PETpla.net Insider 09 / 2012

REGIONAL MARKET REPORTS 11 PET planet insider Vol. 13 No. 09/12 www.petpla.net the trend for brand owners to incorporate blowmoulding PET bottles into their production lines and, now, to start taking responsibility for the injection moulding of preforms in-house as well. As a consequence, the converters, having first lost the business of supplying the bottles, are now also potentially losing a piece of their preform supply business – to their own customers. An estimated 70% of mould cavities are today in the hands of the brand owners and only 30% are still with the converters. The fact that these converters are still not com- plaining is due to the phenomenal growth in the beverages market. We put some questions to Arthur Liu: PETplanet: How are you coming to terms with the migration of your core business? Arthur Liu: The Chinese beverage market is driven by huge volume but low margins. As a company specialised in packaging solutions, we have to adapt and change. We have a strategic phased plan that we follow – in several phases. Our target is to transform the business from a production-based model to one where we focus on creating value and bringing customised services to our customers. PETplanet: Could you explain what you mean by this transformation? Arthur Liu: Looking back at the development of the beverage industry in the last few years, we can summarise them in three phases. In order to remain competitive, we have to continually adapt our business model and adjust our strategy. PETplanet: Phase 1 (before 2005) Arthur Liu: Before 2005, the beverage industry value chain was conventionally a buyer-seller relationship. Sup- plying good quality products with a competitive pricing strategy was key to gaining more market share. During this time, we established one of the earliest ‘inline’ produc- tion models with our customers. Over the years, we suc- cessfully helped customers to reduce their logistics cost, improve product safety whilst continually raising the bar for our own operations. But no business model is sustainable forever (buy and sell is out). With the growing competitiveness of the market and the pressure to reduce cost, we need to re-invent our business model. Husky machinery at the Zi Jiang plant PETplanet: Phase 2 (2005 to 2010) Arthur Liu: From 2005 to 2010, the Chinese beverage market was growing at more than 25% annually. Inter- national players such as Coca-Cola and Pepsico were aggressively expanding their China operations and this brought about increased demands on cost optimisation. By end 2005, Coca-Cola BIG acquired bottler Kerry Beverages, and bought their first blow moulding machine F.l..: Wolfgang von Schroeter, Liu Tie Feng and Wang ZhenHui