waste regulation, and they have entered right now into a dialogue because they want to issue one common text, which will be voted in the April, May of this year. And as the parliament is due for re-election in June. And as the actual president, [indiscernible] she has applied to be reelected, there is a lot of pressure to get that thing through.
And we won’t focus on the headwind and on the tailwinds because it’s a bit too complex. I will just ask you to focus on the green box because it’s a bit more simple. So on the consumer packaging, what would be the impact on the consumer packaging, it might have a bit of headwind impact because of reuse and the recycle, which is involving in the packaging waste regulation. when it comes to the paperboard industry, for the paperboard industry I think it will be modest tailwinds because of the inherent — I did it well, that was — benefits of fiber-based packaging compared to plastic. And as us, as a company, I think it’s a great tailwind because we are an innovation provider in packaging and in fiber packaging, and this is what the packaging waste regulation will drive.
So I am extremely confident about the tailwinds.
Mark Connelly: So the regulation for us is a tailwind. AR has dramatically expanded our innovation capabilities. But Europe is slow right now. Is that slowing down our ability to get our customers to get products in the market?
Jean-Francois Roche: No. Not at all. And we as I said before, 2023 was an expected reset because we know that the market end of ’22 was a bit over speeding, if I may say it that way. And our sales were up on the innovation by nearly 3% to 4%. This is what I said for ’23. So we are still very confident for ’24. And as well, if we look a bit long-term objective, 3 to 5 years, we know that 70% to 80% of our growth will come from innovation and that’s what give us a bit confidence. And there is one noticeable things to change that we have noticed across several multinational company. Normally, large multinational company are slow in innovation because of who they are, because of their processes, because of what made them. It’s a bit something which is — and I recall a discussion I had one upon the time with a CEO of Kellogg.
He put his mobile phone on the top of the white board because he said any breakthrough innovation would never come to my desk because of who we are. And I think the large multinational company have understand that. And there is a clear change in the way people address innovation. Top management is involved because they want to get it done. They don’t want it to be a 3, 4, 5 years process, as Maggie said, they want it quick. And that’s a major shift in the way people are addressing innovation. Just some highlights about what we have done in terms of innovation lately. So KeelClip started at the right time in mid — just at the beginning of COVID, we cannot hit a better date in Europe, and it became extremely successful. I think the capacity we have installed today in Europe, in terms of — is in the range of 300 million, 3.5 billion packs.
This is what the installed capacity we have on the machinery side, and we have seen a very strong type performance in KeelClip. It’s something which is now developing in North America. So we see great traction. It is a bit what we discussed. It was launched in Europe, I know it’s — it moves to North America. PaperSeal was developed for the retail industry in early 2020, to replace CPET trays. And we got great traction, inflation then came, then we have to rework a bit. And then we have developed a new technology, which is called PaperSeal Tray, where we have seen amazing demand in Europe, and we see as well a lot of traction on the North American market, as well and with that technology because it’s CPET tray replacement. Boardio, as Mike said, and as Maggie said, was developed for infant nutrition in Europe for a customer called Danone because it’s public knowledge.
And then it was reiterate, we developed it. And clearly, we have seen a unexpected traction on the U.S. market on Boardio, you have seen Mentos, you have seen Club Coffee. I don’t want to make any teaser, but you might see many new things soon, if I may say it that way, which is clearly because it’s a replacement to blow-molding technology. So we are getting great traction. And then we launched with Unilever, this childproof solution for the pods in Europe. And it’s — because it’s Unilever, it was a large launch in Europe, but they are expecting to launch that product worldwide, which will give us the capability as well to manufacture that product because of the network we are having a bit all across the world. And we are getting traction with other customers as well in North America.
