New Toyo

[Curiousparty]

It is only natural for big tobacco companies such as PMI and BAT to diversify its (packaging) suppliers' risk amongst a few key players in the region (Amcor, Tien Wah, Amvig, etc), and then force the suppliers to compete among themselves for its contract.

In the packaging world, 7 year supply contract was the exception rather than the norm. Going forward, the supply contract period should be much shorter, to the angst of suppliers. It will ensure survival of the fittest for the benefit of tobacco companies.

You might wish to refer to Amvig website for more information on the intensity of competition amongst printers.
http://www.amvig.com/eng/ir/report.asp

You can see that Amvig is much more transparent than Tien Wah/New Toyo in terms of revealing information relating to industry market share and tendering practices .
Despite the seemingly more intense competition in PRC, Amvig EPS has been relatively stable unlike Tien Wah.

(AR 2013 - Amvig)
On the other hand, the implementation of tendering by tobacco groups
(the “Tendering”) has continued to put pressure on the overall selling
prices of the Group’s products. As such, the Group has focused on
reducing costs, improving efficiencies and increasing sales volume through
organic growth to cushion the drop in selling prices. During the year, the management continued to implement its profit improvement programs, which was launched a couple of years ago, to counteract the impact of price reduction as a result of the Tendering. Operational indicators including machine running speed, manning and wastage are constantly monitored. Abnormalities are rectified on a timely basis. New machines were also installed so as to increase productivity, reduce wastages and labor costs. The overall impact on our gross profit margin was mild.


(AR 2012 - Amvig)
The ongoing tendering practices of tobacco groups, in a longer
term, will also benefit the Group through a number of ways
including an increased visibility in the order book for tobacco
packaging products. It will also hasten the consolidation of the
tobacco packaging industry as smaller players will drop out through
more intense competition.


Will struggling Tien Wah be able to renew the next contract ? I think it is still a big question mark at this stage.

tks.