After a series of layoffs, Tupperware Corp. plans to expand its only U.S. plant in Hemingway, S.C.
``That's part of our strategy to increase the share of the U.S. convenience market,'' David Kusuma, vice president of product development worldwide, said in an Oct. 20 interview in Charlotte.
Since March, the Orlando, Fla.-based company has cut about 250 jobs, nearly half of the workers in the South Carolina plant. That came less than two years after two previous layoffs.
``Although the U.S. housewares market hasn't been growing, I think there's potential with the right products and the right target,'' Kusuma said. He did not provide details about the possible products.
The South Carolina plant molds ``complicated'' plastic items, including accordionlike, collapsible, food-storage containers called Flat Outs, and two-component polycarbonate products, he said. It supplies North America as well as Europe.
``It is also a key distribution center for products from outsourcing as well as Tupperware's overseas plants,'' Kusuma said.
North America accounted for 20 percent of the company's 2004 global sales, he said, but the share will shrink further this year.
Tupperware differentiates itself from competitors in unconventional ways.
``There are two areas of competition. The first is the product; the second is the marketing channel. Most of our competition on the product side are not competitors on the channel side,'' he said in a follow-up e-mail Oct. 27.
``We are a global direct-selling company first,'' Kusuma said. ``We certainly monitor companies with product categories that overlap our own, but we don't necessarily consider ourselves their competitors.''
Direct selling is Tupperware's main distribution channel, the traditional ``home parties'' held by distributors worldwide. In relatively new markets like Latin America, Kusuma said, direct selling is gaining much popularity. ``Our parties are even held on horseback,'' he said.
Tupperware experimented with selling products through Target retail stores in 2002, but stopped after a few months when home-based sales slipped.
Despite the emphasis on marketing channels, Kusuma said Tupperware has a strong heritage that needs to be maintained - ultimately its products.
``Our customers expect our products to be the best in quality, best in design, and last a lifetime,'' he said.
At the Oct. 19 Design Day conference at the Plastics Encounter trade show in Charlotte, Kusuma underlined three current key strategies: to reposition product lines, diversify categories and focus on outsourcing.
The firm is developing products for customers' specific needs during seasons such as Halloween and Easter. In addition to the traditional lineup of food containers, Tupperware is growing with trendy gadgets and kitchen items like stainless-steel cookware and porcelain tableware.
With the portfolio expanding to glass, ceramics and stainless steel, plastic food containers remain Tupperware's core business. ``That's where our expertise is,'' Kusuma said.
But he underscored the firm's diversification, saying: ``Beauty packaging business will soon account for one-third of Tupperware's worldwide sales.''
Tupperware bought Dallas-based BeautiControl Inc., a direct marketer of cosmetics, about three years ago. Another acquisition, currently pending, will boost the firm's share of the beauty business once the deal is final, in about a month, he said. Tupperware is buying Sara Lee Corp.'s direct-sales operations, which primarily sell beauty and personal-care products in Latin America and Asia. Brand names included in the deal are Fuller, Nutrimetics, NaturCare, Avroy Shlain, Nuvo Cosmeticos, Swissgarde, and House of Sara Lee
Beauty packaging is different from food containers, Kusuma said: ``It has to look good, it has to last, but it doesn't have to last forever.''
Instead of simply adding product categories, Tupperware's diversification goes hand in hand with innovation. The company describes its products as ``low-tech'' innovative applications and ``smart'' innovative applications. The fresh-vegetable container, which uses air pressure to balance humidity, is a good example. Kusuma called it ``scaling down'' existing industry technology for use in the kitchen.
The company now has two product development centers, one in Orlando focusing on U.S. markets, and one in Belgium designing for foreign markets. Tupperware closed product development in Japan about two years ago, consolidating capabilities to focus better, he said.
Tupperware divides its world market into North America, Latin America, TEAM (Europe, Africa and the Middle East) and Asia Pacific. Europe, its biggest market, accounts for about half of global sales.
For a company that generates 80 percent of its sales abroad, the outsourcing model has the general advantages of low-cost labor and market proximity. Yet, lower costs are not the sole reason to outsource, Kusuma said. Tupperware's plant in Okazaki, Japan, was not built for cost advantages but for Japanese consumers who prefer products made domestically.
``The production costs are very high in Japan,'' but it is worthwhile because the market is willing to pay the price, he said.
Outsourcing also lets a plastic molder expand capabilities and bring in metal products, for instance. ``It is an effective way to add new product lines without starting in-house production and trying to catch up with players that are already in the field,'' Kusuma said.
In Asia Pacific, Tupperware's largest markets are Australia and Japan. The company developed a tall and thin rice dispenser to solve space problema in Japanese kitchens. In South Korea, small refrigerators are designed for making kimchi at home.
Both the Chinese and Indian markets are growing rapidly, with their own special needs and consumer expectations, Kusuma said. The popularity of stainless-steel food containers in India keeps Tupperware away from certain product categories. Although the firm makes stainless products, it cannot make them more cheaply than local Indian manufacturers.
Tupperware said outsourcing does not affect design that much, but it is hard to find qualified suppliers overseas. Some suppliers tend to trade high capital for labor costs.
``Rather than doing anything in automation and having products coming out of the end, they do not mind going with cruder equipment and finish it all by hand,'' Kusuma said. ``To solve the problem, partly, you need to form partnerships and bring them up to meet the specifications.''
China is a special area in Tupperware's world map, because direct selling had been illegal there until recently. As an alternative, entrepreneurial storefronts have been opened to sell the products. Kusuma said the company currently has close to 1,900 outlets in China, nearly doubling its number from last year.
So far Guangzhou is Tupperware's only production site in the country. About 200 employees work at the South China plant.
``The fact that Tupperware has a plant in China already helps the company out,'' Kusuma said. ``It helps to manufacture and deliver product to the local market and helps Tupperware Worldwide to follow up on global products that are being sourced in that part of the world.''
``We try to control the design and outsourcing outcomes,'' Kusuma said. He said he was just back from a three-week trip in China where he worked with a couple factories from which Tupperware is outsourcing.
Kusuma said Tupperware is just getting used to the Chinese market's preferences. The best-seller in China is expandable containers. Also, ``they do not like to buy individual containers, but in combinations and sets,'' he said.
Tupperware is not yet aggressive in China with technological innovation. Most companies Tupperware is monitoring are in Japan and South Korea, he said.
The company gets materials locally, but ``only from subsidiaries or joint ventures of global suppliers, such as Bayer China,'' Kusuma said. It manufactures some tools in China, but only with a few long-term partners. However, a lot of its outsourced products are made in China.
``In terms of product development, China's importance will grow in the future,'' Kusuma said. ``We don't do product development in China, [but] we do product development for China.''
One of Tupperware's competitors, Rubbermaid Home Products, won a lot of attention this year when it announced that it would move away from plastics and use more alternative materials. Kusuma said Tupperware also is looking at exploring alternative materials ``to see what can be replaced and what can be done better and cheaper.''
He agreed the hurricanes have impacted the resin market, especially the availability of some specialty resins.
``It has made our job a bit more difficult,'' he said. ``Part of it is good in the way that it allows us to really push ourselves to be more efficient, materialwise, and towards developing alternative materials.''
He also said the resin market may have a stronger impact on cost-sensitive companies like Rubbermaid.
``Tupperware is very different, because it does not compete in the commodity market and does not compete on price at all,'' Kusuma said.