How plastic bag firms can survive after crippling ban

Ban on plastic bags has created demand for alternative carriers. PHOTO | ANTHONY OMUYA | NMG
Ban on plastic bags has created demand for alternative carriers. PHOTO | ANTHONY OMUYA | NMG 

The plastic bag industry has suffered a severe blow following the outlawing of its product last week. With the implementation of the plastic bag ban, manufacturers and retailers will suffer losses as consumers embrace alternatives and new players enter the market.

They, however, can still survive the disruption by switching their product line to meet the current needs of the market.

“Changing the product line in order to meet this new demand is a strategy that works because such a company is familiar with the market and has a ready consumer base, or they can also choose to relocate to a different market that still makes use of its products,” said Bruce Gumo, marketing analyst at Biz Trace, a marketing solutions company.

The plastic bag ban, which is described as the toughest in the world, will see violators fined Sh4 million or face a four year jail term.

The move comes as part of a global effort to clean up the environment, which is facing worsening pollution, and to prevent the harming of animals, especially aquatic ones.

To this end, companies have now been forced to comply with the new regulations.

Laneeb Plastics, for instance, a manufacturer of polythene bags and related products that it also exports to neighbouring countries, was forced to shut down its operations when the ban took effect, laying off employees and suffering major losses that could amount to more than Sh20 million per month.

As companies move into decline due to decreased demand or the ending of their products’ lifecycle, most tend to shift focus to alternative products, often injecting capital investment in a bid to survive.

“As demand declines, the overcapacity that was already apparent during the period of maturity now becomes endemic….For companies interested in continued growth and profits, successful new product strategy should be viewed as a planned totality that looks ahead over some years,” said Theodore Levitt, professor of marketing at Harvard Business School in his article ‘Exploit the Product Life Cycle’.

“For its own good, new product strategy should try to predict in some measure the likelihood, character, and timing of competitive and market events. While prediction is always hazardous and seldom very accurate, it is undoubtedly far better than not trying to predict at all. In fact, every product strategy and every business decision inescapably involves making a prediction about the future, about the market, and about competitors.”

An example of a company that is seeking to change its product line in order to survive in its industry following a ban of its products and the growing popularity of an alternative is Philip Morris, a global cigarette and tobacco company for brands such as Marlboro.

Following bans on smoking in public places and buildings in different countries and increasing competition from e-cigarettes, its sales declined.

However, rather than invest more in countries where such bans have not yet been implemented, it has slowly diversified embracing reduced-risk products that could eventually replace traditional cigarettes entirely.

According to a case study titled ‘The Pharmaceuticalisation of the Tobacco Industry’, conducted by researchers at the University of California, San Francisco since 2008, Philip Morris International has spent more than $2bn researching reduced-risk products.

“Last year for instance, it spent €500 million on its heat-not-burn product iQOS and submitted a multimillion-page MRTP application to the US Food and Drug Administration in the hopes of certifying it as a reduced-harm product. The company ultimately aims to replace cigarettes with reduced-risk products as soon as possible,” reported the researchers.

- African Laughter