PETpla.net Insider 09 / 2012

REGIONAL MARKET REPORTS 12 PET planet insider Vol. 13 No. 09/12 www.petpla.net and injection moulding machines, as part of their efforts in integrating their production operations. At the same time, Wahaha, Ting Hsin were also charting their growth and adopted the business model of in-house manufacturing. This changed the dynamics of the beverage packaging industry. Zi Jiang not only has to be competitive amongst its competitors but also its customers. Leveraging on industry know-how and strong customer relationship, Zi Jiang established both joint-venture (JV) and JV-like business models, partnering with equipment suppliers and downstream suppliers to increase line effi- ciencies and achieve greater resource optimisation. PETplanet: Please explain what the joint-venture busi- ness model is about? Arthur Liu: A JV business model builds on the strong relationship between the stakeholders where both parties establish common interests such as return on investment, cost optimisation, etc. However, this form of strategic alli- ance has its limitations due to the nature of the long term equity investment. Zijiang then developed a JV-like business model and a deal was made with Swire under this arrangement. The basis of the JV-like formula is that both partners each make a separate investment – Zi Jiang, for example, in equip- ment for injection moulding and blow moulding in-house - and receive an agreed fixed amount by way of a return on investment. The costs incurred are separately recorded (open book) and split between the partners according to their investments. The commercial risk is jointly borne by the partners. In 2010, Zijiang was awarded ‘Coca-Cola best supplier’ for our outstanding efforts in creating value for Coca-Cola using this JV-like formula. Zi Jiang and Swire (Coca-Cola holding) currently have two JV-like partnerships which have been in operation for the last five years:  Zheng Zhou plant: 200 million bpa; in-house: two blow moulding machines and two injection moulding systems  Hanghou plant: 300 million bpa; in-house: two blow moulding and one injection moulding system. Zi Jiang is now working on adopting the same approach for Cofco, CCCIL and other customers. PETplanet: Five years from now, how do you think the beverage industry value chain will evolve? Arthur Liu: The rapid growth of China’s beverage market provides a unique development opportunity for equipment suppliers. When Sidel introduced the Combi (blower-filler-capper) to the Chinese market in 2008, major players such as Coca-Cola, Ting Hsin, Wahaha quickly warmed to it and the Combi soon became a trend in the market. I would categorise the period after 2010 as the Phase 3.