 Good morning. This is Jorge Siqueiro, Vice President of Market Development for PMMI. Welcome to the Thailand Packaging Machinery Market Webinar. You are currently muted. If you want to make a question, any comments, please go ahead and use the chat box on the bottom left of your screen. I will be keeping an eye on it and you can make a question at any point or if not, we're going to allow some time at the end for Q&A. So earlier this year, PMMI engaged with Converging Knowledge. It's a consultant firm to help us conduct this research. They interviewed 50 end users and 10 suppliers, agents, OEMs in Thailand, trying to have a better idea of the trends on drivers pushing the demand for packaging machinery in Thailand. The information on this webinar, the report that I'm going to make reference on this webinar, you can download it directly at PMMI.org. I'm also using some information from other reports. I would recommend you to take a look to all our research, PMMI.org slash research. So what I'm trying to cover today, basically it's number one, kind of a general idea on the economical and political highlights of Thailand. The current packaging machinery demand, some regional packaging formats and end user markets are relevant to Thailand. The drivers and trends supporting the packaging machinery demand. I'm going to go down and trying to be as specific as pointing at the best sell prospects for packaging machinery and then kind of briefly summarize the conclusions of this presentation. Well, Thailand is the second largest and the fourth most populous economy in Southeast Asia. It accounts for about 11 percent of the population and 16 percent of the gross domestic product. Thailand is part of an economic group named Asian. Asian, it's going to highlight here, you know, it includes all these countries around Thailand. That's Indonesia, Malaysia, Philippines, Singapore, Brunei, Cambodia, Laos, Myanmar, and Vietnam. I'm making reference of this because Thailand is pretty much a manufacturing hub for the region, mainly for ASEAN, but also for Southeast Asia as well. The Thailand is currently under a military rule following the group in May 2014. And I know that, you know, when we talked about a military rule, it sounds kind of a little harsh. It's not the first time that Thailand has been under a military rule. It's been a couple of times already. They have been moving back and forth between civil rule and military rule, all of these within relative peace, relative peace. And what's interesting, you know, it's not at this moment, but Thailand has been a constitutional monarch in the past and it's keen, it's very well respected, and it's considered kind of keen in terms of all these transitions, peaceful transitions between military and civil governments. So while Thailand is under a military rule, I would want you to understand, you know, that that's happening in the past and that's not necessarily meant a significant problem for the for the Thai economy. It has some implications, but it's just the way Thailand is, I would say. Now, in terms of the gross domestic product of Thailand, if we compared it against other ASEAN countries, we're going to see Indonesia the largest country by population and by GDP. But in terms of GDP, you can see that Thailand is second in the region, followed by Malaysia, Singapore, Philippines, and other countries. When we take a closer look at Thailand and we try to understand what's happened in the past few years, we're going to take a look at some of the setbacks, you know, here in the bottom of the screen, setbacks for the Thailand manufacturing. Of course, in 2001, we have a global financial crisis. We can see, you know, the blue columns represents GDP. You can see how the GDP kind of dropped in 2008, 2009 with a financial crisis. It starts coming up in 2010. Then in 2010, Thailand faced significant floods, severe floods that affected the manufacturing operations. So, even though it was affected, it wasn't really horrible. I mean, it was pretty much stayed the same without any growth in 2011. Then again, it recovered some of its growth in 2012. 2014, we got the military coup. While the military coup is not creating a significant problem in terms of stability, it does slow down the economy. So, that's what we're finding in 2015, kind of relative to slow down in terms of the Thai GDP. So, what does this mean for packaging machinery? You know, we've been talking about Asian, we've been talking about all these macro numbers. So, let's try to bring all these numbers down to packaging machinery. What we have on the screen right now, it's the imports of packaging machinery into Thailand from 2011 to 2015. As you can see, obviously, you know, the effects, there are effects of the general economy of the demand of packaging machinery. In 2012, the imports were around $472 million, and then it started dropping in 2013, 2014, and kept dropping on 2015. So, I guess at this point, you might be wondering, wow, what kind of stories is PMI sharing with us? You know, it's a Thailand that the economy is not doing that well, where imports of packaging machinery have been declining consistently for the past four years. So, why do I care about Thailand? Well, it's about the economical cycles. Mainly in developing countries, these cycles could be a little more steep than in developed economies, but we do believe that Thailand is now pretty much touching the bottom, and will start bouncing back in coming years. And there are several factors that we're going to discuss on this presentation of why we believe it. I'm going to take kind of a closer dive into these numbers of packaging imports just to give you kind of a better idea of what's the situation for packaging machinery imports in Thailand. On this line chart, we have the largest imports of packaging machinery into Thailand. We have Germany, China, Japan, Italy, Taiwan, South Korea, and the US. If we want to look carefully at this and take a look at the share of the market for each of these countries, we're going to find that Germany is number one and Italy is number two. This is pretty consistent in many markets around the world. Germany and Italy, both countries are very aggressive exporters of packaging machinery. They have a significant presence around the world. The third one, Japan. Japan has significant presence in Asia, not so much around the world, but in Asia. And of course, because of how close it is to Thailand, China is number four. We have other suppliers like Taipei, Korea, and other countries, US coming on seventh place with just about three, over 3% of the share of the market. So pretty much the US has a very small share of this market, a significant presence from developed economies, Germany, Italy, and Japan. However, we're finding a significant push from low-cost manufacturers like China, Taipei, and Korea, and also a push from local manufacturers, Thai manufacturers. So why do we think Thailand is a good option for exports, for a packaging machinery, to export packaging machinery? When we track markets around the world, there are three main drivers that we try to follow very carefully. Demographics, disposable income, and the development of the retail networks. Demographics for Thailand looks pretty good. The country is growing. Fairly young country with disposable income growing. Again, the trend is growing, maybe not every year, but trend in general is the disposable income is growing. And certainly the retail networks in Thailand have been established more and more around the country, currently a significant number of convenience stores opening around. Other trends supporting the demand for packaging machinery in Thailand, government policies are pretty much supporting the development. Thailand, as I was saying, it's kind of a hop, a manufacturing hop, and they export a significant number of products going from automotive, electronics, and maybe those might be important for packaging, but even more important for packaging is processed foods. Thailand is a significant exporter of processed foods to the region and to the world. And that's one of the reasons that we believe as the economy in the world starts to recover, Thailand exports are going to start increasing significantly. Also, we're finding a significant and steady urbanization in Thailand, meaning more and more people living in the cities and relying on the supermarkets, convenience stores to acquire all the products that they need. As well, there's, as the income, disposable income is starting to increase, there's a growing demand of value added products, mainly when we talk about more, making products more convenient for the consumers. When we look at the demographics in Thailand, we would see that a significant number of Thai women are part of the workforce. And if I'm right, it's something around 70, 70 to 80% of women, Thai women are in the workforce. That means they have less time to prepare foods at home. They do rely more and more on processed foods, convenient packaging, convenient solutions to help them prepare and cook foods for their families. More and more of the households are getting smaller, maybe three, four persons in the household. That also has an impact in terms of the presentations, the size of the presentations. More and more people in Thailand spend longer hours, more hours in driving to and from their work. They are looking for more convenient packaging, so it allows them to consume the products as they move. And again, we mentioned Thailand is kind of a key hub for the region, and that's something that will keep being relevant in terms of growing in the coming years. So one other potential benefit that we are specifically for the US, and Thailand is the TPP, the Trans-Pacific Partnership. This trade agreement was signed May last year. The fact that it was signed does not mean it started the implementation. First, it needs to be approved by the local governments. But in general, we have the impression that governments will approve it, maybe it will take longer than expected, that the TPP will become a reality in the next couple of years. What's the implication here? Well, when you look at the total landed cost, import duties plays a significant role. In this case, for packaging machinery, import duties are around 30%. So when the TPP is implemented, it's very likely that for a number of years members of the TPP will get a duty of, we only need to pay a duty of 0% for packaging machinery being imported into Thailand. So as the natural competitors of North American manufacturers are European, I would say German, Italian manufacturers, as well as Japanese manufacturers, will have some advantage against, well, significant advantage against European manufacturers with import duties, as with implementation of TPP, the import duties for packaging machinery will drop to 0% for the US. So this is something to look at. This advantage, normally, it's something that you can count on for maybe two years, maybe up to five years, normally not more than that. So it's just a window of opportunity. Make sure that you're ready to take advantage of this window of opportunity when it opens. It will be a window for the US just for a few years, very likely Europe will sign agreements or will reach agreements with different countries in the Asian community or with Thailand, so the duties will be dropped for them as well. Now, I would want to talk a little more about trends, regional trends in Asia and how these trends are affecting Thailand. Of course, we already talked about rising disposable income. With this rising of disposable income, it's more a trend of developing more premium products, much more attention to personal care, health and wellness. The second one we have on the list here is positive impact of internet retailing. We're expecting that internet will increase the demand for packaging and packaging equipment. Consumer health and consciousness. More and more people in Asia are aware of health and environmental situation. They are looking for products that won't harm themselves, looking for products that won't harm their environment. And while they might not be ready to pay a significant premium for environmentally friendly products, they will certainly prefer an environmentally friendly product than a regular one. Meaning if the packaging can play a significant role here, the trick is how to do it without increasing significantly the price of the products. In terms of the materials being used in the region, flexible is number one as in most of the regions followed by pet bottles, flexible aluminum folding cartons. Interesting here, while flexible plastics is number one, the category that is growing the fastest is pet bottles, mainly because of the use in water ready to drink tea and some other specialty drinks. In fact, let's take a closer look at some of these categories and how they are behaving. On this table what I'm sharing is different products and the blue column for example on the first one, bottle of water, the blue column represents the absolute growth in containers. That means new containers that will be, in addition to the current sales, will be added to the market between 2014 and 2019 and this is a number in billions of containers. So that's the blue column, the yellow square, the orange square, something that you can read on the right, this orange square you can read on the right of the chart and represents the growth. So bottle water will be, in terms of numbers, will be growing significantly in terms of percentage, it will have about just over 8% growth. That's one of the reasons pet bottles are growing significantly. Also we should take a look to ready to drink teas, you know, it's significant size, very reasonable growth and also we were talking about specialty drinks. Look at the growth of this category, it's over 14% and while we are starting from a smaller base, the growth in this category is significant. In addition to these, we should pay attention to drinking milk products, yogurt, and sour milk products as well. Those are specific industries that are going in a very healthy way in the time market and again one of the reasons is increased of water consumption, increased of yogurt and sour milk, increased of ready to drink tea and specialty drinks are all linked to health and wellness. So let's take a closer look now and we're diving now into more into the details here. Let's take a closer look at the ready to drink tea and how the tea is being sold in the region. So pretty much as you can see again, you know, the column represents the volume growth and the square represents the compound annual growth between 14 and 19. So pet bottles are growing from a very significant base, certainly the dominant container for ready to drink tea. Now it's also interesting to take a look in this market for metal beverage cans also growing significantly and then some other containers like thin wall plastic containers with a very small base right now but growing at a significant pace of 18% in the next few years. So I'm going to take a look to another two or three products just to have a better feeling of what's being used, what type of containers are being used in the region. For yogurt and sour milk products, as expected thin wall plastic containers have a significant size that will keep growing significantly. Shaped liquid cartons is one of the categories as we can see that will will be having the fastest growth. Growing from not such a small base and growing at a very fast base. This now from a significantly smaller base but still growing fast will be aluminum and plastic pouches, you know the multilayer plastic pouches. We made reference to the shaped liquid cartons, you know, where there are poop based containers, some type made out of some type of paper. Again you know the thin wall containers and the pouch is also playing a role in yogurt and sour milk products. Specialty drinks, that's the last of the products that I wanted to look at for the Asian region. Interestingly this segment is significantly big for metal cans and it's growing very very strongly on metal cans. So we recognize the importance of food and beverage for packaging and for Thailand. This chart shows the growth from 2011 to 2015. It's grown in the local currency, that's okay. Not an incredible growth but a consistent growth. But what happened when we look at the future? What are we expecting to see in coming years? Well let's take a look at the food and drink behavior between 2013 and 2020. We are expecting to have significant growth from this year up to 2020 in terms of food and drink spending in Thailand. And not just how much food and drink is being spent or consumed in Thailand, will be consumed in Thailand but also how much food and drink Thailand will be exporting to other markets. So in this chart on the dark color we have exports, on the light color we have the domestic market. So as both markets, you know we are both markets, the opportunities for growth in the Thai economy are significant for food beverage, personal care and pharmaceuticals. So again when we look at the Thai market we should look not just as the internal market but keep in mind that Thai's a manufacturing hub and they export significant amount of their products to the region. So now talking more about, I've talked about you know regional in Asia and specifically in Thailand, you know what are the proportions of the materials being used in Thailand? Again number one we have flexible packaging with over 25%. Significant you know with 24% are rigid plastics and interestingly enough in Thailand glass is number three. Okay so that's kind of a little difference against the region. Glass is still a lot, being used a lot mainly in the brewery and food products. It has a significant share. So let's keep moving. What's happening? What else is happening in Thailand that's it's pushing the demand for packaging machinery? Well wages and automation. I mentioned earlier that we interview 50 CPG companies, consumer package good companies in Thailand and this is what they have been telling us. You know it's basically since last year salaries increased 3.9%, since two years ago 9.3%, three years ago 12.1%, five years ago 18.6%. In terms of what they expect to see in the future in the next two to three years, 64 of them expect to see increases in wages in Thailand. The Thai government has established a minimum wage around the country and of course this is having an impact in terms of the costs for manufacturing the products for Thai CPGs. Basically what we're expecting to see because of this is an increase on demand mainly on secondary packaging machinery as they consider it essential to contain the costs on their manufacturing operations. So we went a little further and we asked the people we interviewed what are you planning to buy? What do you think is going to be the impact of increased wage line automation? Well yes number one thing it's secondary packaging. By far most of the CPGs are considering investing on secondary packaging to balance the increased wages. We have also some increase on the end of the line as expected with palletizers. Interestingly enough conveyors are not showing kind of a significant increase in terms of demand. Okay so which other developments have we seen in terms of impacting the demand for packaging machinery? Well not surprisingly cost savings on materials. That's a common theme around the world. We've seen how the plastic balls have been coming from kind of rigid to thinner wall, thinner wall, thinner wall to where the point that we're not exactly sure if they are rigid anymore and they are once you open a bowl of water basically it's a flexible packaging almost. A trend for smaller sizes is this interesting. The trend for smaller sizes being driven by two reasons. Number one is health and wellness. Thailand is the country with the second significant incidence in terms of obesity among the ASEAN countries. So there's a significant concern. The government is educating citizens but more than anything it's the work of social networks and the internet in terms of educating consumers about the quality of nutrition. So smaller sizes means less calories on one hand, smaller sizes means less cost maybe lower prices and the option to enter into different markets. So those two are combining for pushing for smaller sizes. Again as we were mentioning before environmentally friendly products are important. If you can bring up an environmental argument to the table it's something that they will take into account. Again you need to do it in such a way that you won't be increasing significantly the cost of the product. This could be from using less materials, the type of materials you're using. In general it's very, very close to the perception of environmentally friendly that consumers have. Again we have slimmer shapes, kind of cleaner look, more value added containers, more convenient containers, something that makes life easier for consumers. And of course we have a number of regulations coming into play. We were talking how Thailand export a significant amount of their products. When you're talking about exporting processed foods regulations are very demanding. So this is among other things, you know the type of regulations that we need to pay attention to and that in many cases offer opportunities for packaging machinery manufacturers. Now in terms of increasing capacity, so we asked the company that we interviewed, so what are your plans? Are you planning to increase your capacity or what do you feel about it? Half of them said you know in the next two years we're not planning to increase capacity. The other half said we're going to make some plant upgrades. We are going to open new facilities or both. So there's a significant number of investment in the mind of Thai companies. Now when we were asking them, well what type of equipment are you looking to buy? Well as we said you know a significant number said well no we're not planning to buy right now and this is as of today, this can change as the economy reactivates. But as we mentioned, a significant amount of secondary packaging in terms of case packing, sealing, catering machinery, primary packaging in terms of form fill and seal equipment, vertical and horizontal. This is consistent with what we have seen in terms of the use of flexible packaging. Also wrapping, bundling, palletizing kind of more on the end of the line, also conveying and feeding, orienting equipment. And interestingly enough the last one on the inspecting, detecting and check waiting equipment. While this is relatively low on the feedback we got from CPG, we are expecting this category to increase significantly because of the demand, the push on regulations, new local regulations and regulations to enter export markets. Okay now in terms of how do they learn about the packaging machinery? How do they look for packaging machinery, the CPG companies in Thailand? Most of them it's via trade shows, mainly local trade shows, some international trade shows such as Inter-Pak and Pak Expo. When we talked about local trade shows the majority of them made reference to pro-pak Asia as they show for packaging in Thailand. In terms of additional sources of information of course is suppliers, current suppliers or new suppliers, including in between a mix of suppliers and others we have internet that's taking a significant share of way to communicate with end users. Now we asked them when you make a decision for investing in packaging equipment what are the key factors that influence your decision? Well first of all they said quality in terms of a machine that will deliver the product with the right quality. Then we have operational and upfront cost, to be honest mainly big chunk of this is the upfront cost, some of it is yes the operational cost as well but they do pay very close attention to the cost. Reliability of course making sure that you have a piece of equipment that you can rely on for consistent and manufacturing to deliver product to the market. And the fourth one very interesting is after-sale service. Of course these two reliability and after-sale service are closely linked. Eventually a machine it doesn't matter how good it is eventually it will need sales service and the the total experience, the final experience for the end user is closely linked with after-sale service. And of course we have others like brand reputation not lost but last the standing relationship story for that and some others. So when we asked them when you buy packaging equipment how do you buy it you know it's financing a bit a big thing or not? Well about half of the respondents they weren't really aware they were more in operations they were not aware of financing options but 42 percent responded that full payment upfront it's what in general they're used to. Six percent they don't have any decision decision was made on half quarters overseas and a small percentage they they are taking advantage of least some or some other financing opportunities. So what are we at this group so what's your expectation in terms of growth and investment for packaging machinery in the next few years? And a few you know said now it might be shrinking no growth but significantly as you can see here significantly they are suggesting a growth something between one and seven percent so we feel confident you know that we're going to see growth at minimum and four to five percent on the time market for packaging machinery the amount for packaging machinery. In terms of competition who is in the in the time market and how's what's the perception for the different suppliers and at this point we're not going individually by supplier but in general we're grouping them in and come by country of origin. Well North American suppliers are not well known in Thailand they there's just a small presence they are not well known however and this on the good side the quality the precise quality of North American equipment is very high it's pretty much either close or a pair with Europe and Japan. Europe on the other hand it's perceived as mainly German equipment as top quality excellent equipment expensive but again you know it's very reliable very well known both Italian and German equipment some concerns about after-sales service in many cases these companies do not have their own office they work through agents and after-sales service is an issue. Japan it's also a supplier of top-of-the-line packaging equipment better position for after-sales service sits closer to the market very other than after-sales service the perception is very similar to European manufacturers it's very good quality very reliable better after-sales service sales service China now we're moving to and I'm putting here China but I mean here China South Korea Taiwan India other low-cost manufacturers on the region that have been entering the time market in a very aggressive way of course they are very competitive in price most of the times with prices there will be about 50 percent of European North American Japanese piece of equipment so it's very aggressive very competitive in general not good after-sales service and finally we get to the low-cost suppliers Italian manufacturers of packaging equipment have been growing in past years getting more sophisticated still not ready to compete with equipment from North America or Europe but certainly with a significant advantage in terms of service because of being local so many small and medium manufacturing operations might rely in low-cost manufacturers either from China India Korea or local suppliers from Thailand but as soon as their operations start to speed up and they require more reliable and fast equipment they will turn into North American European equipment okay so we're getting close to the end of the presentation we asked you know the people that we interviewed what are the most common way to distribute packaging equipment and the first one is non-exclusive local agents and distributors that was to be expected exclusive local agents we normally not encourage our members to go after exclusive local agents unless they already have a long and very successful experience with a non-exclusive agent first final then we have of course a local sales office that's I would say maybe they prefer in terms of having a local presence having service available locally but of course here it's it's the balance between the investment and the sales in the market and with this I would want maybe just to make reference to highlight some of the what I've said some of the opportunities for North American manufacturers again certainly we are very confident that the time market is it's going to rebound in the next few years there might be you know and slow down here or there but the long-term trends the drivers the indicators are all showing us that the time market is full of opportunities moving forward specifically for North American manufacturers the main problem is we haven't been there basically we need to develop a presence we need at minimum to establish a local agent if business can justify it's a local air office would be great after sales services key you need to invest if you're working with an agent you need to invest in training your agent in making sure that at least he's able to rely information that will help you solve any problem that your customers have in Thailand after sales service he's a most and it's something that North American manufacturers need to take it seriously at this point I'm I think I'm pretty much done I'm gonna I'm gonna move to the questions and answer section I hope this some of this information has been of value for all of you if you have any question please please go ahead and write it on their chat box on the lower left of your screen I'm gonna wait for for some questions to come I'm gonna make reference to a couple of of other products and services from PMMI so next week of course if you're attending this seminar on the market in Thailand you might be aware that next week we have a PropagAsia in Bangkok it's the the packaging show for Thailand we will have a pavilion at the show we have a PMMI will have a booth we'll have interpreters we'll have some other services at the booth but maybe more more importantly we're organizing a reception on Wednesday June 15 at 6.30 at BTEC and in the at the venue we're trying to make it easy for you guys here what we're going to do we're going to invite some local leaders of the manufacturing industry to share us some insight on what's happening within Thailand in terms of manufacturing we will also have a panel where we have agents and other suppliers of the industry sharing their points of view and the time market and opportunities for PMMI members so I have a question here it's in terms of where do you where can you download the report give me a second okay you can download the report from here you can go to PMMI.org slash global you can download the report most of the information that I've shared today with you it's on this report also I would strongly encourage you to go to PMMI.org backslash research there you can find the rest of the information that I've been I've been sharing with you guys I have one other question it's in terms of opportunities for inspecting and detection equipment as I was saying one of the big opportunities for Thailand in terms of growth it's exporting exporting of processed foods and I think that's going to bring a significant amount of business opportunities for detection and inspection equipment it might take maybe a year two years for some of these opportunities to crystallize as the rest of the region start of speeding up the economies are start to speed up but certainly the opportunities will be there also next week we are going to have a pavilion at FISPAL in Brazil another market presentation down there and if you're responsible for the markets in Asia next month we have Propact China we will have a pavilion in Propact China and same we'll have a reception a presentation of market research about the Chinese market that's going to be in July 14th Thursday July 14th so at this point we don't have any additional questions I would want to thank you for your time I hope you find you found the information we shared here interesting and valuable we will follow up this webinar with an evaluation and with a link to download the report and access additional information and services from PMMI so again thank you very much have a good day and hope to see many of you next week at the Propagation