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October 20, 2008 02:00 AM

Welloyd's strategy: all markets, low to high-end

Steve Toloken
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    David Wai is one of a growing number of Chinese business people seeing opportunities in Africa.

    His company, the Hong Kong-based machinery maker and molder Welloyd Industries Co. Ltd., has a factory in Asaba, Nigeria, where it manufactures simple household plastic items, to complement a South China factory where it does more sophisticated molding, and makes plastics machinery and tools.

    Wai has been manufacturing in Nigeria for 25 years, and he says the economy there is good at the moment, fueled by high oil prices. (Nigeria is Africa's second-largest oil exporter, although fighting in oil-rich areas has cut production 40 percent in the last three years, according to the Associated Press.)

    That has not affected his business much, and he said profit margins are actually higher in his Nigeria factory than at his operation in Dongguan, China, where rising costs, new labor regulations and a very tough competitive environment are putting the squeeze on profits at local firms throughout South China.

    ``China has too much competition,'' Wai said. ``In Africa, there are fewer manufacturers and more buyers.''

    Still, giving a tour of his Dongguan factory recently, he said each location has its strengths and weaknesses.

    Nigeria can only really make simple goods, because the country lacks the sophisticated supply chain needed to make an electronic toy or other similar product, he said. While unskilled labor is readily available, the company must train any skilled workers itself, he said.

    He also said it costs more to produce goods in Africa because a lack of technical support means machines may run at only 70 percent of the capacity they would in China.

    ``If a machine breaks down in China, maybe it takes one day to have the service people repair it,'' he said. ``In Africa, maybe it takes two weeks.''

    Welloyd, with about US$10 million in annual sales, has carved out a rather unique three-pronged approach to business, which has it in markets from low to high-end, from Africa to America, and points in between.

    From its 500-employee Dongguan plant, it exports blow molded bottles and products mainly to more demanding, high-end markets like Japan, the United States and Europe, taking advantage of China's lower labor costs.

    It also uses Dongguan's technical skills and nearby manufacturing base to make blow molding machinery, but it focuses on making simpler machines and exporting those to developing economies like Africa, Southeast Asia and the Middle East.

    And finally, the 300-employee Nigerian operation sticks with blow molding and injection making packaging, utensils and simple plastic products for the local market, and running a profitable operation servicing equipment he has sold there.

    Wai, a Hong Kong native, first went to Africa in the early 1980s, recruited by a British-Hong Kong joint venture firm to help operate a packaging factory.

    After a few years, he struck out on his own, setting up his Nigerian blow molding operation in 1984. In 1988, he started his Hong Kong machinery operation, and moved it from Hong Kong to Dongguan in 1992, when he also expanded his China operations into blow molding.

    He has no plans to change what each factory does, and said, for example, it would not be practical to manufacture molds or plastic equipment in Africa because it would be hard to find good suppliers of steel.

    Wai said he focuses his efforts in China these days on seeking higher margin businesses than simple bottle molding, such as making hospital and laboratory bottles for Japan, household trash bins for Hong Kong's recycling programs, and new products like portable toilet seats and hard-to-mold applications like space-saving, triangular water bottles that lock in place on bicycles.

    With its machines, he said Welloyd's goal is to develop equipment that has ``90 percent'' of the functionality of more sophisticated machines, but at half the price or less.

    For example, he showed what he said was a new blow molding machine bound for Malaysia that makes 100,000 bottles a day and costs about US$150,000. That, he claims, is 90 percent of the performance of a machine costing three times as much.

    ``I don't want to use all the systems they use in America or Europe,'' he said. ``We just want to be simple, and do a little bit of research and make a cheaper machine for developing countries.''

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