ASIA - More than a year since NatureWorks established its first Asia Pacific headquarters in Bangkok, Thailand, Trina Tan interviews Rich Weber - Commercial Director, NatureWorks Asia.
Qns: What are NatureWorks’ largest markets in Asia?
Ans: China, Taiwan, South Korea and Japan are our biggest Asia markets, and we’re also starting to see growth in Southeast Asia. In all, about 30% of NatureWorks’ overall production is sold into Asia Pacific.
In markets like Taiwan and Korea, one of the main driving forces is legislation that was introduced several years ago to create demand for bioplastics.
In Taiwan, demand has grown not only from domestic consumption but now also for export markets. A significant portion of Ingeo is converted partially in Taiwan and re-exported out to North America, Europe and also Australia and New Zealand. We’re also seeing a similar trend in China.
PLA demand in South Korea is more for domestic consumption though some portion is exported at a growing rate. In South Korea, Ingeo is used mostly for packaging.
Japan is probably one of our most diverse markets, from an application standpoint - in packaging, durables, electronics, fibers, films. In the rest of Asia Pacific, typically you’ll see a large portion in packaging.
Qns: What’s driving demand for PLA in Asia?
Ans: We’re seeing a lot of companies looking for alternatives to polystyrene. So if you look at our value proposition compared to polystyrene, there are a couple of things that get customers interested.
First, from a performance standpoint, Ingeo can perform very similarly. We’re also starting to be very cost-competitive with polystyrene in certain Asian markets. So companies are looking at their packaging portfolio and seeing that polystyrene prices have been increasing while PET prices have been decreasing.
At the same time, large MNCs and Asian governments are concerned around certain perceived problems with polystyrene. Taiwan for example, is trying to move any food-contact material away from polystyrene. We’re seeing large brands, especially dairy companies, trying to move away from that too.
So here you have a product that can perform, has cost parity and probably has a better longer price potential than other materials, Also, I think it’s helpful that companies want to improve, and Ingeo can help brands deliver that sustainable message.
So I think it always starts from an application standpoint: Does it work? What’s the cost of it? What are the benefits around being healthy and natural?
In Korea, polystyrene is pretty depressed. Prices are starting to go up in China and Taiwan. In Southeast Asia polystyrene is pretty expensive, and especially so in Australia and New Zealand, which is seeing a bit of a shortage this year.
Overall we’re seeing global trends for quite a few years now - we have been cheaper than polystyrene in North America, in Europe we have price parity, and now we’re starting to see that trend as well where polystyrene prices are starting to go up in Asia.
Qns: What are the factors impacting on customer sales?
Ans: I think we’ve seen over the years that what’s really going to determine customer sales is firstly performance. Sustainability is really just an additional secondary benefit. It’s not going to be the primary decision-making factor in most cases, especially in packaging.
Customers will first ask about how the product will perform and at what cost. And so I think that’s where we’ve been successful, in showing how Ingeo can perform and operate at an advantage over other materials – that’s what we’re trying to focus on and drive as part of our value proposition.
NatureWorks is a little different from your traditional resin company. We spend a lot of time going downstream and talking to the brands about the sustainable benefits of our material. With our converter customers we talk more about how it performs.
Qns: What is NatureWorks’ growth strategy for Southeast Asia?
Ans: In Southeast Asia, companies are still familiarising themselves with bioplastics and its different types, understanding what the different options are, what works well or not etc.
As we see these markets develop, we’re trying this approach where we look for applications where we know Ingeo works with relative ease, eg in rigid food packaging, shrink film etc. We look for areas where it’s relatively easy for converters to use our products and we try to develop those areas first.
Then we start getting into more technically challenging sectors that will require more processing knowledge, such as like durable applications.
So in time we think we’ll be able to develop a whole range of activities but right now we’re trying to focus on the easier ‘drop-in’ applications.
For example, in the Philippines and Thailand, we’re now starting to do tests and trials, mainly in food packaging.
Qns: What is the price difference between Ingeo and conventional plastics in Southeast Asia?
If you look at rigid food containers, there is a huge massive oversupply of PET now but NatureWorks is starting to narrow the gap because we have certain physical benefits to our advantage, such as the ability to downgauge, decrease weight etc.
That said, it is still challenging. Depending on the application, Ingeo is currently about 10-15% more expensive compared to conventional plastics in this region.
Qns: So does that hugely impact on your sales proposition in Southeast Asia?
The resin price is just one component of the overall cost of the finished product.
The other issue that we’re trying to overcome today in Southeast Asia is that, unlike North Asia, in this region we don’t have a lot of fully-scaled or fully operational converters (ie running at full capacity)
Because we’re still trying to get converters in Southeast Asia up to scale, a lot of the cost difference is due to inefficiencies, e.g. switching back and forth between materials. If we can get converters up to scale, then you’ll see a big uptake, cost competitive.
What’s nice about Southeast Asia is that it also exports a lot of plastic products around the globe. Large film manufacturers in this region are exporting to Japan, China, North America; so I think over time you’ll start to see a lot of Ingeo product exported out of SEA.
When the Thai plant comes up, it’s going to be very beneficial because we’ll have a local asset that will help break down our transportation cost and tariff benefits.
We have to explain to our customers that today, when you look at the comparable prices, maybe there’s a bigger difference than they’ll like, but at least with the new plant coming online, as our projects with them start to ramp up, you’re going to have a lower priced-product
Qns: How are Asian consumer demands and trends influencing demand for PLA?
Ans: Southeast Asia is a big market. You look at ASEAN (Association of SouthEast Asian Nations) – the populations of all the ASEAN countries are almost similar to Europe. You have very fast-growing economies like Philippines, Indonesia, Thailand, and a middle-class population that’s growing very quickly.
I think many people in these countries care a lot about the environment because of the flood risks; tourism is also a very big aspect of their economy. I think Southeast Asians are a little more sustainably-conscious.
On the other hand, Northern Asian consumers have a little bit more understanding of what they want; they feel more in touch with the environment and sustainability.
Qns: What are the main concerns of brand owners pertaining to packaging options?
One common issue we hear a lot when we talk to these brands – they all want to be more sustainable, more green, they just don’t know how to do it.
It’s easy to talk about sustainable goals and milestones but actually implementing it is more challenging and that’s where we have our conversations, talking about how Ingeo can be a very good vehicle to their sustainability goals.
But of course, brands also care about price.
We want to make sure brands know that Ingeo can be one of their material options. We want to make sure that Ingeo is in their thought-process, be it whether they want to come out with something different, more innovative, more sustainable.
We want to make sure they know that there’s a product out there that can fit into their application and that can be easily incorporated.
Qns: How are you talking to companies about sustainability?
Ans: We always try to change the perception that bioplastics doesn’t always mean biodegradable. Biodegradability and compostability can make sense in certain specific applications, for example in foodservice packaging.
But in other applications, the biodegradability issue doesn’t really make sense. There are a lot of other end-of-life options out there and probably better options, depending on the particular region.
NatureWorks has been doing a lot of work globally about recycling Ingeo. That is still the preferred method for a lot of products, especially for clear products, rigid packaging.
What’s great about our product is that it can work in whichever waste management system makes sense, be it recycling, composting or incineration.
The worst-case scenario is that it could end up in landfill, but it doesn’t cause any contamination or any issues there.
Sustainable end-of-life is much more challenging thing to implement because the end-of-life systems are not there.
So we tell brand that rather than focussing on end-of-life, which is hard to prove, try to change the message more to front-of-life because that is easier and consumers can get that.