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Topics Packaging, Consumer Products, Injection Molding, Asia, Containers/closures
SEOUL, SOUTH KOREA — Large South Korean plastic container maker Lock & Lock Inc. is investing $30 million in an injection molding factory in Vietnam — its fifth worldwide — as the company increasingly targets inland China and Southeast Asia for growth.
The new Vietnam plant, located in Tien Giang province, is scheduled to be completed in 2014, but the investment comes amid some rising challenges for the firm, including shrinking profit margins.
The Seoul-based firm, in some ways considered an Asian version of Tupperware, reported 2012 revenues of 508.4 billion Korean won ($477.2 million), up 31 percent since 2010.
But while revenues have grown, profit has held steady at more than 62 billion won ($58.7 million), resulting in falling margins.
The company, which has more than 280 injection molding machines in factories in Korea, China and Vietnam, is a household name in parts of Asia and is betting on sales growth in China and Southeast Asia.
China accounted for more than 50 percent of the company's sales in 2012, the first time it crossed that threshold, and now generates 80 percent of Lock & Lock profits, the company said. Its China sales in 2005 were practically zero.
But that growth has come with costs. It's been one factor hurting profit margins, which declined from 21 percent in 2010 to 14 percent last year, the company said in a written response to Plastics News questions.
"Our margins declined due to a couple of reasons," the company said.
"We had so-called 'growing pains,' such as one-off expenses and inventory-related costs as we tried to improve our administrative capability and streamline our businesses in several aspects."
The company added, "Also, we came to spend more … for our geographical expansion into lower-tier cities and inland towns in China."
The company declined an interview with Plastics News, but said in investor information that it has been accelerating its expansion in Southeast Asia and in smaller cities in China, away from the more-prosperous coastal regions around Beijing, Shanghai and Guangzhou.
For example, it said it expanded its sales network from four to 10 cities in Vietnam and strengthened its retail channels throughout the region, including online, in hypermarkets and on television.
China is the "clear growth driver of the moment for both top and bottom lines," the company said. Southeast Asia, it said, has "great potential but [is] more of a long-term story."
The company, which went public on the Korea Stock Exchange in 2010, told Plastics News the new Vietnamese molding factory is designed to meet growing demand in both Southeast Asia and 100 markets worldwide.
It did not provide capacity details of the planned factory but, based on the size of investments at its other four molding plants, the new Vietnam facility would have about 60 molding machines.
It has one molding factory each in Korea and Vietnam and three in China, although it told Plastics News it does not plan additional molding factories in China. It has about 160 molding machines in its China facilities.
Lock & Lock has also been expanding into other plastic containers, like household storage, and into ceramic, metal and glass kitchenware. It also opened glassware and cookware factories in Vietnam last year, and opened its first molding plant there in 2007.