OREANDA-NEWS. June 02, 2011. In order to build a strong, profitable and sustainable industry for the future, FPP firms must evolve over the next two decades or they risk losing out to the more flexible players and new market entrants, according to a new report from PwC ‘Growing the Future’, reported the press-centre of PwC.

Whilst the opportunities are huge, it is essential that the FPP sector improves returns on capital from existing businesses, or risks losing the investor support it needs for the journey ahead.

Alexei Ivanov, partner, forest, paper & packaging industry leader PwC Russia, said:
“To ensure the industry gains full benefit from these developments, it will need to draw on old strengths, such as forest and fibre management but also improve its capabilities, for example around innovation and R&D. Those companies that fail to do so may struggle to attract investment and, therefore, survive in this fast changing market environment.”

The PwC paper highlights that increasing competiton for fibre will be key to shaping future supply chains. As demand outpaces supply, not only will FPP players have to compete against new market entrants for control of fibre supplies but, in response to growing pressure, new methods of accessing available fibre will also emerge.

Alexei Ivanov commented:
“New methods of accessing fibre may emerge with international fibre exchanges and a new biomass aggregation industry being two possibilities but, there may also be others as the industry evolves.”

New market entrants in the value chain, a result of the evolving uses of wood fibre resources, will also play a significant role in changing the face of the industry. Chemical and energy companies for example, will want to secure wood fibre for their own applications, changing the nature of competition for good.

Working across industry boundaries will therefore become increasingly important and there will be a wide range of opportunities for FPP companies who wish to partner with both new and traditional market players alike, however they must make the move to capitalise on the potential benefits.

The PwC paper argues that there is significant potential for forest product companies to benefit from extending the boundaries of what products and by-products the FPP industry produces and how. As such, executives will therefore, need to take a close look at their company's business model and consider where they can best compete in the value chain.

Alexei Ivanov commented:
“In this new market dynamic, most companies won't be able to succeed on their own. They'll need to form alliances with parties who have better access to capital, experience in new markets like energy distribution, or research competence in areas like molecular chemistry.

“Provided the right strategic choices are made in order to generate a respectable return on investment, finding good partners should help generate new, and much needed sustainable and profitable revenues.”