ASIA - While major Japanese packaging manufacturers have had a fairly low profile presence in South East Asia for more than a decade, in 2014 there was a noticeable increase in expansion and growth across the region.
Japanese conglomerate Rengo, while predominantly considered to be a corrugated carton manufacturer, has been buying into Southeast Asia like there is no tomorrow.
Following a restructuring back home, which included a rebranding, the company - now known as ‘General Packaging Industry Rengo’ (to reflect the diversity of its operations) - went on a spending spree.
The Japanese company already had joint ventures in Indonesia, Singapore, Malaysia, Philippines and Thailand in the corrugated sector, but in recent months has expanded to acquire a 22% stake in Thai flexible packaging converter Prepack Thailand Co Ltd through its local JV company Thai Containers Group Co Ltd (TCG).
With two plants in Thailand province, Prepack has a flexible packaging production capacity of 14,000 tons per year and had net sales of about US$45.25 million in 2013.
Meanwhile, the Thai Containers Group began constructing a flexible packaging plant in Vietnam with an annual production capacity of 3,000 tons.
For more than a decade another Japanese player, DNP (Dai Nippon Printing), has been quietly supplying flexible packaging to major multinationals such as Unilever from its operation in Indonesia. In the words of a former Unilever packaging procurement czar: “DNP is probably the greatest kept secret in the region - Japanese quality at Indonesian prices!”
Well, those days of flying under the radar are gone, and early 2014 it opened a greenfield plant in Vietnam and began to divert mainland Southeast Asian customer orders to the new facility. Meanwhile, the Indonesian plant in Surabaya was re-focused to service the domestic market.
The US$39 million investment tells us three things: That Vietnam is finally emerging as a production base that now has the infrastructure to supply neighbouring Southeast Asian markets as well as its servicing its own growth in end-user multinational corporation investment such as new production plants from P&G, Unilever, Kao, Ajinomoto and Nissin Foods, not to mention a US$3 billion investment from Korean electronics giant Samsung.
DNP’s expansion also tells us that the domestic Indonesian market for flexible packaging has been growing fast enough to sustain DNP’s existing operations in that country, and that Japanese corporations are finally expanding beyond their borders and flexing their muscle in Southeast Asian markets.
On a corporate level, Japanese expansion into Southeast Asia will be a trend that can be expected to continue throughout 2015 and beyond.
But what is much more important for the packaging sector in Southeast Asia is that the presence of Japanese packaging manufacturers will fundamentally change the structure of the packaging industry in the region and the way packaging is conceived and purchased.
Currently in Southeast Asia, most package formats are initiated by the brand-owner - either by developing formats, shapes and designs in house, or by simply introducing successful packs from outside the region; Europe or North America.
But that’s not the way things are done in Japan, where most research and development (R&D) is undertaken by the manufacturer; for example by Rengo, DNP or Oji, Toyo Seikan or a host of other major Japanese converters.
This leaves the brand-owner room to develop and promote the brand, its values and persona, while the manufacturer/converter holds the patent and intellectual property licensing rights.
The increasing availability of Japanese manufacturers setting up shop in Southeast Asia, and bringing with them their portfolio of innovative packaging solutions, means that Western brand owners such as Unilever, P&G, Nestlé et al. now have a whole new range of packaging formats available to them in their main manufacturing centres in Thailand, Vietnam or Indonesia. Formats and designs that had previously been restricted to their Japanese subsidiaries and marketed only in Japan are now available outside the country.
Supermarkets in Southeast Asia are already seeing the start of this trend towards Japanese formats. For example, there is an increasing migration of detergents and personal care products such as shampoo, moving away from HDPE pump-action bottles to lighter weight flexible stand-up pouches complete with laser-cut easy-open spouts and closures with ingenious spouts or other mechanisms that prevent the liquids from ‘globing’ and delivers a measured dose when squeezed.
Other trends beginning to make their way into the Southeast Asian retail markets include:
Easy to open, easy to close packs: Laser-cut tear strips on all manner of pouches are ubiquitous in the Japanese market; these give a sharp clean tear. These days it is rare to find a flexible pack that simply opens by ripping at a cut notch in the pack’s welded seam.
Re-sealable packs are also ubiquitous, particularly in the pre-cooked food sector where the consumer may not wish to eat the entire contents of the pack, but wants to save half, store (either in the fridge, freezer or cupboard) and consume at a later date.
Easy-to-use packs, in the form of self-venting retortable or microwavable pouches for soups, stews and gravy are commonplace. The self venting mechanism that allows steam to escape and prevents the pouch from exploding in the microwave is now in commercial production across Japan, and it is rare to find a microwavable pouch or tray that still requires to be punctured by the consumer before being popped in the microwave.
Easy-to-store packs, made from extreme oxygen or moisture scavenging laminates, now have an extended shelf-life of more than three months (in the case of bread and biscuits) without the need for the addition of a small silicone sachet, or pad, which used to come with every portion. These are now commonplace.
Some packaging formats, such as pre-cooked rice in microwavable trays, incorporate all of the above features and have an extended shelf-life of up to three years un-refrigerated.
These easy-to-open, easy-to-use, easy-to-close and easy-to-store packs were developed in response to Japan’s changing demographic, where the reality is that the population is rapidly ageing (the over-65 age group now represent more than 24.5% of the population).
Elderly people have greater difficulty opening packaging, prefer the convenience of microwavable pre-cooked meals but frequently forget to puncture the pouch to allow the steam to escape.
The sad reality is that men tend to have a shorter life-span than women, statistically in Japan by approximately ten years; therefore the single person household represents a large proportion of the elderly 24.5% of the population. Which of course means that the brand owner has to consider single portion packs or, as is now common, develop solutions. These could be easy-to-close and easy-to-store re-sealable packaging. Another alternative is to separate the standard family-size serving into two separate sections so that the single householder can simply eat half the contents, and store the rest for later.
Of course, they are not labelled or promoted as being targeted at the elderly market, because the younger age groups also benefit from these innovations: individual family members can make their own choice of meal, and the busy mum can simply pop several varieties of soup or stew into the microwave…. and who doesn’t want an easy-to-open pack?
All of these solutions - from detergents in flexible pouches to ready meals - have been developed for the most part by the packaging manufacturer/converter and then licensed to the brand owner, frequently on an exclusive basis. Increasingly though, brands are waving their requirement for exclusivity in pack function and simply focusing on the graphics for brand differentiation.
The increasing presence of Japanese packaging converters with large manufacturing operations in Southeast Asia means that these solutions, made regionally, are beginning to find their way into supermarkets in Singapore, Bangkok, Jakarta and Kuala Lumpur and throughout 2015 this trend will continue.
It won’t be very much longer before those solutions begin to appear in a Tesco, Waitrose or Carrefour near you, because the multinational consumer product manufacturers are already shipping ‘Made in South East Asia’ product into the European markets; and having tested the new formats in the Southeast Asian markets, it will soon be the West’s turn.