NatureWorks investing in Latin America

Mike Verespej

Published: July 27, 2009 6:00 am ET

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Bioplastics manufacturer NatureWorks LLC is adding a distributor in Brazil for its Ingeo polylactic acid resin and in August will announce a major product launch in Colombia.

“We are trying to develop a supply chain, and part of that is developing all the right channels,” said Salvador Ortega, business development manager for NatureWorks, at NPE2009, held June 22-26 in Chicago.

Ortega, who is based in Mexico City, is responsible for resin distribution in all of the Americas and for working with brand owners and compounders in Latin America to expand the market.

“The scale of the business is different in Latin America than in North America, but there are more similarities than differences,” he said.

The relationship between distributors and converters is extremely important because of the culture in Latin America and because many converters are family-owned, Ortega said.

“We like to partner with companies that know the local market because language, cultural and warehousing capabilities are absolutely needed to be successful,” he said.

NatureWorks has been in Mexico for four years, mostly on its own until signing a distribution pact last December with Proma Plast SA de CV in Mexico City.

NatureWorks in January inked another distribution agreement with Quimicoplasticos of Medellín, Colombia.

NatureWorks is a wholly owned subsidiary of Cargill Inc. At the end of June, Teijin Ltd. of Osaka, Japan, decided to relinquish the 50 percent stake it had held in NatureWorks for the past 21 months.

“We are looking at Chile as the next place [after Brazil] and Argentina will be the other one,” Ortega said. “Those will be the places we develop in the short and medium term.”

PLA was completely new in Mexico four years ago, Ortega said, but the Mexican market — which is about 10-15 percent of the size of the U.S. market — quickly tracked what was happening to the north because many brand owners and retailers have presences in both countries.

“If Ingeo is used in the U.S., the companies in Mexico want to follow, as many of the brand owners and retailers are global companies,” Ortega said.

“Sustainability is at the center of environmental demand everywhere and it is very strong in Latin America,” he said, pointing out that a ban on plastic bags in Mexico City was approved earlier this year and goes into effect in March 2010.

As in the U.S., food packaging was among the first applications for PLA in Mexico, he said.

“What we are seeing today — though not entirely commercial yet — [is] some work with bottles, injection molding applications for consumer goods, film applications and cosmetics,” Ortega said.

The company was experiencing 20-30 percent annual growth in Mexico for a few years, but growth slowed down to about half that rate in 2008.

With more than 100 million people, Mexico is the second-largest market in Latin America, behind Brazil, which is nearly twice as large.

The Colombian market is much smaller, at 45.6 million people, and PLA may be slower to gain market share. At this point, the company is primarily helping customers with developmental work on cosmetic containers, thermoformed trays and disposables.

“But our major [Colombian] product launch in August will be very visible,” Ortega said.

In Brazil, there are challenges because “the economy is not as open, there are import duties to get into the country” and there is the need to be fluent in Portuguese. But there is a willingness to look at PLA because of the country's use of sugar cane-based ethanol for the past four years, Ortega said.

“That has opened people's minds to using products coming from natural sources,” he said. “You have to have a local partner help you develop that market and develop the supply chain in that market.”

Copyright 2009 Crain Communications Inc. All Rights Reserved.


NatureWorks investing in Latin America

Mike Verespej

Published: July 27, 2009 6:00 am ET

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