03 Dec Cork: A unique natural material playing a key role in tackling climate change
António Amorim, CEO, Corticeira Amorim, highlights the many technical and sustainable advantages of using cork in diverse applications
Corticeira Amorim is the world’s largest producer of cork products. As CEO of one of the most international of Portuguese companies, I’m sure our readers would be interested in your views on the global praise Portugal has received for its handling of the coronavirus crisis. What, in your opinion, are the key elements that have allowed Portugal to tackle this crisis so effectively?
Portuguese people are known for their ability to improvise, which is what we did at the earliest stages of the pandemic. We clearly followed the instructions that were given that had a positive effect on the local economy throughout April and May. We are experiencing an uptick in cases and fatalities at the moment, however it is positive that we have vaccines just around the corner. It’s a question of staying positive, staying safe and staying vigilant until that time comes. As a company, we have been impacted like everybody else. We are a business-to-business company so most of our customers were affected this year in various industries worldwide. Across this year, we saw a decline in turnover of around 5 percent overall and we estimate finishing the year with a reduction in our total 2020 sales of 5-6.5 percent.
I presume that you are asking yourself why we were not as affected as many other industries? Firstly, we depend on exports, which represent 95 percent of our turnover. Secondly, we have a worldwide network of sales companies in the most important countries for our business that always operate very closely to our local clients and that proximity is absolutely crucial at the critical phase of this pandemic. We have quite a large spread and international presence that dilutes our risk. We depend on wine, but we also depend on home interiors, composites and industrial activities. As a company that has been in business for a while, our advice is never depend on one product, one market and one currency. For this reason, we have actually seen some growth in certain geographies across our client portfolio. Our clients understand that we are relevant in the wider industry supply chain, so it was absolutely mandatory to continue to serve our customers worldwide and that is why we have overcome this pandemic better than other companies in our industry.
In our interview with Portugal’s Secretary of State for Internationalization, Eurico Brilhante Dias, he said: “The current industrial revolution that is in progress is the first to happen at the same time for everyone, in which location is not a determining factor and in which talent, creativity and innovation are the capacities that will differentiate the winners from others.” What impact is digital transformation and Industry 4.0 having on Corticeira Amorim’s business and on the country?
First of all, digitalization is something that existed before the current pandemic, although that has accelerated it. All of the internal processes that we were exposed to have somehow been accelerated because, with no traveling, we had to focus on our internal processes. At the same time, we have to note that the current pandemic will have an impact on the global supply chain. Nobody wants to be as dependent as we were with such distant supply chains. The issues that our secretary of state was referring to are the relocation of industries and the re-industrialization of Europe, which will happen where we will have product, human resources and infrastructure to support that investment.
For us, it is clear that Industry 4.0 is certainly at the top of our priorities. That has coincided with the implementation of the SAP customer relationship management system in the whole of our manufacturing and sales departments. This means that we are finally going to have a very strong database through which we can leverage a lot of our data collection from the shop floor that we want to accelerate into a digital strategy going forward. Digitalization for us is not only 4.0 or data collection, it is the potential to implement artificial intelligence in the technology upgrade of our critical manufacturing processes.
I believe that Portugal is well positioned: in my view, our education system is certainly an asset, our universities prepare our young minds well to engage with these new technologies. I think that we need to strengthen our investment into knowledge of all the new business trends that are pushing the world forward. Portugal has never been strong in industry, so we have an even more important role to play in this re-industrialization phase of Europe, in attracting interesting international investment for people to take advantage of the talent that we have here. What is next is shaping this new generation to be more ambitious and with a view to have a purpose in life that is more than just having a job. If we do that, I think that the future of our country will be very positive.
The cork business involves a permanent struggle for process optimization, technological evolution, performance improvement, the creation of new products, the consolidation and conquest of markets, and very long-term planning. What is the current position of global cork industry and how positive are you about its future?
I think that we have never been as positive as we are now, firstly because I think that cork has proved that it has a wide variety of applications and that it is the best performing product. When you are talking about the most-used application for cork, it is closures for wines, sparkling beverages and spirits, in which cork is taking market share away from alternative closures because it is a better-performing closure.
That is on the performance level. There is a second factor, which is the sustainability factor. One metric ton of cork produced by the forest retains up to 73 metric tons of carbon dioxide (CO2). This is unique from a sustainability standpoint. When that happens, people that use cork for their wine bottles are helping the carbon footprint of their wine bottle. Corticeira Amorim tries to bring all of these technical and sustainable advantages in order to enhance the use of circular-economy products. The other day, somebody from Nike said: “Waste does not exist. It is only byproducts in the wrong hands.” So if you put all byproducts and residue in the right hands, I am sure that we can create value, ethical use and wellbeing for the client. Our company has been recognized as being very outspoken about this and I think that cork will stride positively in markets going forward.
To offset global changes like climate change, I think we need to do two things. The first is to stop using products that are polluting and start using natural materials. The second is investing in carbon sinks: namely by planting more cork oaks. The two are closely linked. If we use more of these natural materials we are going to be forced to plant more trees. We can plant more trees and increase the forests’ capture of CO2. Also, we have been investing in research and development (R&D): we create pilot plans with new technology, we challenge universities and design schools in Portugal on how they can use cork combined with other materials to replace traditional synthetic materials. We used to use recycled rubber in artificial grass pitches, but today we are putting down cork granules because they don’t release any toxins and at the same time they allow the temperature of those pitches to be 12o Celsius lower than the temperature they would be if we were to use recycled rubber. We always think about how to best communicate the true value and advantages of cork, so they are known worldwide.
Since debuting on the stock exchange, 30 years ago, Corticeira Amorim has seen its market value multiply by 17 to close to €1.6 billion. At the start of the millennium, the situation was in the balance for the company but today it stands as beacon of resilience. What are the key principles that have been implemented during your time as CEO that have positively impacted the bottom line and image of the brand?
Basically there are four or five actions that we incorporated in the company over the last twenty years. First was a change in the corporate governance of the company. Despite being family owned, how do we make it more professionally managed? How can we have people with different experience coming to help us and letting them have the freedom to bring in creative value-added skills, while always following the company’s core value. The second thing is that we are a natural raw material and a very sustainable product that is fantastic. We knew that the product needed to perform and meet customer expectations over various uses. Thirdly, we had a clear plan for investment in R&D. I think the main thing that has changed this company over the last twenty years is the strong capabilities that we have recruited in this area. Innovation meant that we discovered many more use cases for cork and improved our internal processes. Linked to this is a very solid financial structure, of course, and is the fourth reason: because a business that does not reinvest in itself is a business that will not last for a very long time.
We have created a new ambition for the business, to become larger and the biggest promoter and developer of cork. In order for that to happen, our last but not least action is that we need to communicate; we need to be more present in the market and use social media in order to engage the thousands of people who have never heard about cork. With all these factors coming into play, we have only had two years that the company has not experienced growth—they were 2009 because we had an economic recession and 2020 because of the pandemic.
Acquisition of the competition has been a key growth strategy for Corticeira Amorim. What can we expect with regard to international acquisitions for the group in the near future?
Before COVID-19, we were in conversation with two prominent players that we put on hold during the pandemic, but we resumed the conversations in September. Last week, we concluded that we will not pursue one of them. We continue with the other opportunity that we will announce in the first quarter of next year. We have been active with acquisitions over the last 15 years because we thought that we could bring value to some of our competitors if we were managing their operations. Organic growth is mandatory for us. We like to absorb companies that have a specific know-how that we don’t have, especially if it is linked to an alternative use for cork that we do not have. This year, we have set up operations for providing cork for sports surfaces and for children’s playgrounds, where we will be replacing recycled rubber.
You wrote a piece for the upcoming book “Hope and Reinvention: Ideas for the Portugal of the Future,” where you highlighted several points, including turning crisis into opportunity, exporting as an obligation, promoting Portugal abroad and innovation. Could you summarize what you see as the best path for Portugal to follow in order to rekindle its economic flame?
I think that we have seen in our history that Portugal normally does well when we are confronted with difficult moments like this. Meaning that, throughout a crisis we do very badly but that crisis has been the biggest instigator for another period of economic growth. Just imagine what we went through in the aftermath of the 2009 crisis that generated an internal crisis in 2011 and how well the country has come out of this. It has been said that a crisis can never be wasted: now imagine two crises. That is the takeaway that we need to focus on. I think that there are plenty of opportunities for us to do that.
Portugal is a very likeable country, we have talent but we require a lot more ambition than we have in the country. To try to grow, to try to grab opportunities and not stay sitting in comfort, which is coincidentally what is being recommended at the moment for health reasons. But we can not do that forever. We need to grow the average size of our companies and make sure people have the ambition not only to serve their community but to serve the country by starting to export and internationalize their activities. We need to use the package that the European Union is providing Portugal to recover from the pandemic to attract foreign investment to be based in Portugal, if possible in industrial activities because those are activities that stay and last for a long time. These are the decisive factors for our economy to take advantage of this important moment.
As a company celebrating its 150th anniversary this year, what would your final message be for the global readers of Newsweek?
The 150-year celebrations were cancelled for us because we needed to focus on getting our company through these turbulent times. But we have an inner feeling of pride and success about this very long history. What is a common factor for the four generations of our family, and for the thousands of people that have worked and are working in our company today, is a true passion for what we do and for cork. This is what keeps us going. Never stop believing in your true motivation and always show passion in everything you do.