A panel session chaired by L&L editor James Quirk during the Labelexpo Southeast Asia conference yielded some fascinating insights into the dynamics of the ASEAN market and identified trends of interest to converters globally.
The participants represented a great mix of local converters, converting groups and global players. They were Piyapong Wongvorakul, Trisan Printing, Thailand: originally a letterpress label converter, the company has diversified into cartons and adopted flexography and sheet-fed; Adrian Pratiwiharja, PT Interflex Sejahtera Perdana, Indonesia: the company was founded in 2008 to produce shrink sleeves, and has now diversified into flexible packaging; Peter Woods, QLM Label Makers, Malaysia: the label group has operations in Australia, Malaysia, Bangladesh and Vietnam; and Brenton Barrett, Multi-Color Corporation (Asia-Pacific), global label group heavily invested in ASEAN.
The first question looked at opportunities for growth in the ASEAN region. Brenton Barrett said the key question is how to make money from growth, ‘as growth comes at a much lower margin that existing business.’ Both Adrian Pratiwiharja and Piyapong Wongvorakul said they are looking to grow their businesses through exports, although the latter noted that increased sales do not automatically translate into increasing turnover.
Brenton Barrett said Vietnam appeared to be the fastest-growing market in ASEAN. He said that despite MCC being an international converting group, its ASEAN customers are looking for the company to be local. ‘It is all about speed to market and being local. We can export to a market for perhaps 1-2 years before have we have to put down bricks.’
Consolidation is a key trend in today’s global market. How does that impact ASEAN? Adrian Pratiwiharja said: ‘We have big multi-national converter competitors in Indonesia and that is a good thing. It is fair competition and makes us want to improve continuously. Certain brands in Indonesia still prefer to buy from a medium-sized local company, where we can be more price competitive. They like the quick lead times from a small business.’
Brenton Barrett commented: ‘Before I sold my company in Australia to Multi-Color Corporation, I had become a medium-sized printer and I could not compete against the big guys. At the same time I had all the costs so I was no longer competitive with local companies. So medium-sized printers have a hard time.’
Peter Woods opined: ‘We are driven by our customers to grow and get bigger and increase our footprint. When we stop growing and investing we will be overtaken and then we can’t compete. We need to be big but our local customers want to be engaged locally – they still want to ask a favor of the boss. And we must not get locked up in red tape.’
Barrett reinforced his earlier comments about localism: ‘More than half of our business is local in all locations. Global brands still look at you as a local company, so we have to look, feel and act better than the local guys. It does not give us any right to the business.’
Diversifying from labels
A key trend seen globally is a diversification from pressure-sensitive labels to other forms of labeling and package printing. This trend clearly impacted the panelists’ businesses. Adrian Pratiwiharja said: ‘We started with gravure printing, but we saw the shrink sleeve market was not growing so we diversified into flexible packaging which includes single structure packaging to multi-structure.’
Piyapong Wongvorakul added: ‘We started with letterpress, and then moved into folding cartons on the roll and now sheet-fed as well. We produce wraparound and in-mold labels and also wet-glue from our sheet-fed presses. We get more orders for folding cartons on the web and sheet-fed can produce smaller runs of IML, so we have adapted both products.’
Brenton Barrett commented: ‘We provide all decorating technologies including tubes, shrink sleeve labels, heat transfer and cut and stack – we want to be able to make sure our customers don’t leave because there is a packaging technology we do not supply. Not in every plant, but within every region. We also invest heavily in MIS because our customers look for us to take work off their desk, to manage their inventory and scrap. So how can we take their costs away? This about more than the decorated product.’
Key digital press manufacturers were present at Labelexpo Southeast Asia. How did the panelists feel about the future of digital? Piyapong Wongvorakul said: ‘We started digital printing 3-5 years ago. In Thailand it is more costly than conventional presses. Customers are looking for cheaper label prices but digital is not cheap, so digital print is suffering. But in the next 2-3 years, when wages increase and cost of producing conventional labels increases, digital printing might come into the market at a better per-label price.’
Peter Wood said: ‘Our customers demand quality as a given. Our industry is based on a skilled workforce but customers are not interested in our expertise, so technology has to help us deliver quality on a consistent basis. This means speed on turnaround and supply – for the new generation of purchasers this is what they want. They do not want to hear about lead times. So digital will continue to grow and this will be number one on a local level.’ Brenton Barrett added: ‘MCC initially struggled with digital. The thing that helped us reach a tipping point was when we had a separate sales team. Nobody in that digital sales team is over 25. They do not talk about costs – price never comes up. In our industry we should sell digital as the premium product which it is. Traditionally we used digital to take the worst-performing jobs off the conventional press and put it on digital, but that’s not what we bought the digital machines for.’
Adrian Pratiwiharja said: ‘In Indonesia it is not really the time yet for digital. We thought about investing in digital but the price is still high there. We have more output on gravure, and certainly that will be the case for the next five to ten years.’
With the prevalence of counterfeiting in the ASEAN region, is protecting brands a growth opportunity for local converters?
Brenton Barrett said: ‘MCC has a division to look at anti-counterfeit packaging, and probably the fastest way to grow is to help our customers protect their brands. It’s not just putting something on the product but also to do with the mining of data. They are prepared to pay a little premium for an end-to-end solution and this has been very positive. When we opened in China in 2011, anti-counterfeiting technologies was the way we got into the market. We did it in China and they are the best counterfeiters in the world, so this is where my team is. We take one step forward, then counterfeiters take a step forward – it’s a constant battle.’
Adrian Pratiwiharja said: ‘We had a water bottle customer being counterfeited, so the customer asked if we had anti-counterfeiting labels. They wanted us to print holograms but this meant we had to laminate, which required different machinery. We tried to suggest micro-print, but they wanted something more visible and overt. In the end they used two different colors coated on the product.’