Blow molding giant Graham Packaging Co. Inc., which entered the China market in April with its first acquisition there, has set an aggressive target of up to $300 million in sales in China and Asia within five years.
The York, Pa.-based company is one of the world's largest plastic container blow molders with 80 factories in the Americas and Europe. But it's a newcomer in Asia, with very small sales volumes, even after its April acquisition of a factory in Guangzhou, China, and a smaller investment in India in 2009.
The firm seems intent on growing quickly in Asia, though, and more acquisitions and investments are planned, said Daniel Yu, general manager of Asia for Graham Packaging Co. LP. The firm aims to tap into growing consumer markets there and boost sales to between $200 million and $300 million in five years, with China being the most important market.
In a July 21 interview at the Guangzhou factory Graham bought from China Roots Packaging Pte. Ltd., Yu said Graham is looking across east Asia at China, Indonesia, Thailand and other Southeast Asia nations, as well as Japan.
“We really have a very ambitious target,” he said. “We see the market potential and the demand here. What we really have to do is apply our technology to go after the market.”
The company's Asian sales are small now, with the Guangzhou factory's sales estimated at $16.5 million.
But if it comes close to hitting its Asian goal of $300 million, Graham's sales there could be in the range of its second-largest region, Europe, where it had 2009 revenues of $235 million.
Graham reported worldwide sales of $2.27 billion in 2009, with 85 percent of that in North America.
Yu said the company is actively evaluating further investments.
“The primary approach will be through mergers and acquisitions, and the secondary approach will be to build a plant in the case of very strategic single-customer relationships,” Yu said.
Globally, consumer product makers including Procter & Gamble Co., Unilever Corp. and Groupe Danone are among its largest customers. Graham plans to target their substantial operations in Asia.
Graham will focus on some of its traditional packaging markets, like food and beverage, personal care and automotive lubricants. It also will target local Chinese and Asian brand owners that are growing in their market sophistication and demands for packaging, Yu said.
“The local brand owners are becoming more and more important potential [customers] for us, and in certain market segments they are the dominant players,” he said.
In China, for example, local companies have strong positions in markets like laundry detergent, while multinationals have stronger positions in shampoos and personal-care products, he said.
He said Graham sees its advantages in China in two areas: design and technology.
The company has a 200-strong global design and engineering staff worldwide that it can leverage to improve package design in Asia, including light-weighting bottles to save on material costs, which Yu said is important in China's very competitive domestic market.
“The Chinese companies are more aggressive in achieving light-weighting, especially in the fast-moving consumer goods areas like water and juice,” he said.
Graham plans to add to its design capabilities in China, he said.
The other advantage Graham sees for itself in China is its proprietary technology for rotary wheel blow molding machines, Yu said, which it claims improve efficiency and consistency in manufacturing in high-volume applications.
Graham claims the No. 1 position in North America for hot-fill juices, sports drinks, yogurt drinks, liquid-fabric care, dish detergent, hair-care, and skin-care bottles. Graham says it avoids markets like soft drinks and bottled water, where there is less technology differentiation in the packaging.
The company is partly owned by New York-based private equity firm Blackstone Group.
The Guangzhou factory was purchased from the parent company of China Roots, Malaysian garment maker PCCS Group Berhad. The plant has about 350 employees and does injection molding, injection blow molding and extrusion blow molding. It makes bottles and closures for global and local firms. The acquisition closed July 1.
Yu, who is native Chinese, joined Graham as the Asia general manager in July 2009, after working as Asia president for U.K.-based Morgan Technical Ceramics, and stints with General Electric Co. and W.R. Grace & Co.