SHANGHAI (April 24, 2:10 p.m. ET) — Consumer preferences are driving change across the diverse end markets of Asia, prompting firms such as Dow Chemical Co. to have to adapt quickly, especially in such sectors as plastics packaging.
Four Dow executives shared their views on such trends during an informal discussion with a handful of journalists April 20 at Chinaplas.
The officials focused their comments on the activities of Midland, Mich.-based Dow's recently reorganized Performance Plastics Division – the largest of the company's six operating units, with 4,500 employees, 48 plants, 28 sites in 16 countries, and 2011 sales of $16.3 billion. Pretax profit last year for that unit, while down about 4 percent at $3.4 billion, still was nearly double that of the next largest of Dow's other five business segments.
The firm divides the activities of its Performance Plastics Division into four sectors – Performance Packaging, Hygiene & Medical, Electrical & Telecommunications, and Elastomers (the latter of which encompasses consumer durables and transportation).
“In China,” said Peter Wong, Singapore-based commercial vice president for Dow's Performance Plastics unit in Asia Pacific, “very big market opportunities exist in packaging,” which represents the largest of the new division's four market sectors. Wong noted that the North American packaging market is large, but it also is very mature, especially in the development and application of technology. Demand for new, progressive packaging technology is very strong in Asia, Wong said, as both sellers and buyers seek for better ways to conserve food and protect products.
“Five to 10 years ago, the demand for technology in Asia was not that strong,” he said. But that is changing fast, a trend Wong said he has noticed particularly in the past 12 months.
“North America is one market,” added Lawrence Cheung, Dow Chemical Pacific Ltd.'s commercial director for Performance Plastics for Greater China. “But Asia Pacific is 20 markets,” with huge demand, calling for billions and billions of packages, he said. This is driving a need for speed of production, all while keeping an eye on key issues such as sustainability.
Hong Kong-based Cheung, who also is honorary chairman of the Singapore Chemical Industry Council Ltd., said change is being driven more by consumer preferences than by the consumer-products brand owners and big-box retailers in Asia.
“We do see a shift in the marketplace in terms of people's mentality,” said Peter Yap, Singapore-based technical service and development director for Dow Performance Plastics in Asia Pacific. “In the past, consumers were only interested in price. Now they have more interest in yield,” such as noticing the fact that thinner-gauge, higher-performance films may allow them to use less of the product to achieve the same results.
“Small-portion packaging is very important here,” added Yap. And infrastructure challenges also can impact package design and function, he noted. Take potato chips, for example, Yap said. In the West, consumers want very easy-to-open chips packages, which tend to be made of printed biaxially oriented polypropylene with a metallized PP film. But in Asia, the market prefers a tough seal on such packages, which are pumped up with gas to create a sort of pillow effect. This serves as a buffer to protect the chips inside from breakage, because the transportation infrastructure in Asia differs from that in, say, North America.
Wong pointed out other differences. “Stand-up pouches are happening very fast in Asia Pacific,” especially in places such as the Philippines, he said. But in India, it's a different story. Instead of consumers there buying 1-liter bottles of shampoo, for example, they opt more for small, 5-milliliter sachets of shampoo. These single-use, disposable packets are more affordable to buy as needed by a population that often has to parcel out its household expenditures on an almost daily basis.
Cheung did point out one similarity in some key trends worldwide, particularly in the area of “green” products. Dow is focusing on developing multilayer coextrusion technology for flexible packaging, to reduce the use of metal layers in film substrates, thereby improving recycling capabilities. “We will not support monolayer films anymore,” he stressed.
To this end, Cheung noted, Dow launched two products last year – its Elite AT and Dowlex NG lines of enhanced-polyethylene resins. He said both are proving to be very popular.
“We don't want to go into the lab and produce the next generation of super-molecules,” for the sake of it, Wong said. “We may over-engineer and the resulting materials may not suit the market. We're trying instead to design based on what customers need,” in the way of faster processing, the downgauging of films to reduce waste, and the like. With that in mind, he said Dow is considering establishing a Center of Excellence for packaging in Asia.
Ho-Sung Kang, the Seoul, South Korea-based Asia Pacific commercial director for Dow Elastomers, noted that sustainability also is a major theme in his business. Polyolefin elastomers are enabling lightweighting in vehicles, and the recyclable materials also are reducing the environmental impact of durable goods such as footwear, sporting goods and household products.
Finally, when asked, Wong also provided an update on Dow Chemical's coal-to-olefins chemicals project in China, which garnered a lot of publicity about five years ago. The project's aim is to use “clean coal” technologies that convert coal to methanol to produce ethylene and propylene, the building blocks of various plastic and chemical products. There has been little publicity about the project of late.
“The coal-to-olefins project is still there, the team is still there,” Wong said. “We're still investing a lot of resources,” he noted, stressing that Dow has not dropped the project. But he pointed out that most of that research work is being done at the corporate level in Beijing.
Major capacity increases by Dow ventures in both the Middle East and Thailand will help to ease the pressure for alternate feedstocks in the Asia Pacific region, but Wong said the aim still is “to reduce the dependence on petroleum-based feedstocks.”