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Sidel says local services will help growth in China

By Dominique Patton , 25-Apr-2006

The leading liquid food packager Sidel says recently opened facilities in Shanghai will make its machines more accessible for Chinese customers.

Sidel, which claims to be a world leader in machinery that moulds plastic bottles and fills them, says China is one of the group's most important markets.

But with whole production lines selling at millions of euros, it cannot reach many of the country's food and beverage makers, operating in one of the most competitive global markets.

Speaking at the Packaging 2006 exhibition in Beijing last week, Ming Ma, marketing and communication director at Sidel North Asia, said that the firm is working to reduce costs so that there is less of a gap between its products and those offered by domestic manufacturers.

"We certainly have an advantage over local suppliers in terms of services, engineering and management of lines but they have cost advantages," Ma said.

This price gap between imported machinery and locally supplied products is well known but Sidel has made an initial step to slightly reduce the difference.

During 2005 it started manufacturing moulds - a critical part of the blow-moulding process - at a facility in Shanghai, thereby cutting out import duties from Europe and using local labour to reduce costs for Chinese customers.

Ma says the actual cost reduction is difficult to estimate but can be seen as a 'decent' saving.

There are also signs that some Chinese customers are willing to make a sizeable investment in capital. Sidel has already sold 10 of its new generation SBO Universal blow-moulding machines, only launched last year at Interpack, on the Chinese market. This represents a tenth of its global sales of the product.

The machine has been developed to reduce bottle costs by 20-25 per cent through lower demands on energy and standardisation of parts.

Sidel claims to have a further competitive advantage over smaller players.

"Overall the machinery cost is only about 10 per cent of the total cost," added Ma. "The real cost comes from the materials. We can optimise the use of material to minimum weights whereas our local competitors can't."

Around 40-50 per cent of China's packaging machinery market is supplied by local companies, with a significant share coming from abroad. There is however expected to be more consolidation in the sector, which is becoming more competitive as higher raw material and energy costs make a big impact.

According to the China Packaging Federation, China's packaging industry had a turnover of US$50 billion in 2005, thanks to an annual average growth of 14 per cent over the past two decades. Last year it grew by more than 20 per cent.

Sidel, one of three units owned by the privately held Swiss group Tetra Laval, had sales of €1.1 billion last year.

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