Neil says..

Neil says..

Neil Farmer discusses the emerging markets slowdown and why it isn’t all bad news for the industry …

151120 Neil Says mainOver the past six years I have visited many emerging world economies and seen first-hand the developments in their packaging industries. In China, for example, I witnessed huge investment in infrastructure, new operations and new technology expansion, and other countries such as Vietnam, Cambodia, Brazil, Chile, India and Sri Lanka are seeing rapid positive changes in the economic landscape. Yet many leading economists and business analysts believe the downturn in many emerging markets is thwarting attempts by major groups to grow in these countries.

This isn’t a view I share. I saw the growth in disposable income of people living in emerging economies first-hand. China has a GDP per head of $6,090 and over the 2007-2012 period had an average annual growth in real GDP of 9.3%. Vietnam has a GDP per head of $1,760 and an average annual growth in real GDP of 5.8% between 2007 and 2012. Whilst China is experiencing a downturn, along with turbulence in the stock market and devaluation of the currency, there are hopes of stabilisation. China’s latest GDP figures show a 6.8% increase on a year ago. There is always doubt over the reliability of these figures and indeed future growth will be at a slower rate, but the Chinese economy is growing at a velocity in excess of much of the western world.

In June Amcor Flexibles Asia Pacific completed the acquisition of Zhongshan Tiancai Packaging Company in China. In September Amcor Tobacco Packaging completed the £20million acquisition of Souza Cruz’s internal tobacco packaging operation in Brazil. Coveris announced in June that it was acquiring Olefinas, an agricultural plastics company with operations in Guatemala and Mexico. Coveris, owned by Sun Capital Partners, also acquired Elldex Packaging Solutions, a flexible packaging company based in New Zealand, earlier in the year. RPC Group has said it is investigating the possibility of setting up a manufacturing facility in Brazil. It may also look at green-field sites in Latin America. The company already has a platform into Asia via its acquisition of Ace Corp of China in 2014.

In July Gualapack of Italy bought a majority stake in Brazilian pouch maker Tradbor Industria Comercio. Tradbor claims to be the only company in Brazil that specialises in pre-made stand up pouches. Rexam’s investment plans for beverage cans in Brazil and its ongoing commitment to Russia, where it has recently announced investment in new state of the art design technology in Moscow, show the company is viewing emerging markets in a positive way. Add to this Tetra Pak’s success in Brazil, its second largest market globally.

We hear a lot about the phrase “the new normal” for China’s economy, essentially a period of slower, more moderate economic growth. For those in the packaging machinery industry this might sound like bad news but I would argue it isn’t. China remains the largest market for European suppliers of packaging equipment, much of it from Germany and for the plastics sector. We are now detecting a focus on automation and higher end added- value equipment with greater opportunities for machinery sales with greater efficiency, higher output and advanced production systems.

Stephanie Cornwall
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