Amid challenges, Vietnam's TTP says rising incomes push growth

By Steve Toloken
Staff Reporter / Asia Bureau Chief

Published: March 13, 2014 12:05 pm ET
Updated: March 13, 2014 12:10 pm ET

Image By: Steve Toloken Jay Tran of Truong Thinh Plastics in Ho Chi Minh City, Vietnam.

Related to this story

Topics Injection Molding, Extrusion, Asia, Personal-care packaging

HO CHI MINH CITY, VIETNAM — There are many challenges to business in emerging markets like Vietnam, but one potential upside that’s getting a lot of attention these days is the growth of what’s broadly called the middle class.

Truong Thinh Plastics, Vietnam’s largest maker of plastic tubes for personal care and cosmetics, said the rising local incomes are fueling its growth.

Sales, for example, have grown more than 10 percent a year for at least a decade for TTP, and it’s doubled production in the last five years, to about 8 million plastic tubes a month.

Showing a visitor around the company’s extrusion and injection molding factory on the outskirts of Ho Chi Minh City, Executive Vice President Jay Tran said he expects that growth to continue. The biggest driver, he says, will be increases in Vietnamese purchasing power.

“What I’m counting on is the people who are workers and taxi drivers, the lowest income part of the country. I have a strong confidence that the purchasing power of this group will increase a lot in the upcoming 5-10 years,” he said.

“The better we clean up poverty, the more population in the middle class we will get,” he said. “This is the main force that makes the domestic consumption grow.”

Some outside analysts back that up. A December report from the Boston Consulting Group said the consumer class in Vietnam, which it defines as having a per capita income of at least $2,300, will triple to 33 million between 2012 and 2020. It said Vietnam and its 90 million people have the fastest-growing middle class in Southeast Asia.

Compared to some countries, that $2,300 per year is not a huge sum of money, of course. Even adjusted for purchasing power parity, which would put Vietnam’s $2,300 at closer to $3,500 of spending power, the local market remains very price sensitive.

But for companies like TTP, which was started in 1986 by Tran’s family, it still represents an opportunity, said Tran, who has a degree in business from George Mason University in the United States.

The company spent $2.5 million last year on a major equipment upgrade to higher-speed machines, including several machines from South Korea. Future plans include developing more capability at making caps and closures and “offering more options and variety instead of just increasing capacity,” he said.

Today it has seven production lines with extrusion and printing, 12 injection molding presses and assorted hot stamping and other machines.

By revenue, business is split equally between the domestic market and exports, although its export markets are more profitable, at least on a unit basis. Domestic clients include local operations for Korea’s LG Cosmetics and the consumer goods business of Bangalore, India-based Wipro Unza.

Tran said the company, which has about 40 percent of Vietnam’s domestic market for tubes, has no plans to shift to more of an export-oriented model.

“I have already accepted very long ago the price competition domestically,” he said. “I acknowledge that selling domestically I earn very little, the margins are very slim, [but] I accept it in order to keep supplying, keep my dominating position in the domestic market.”

Export opportunities are growing as well, in part because as manufacturing costs rise in China, global companies are coming looking for options, Tran said.

“I’ve been exporting to many regions around the world, including the United States, Europe, India, Japan, but recently the United States buyers have been increasing volume a lot,” he said. “They never share where they shift their purchases from, but I can judge from many factors that these were previously ordered from China.

“They are finding alternative suppliers, not only in Vietnam but in Thailand and other Asian countries,” Tran said. “So we are getting what China is losing.”

TTP, with 400 employees, remains relatively small on the world-scale of tube makers. And some of the challenges in Vietnam work against it getting larger, Tran said, like access to capital.

Inflation in Vietnam has roller-coastered up and down between 6-22 percent in recent years, and the country’s GDP growth slowed to 5 percent the last two years as it dealt with a host of macroeconomic challenges. Its prime minister made a very public apology in 2012 for mishandling the economy and for problems with the country’s large state-owned companies.

TTP said it’s had a focus on investment from the beginning. It installed the first extrusion line in Vietnam in 1996, although Tran said getting access to funding remains a challenge for his company, as it does for the country’s mostly small-scale manufacturers.

“In my mind I can see there’s a lot of areas where we can improve efficiently and bring in profits, very profitable improvements that we have not done solely because of the limitations in terms of capital,” he said.


Comments

Amid challenges, Vietnam's TTP says rising incomes push growth

By Steve Toloken
Staff Reporter / Asia Bureau Chief

Published: March 13, 2014 12:05 pm ET
Updated: March 13, 2014 12:10 pm ET

Post Your Comments


Back to story


More stories

Image

Magna opens new exterior facility, plans for lighting investment

October 30, 2014 1:36 pm ET

Canadian automotive supplier Magna International Inc. on Oct. 28 opened a new injection molding and robotic paint line facility in Delta Township,...    More

Image

Xten may shut down, working on sale to Commercial Plastics

October 29, 2014 5:49 pm ET

Xten Industries LLC is working on a sale to Commercial Plastics Co. of Mundelein, Ill. Xten, an injection molder based in Kenosha, Wis., filed a...    More

Image

Detroit Manufacturing Systems to hire 200 for F-150 production

October 29, 2014 10:40 am ET

Interior trim supplier Detroit Manufacturing Systems LLC plans to hire 200 assembly workers by January to support production growth of Ford Motor Co....    More

Image

Cosmetic packaging maker expands in China

October 28, 2014 3:32 pm ET

A $180 million expansion project by the Derjin Group of Taiwan has broken ground in China's Jiangsu province.    More

Image

Facing labor shortage, one processor starts its own bus service

October 27, 2014 2:08 pm ET

Like much of the manufacturing industry, Primera Plastics Inc. in Zeeland, Mich., has had trouble finding qualified workers to fill gaps in its staff....    More

Market Reports

Plastics Recycling Trends in North America

This report is a review and analysis of the North American Plastics Recycling Industry, including key trends and statistics based on 2013 performance. We examine market environment factors, regulatory issues, industry challenges, key drivers and emerging trends in post-consumer and post-industrial recycling.

Learn more

Plastics in Mexico - State of the Industry Report

This report analyzes the $20 million dollar plastics industry in Mexico including sales of machinery & equipment, resins and finished products.

Our analysts provide insight on business trends, foreign investment, top end markets and plastics processing activity. The report also provides important data on exports, production, employment and value of plastics products manufactured.

Learn more

Plastics Caps & Closures Market Report

The annual recap of top trends and future outlook for the plastics caps & closures market features interviews with industry thought leaders and Bill Wood’s economic forecast of trends in growing end markets. You will also gain insight on trends in caps design, materials, machinery, molds & tooling and reviews of mergers & acquisitions.

Learn more

Upcoming Plastics News Events

January 14, 2015 - January 14, 2015Plastics in Automotive

February 4, 2015 - February 6, 2015Plastics News Executive Forum 2015

June 2, 2015 - June 3, 2015Plastics Financial Summit - Chicago 2015

September 16, 2015 - September 18, 2015Plastics Caps & Closures - September 2015

October 27, 2015 - October 29, 2015Plastics Financial Summit - New York - 2015

More Events