SIG cashes in on China's fast-growing dairy sector

The firm's Combibloc filling machines are being used in Yili's new Jin Chuan plant in China's Inner Mongolia region, said to be one of the most modern in the whole of Asia. SIG's Combibloc CFA-712 machines have an output of 12,000 aseptic cartons per hour and the plant covers an area of some 200,000 square metres. All 14 filling units have been fully operational since earlier this year. "This is a significant project for us on a global level,"​ said Jan Schuermann, head of marketing and business development for the firm's China operations. "Traditionally, in more developed markets, you start with a certain number of lines and add more as business expands. But in China, the sheer size of growth is driving this kind of large investment in one go."​ SIG has now supplied more than 30 lines to Yili, considered to be China's leading supplier of UHT milk, in close competition with Mengniu. Both firms have seen rapid growth in recent years; Yili reported sales growth of almost 40 per cent in 2005 to reach US$1.5 billion, while Mengniu said its sales were up 50 per cent last year. Such growth has allowed the leading players to invest in the most modern production technology available. "What they're doing is state-of-the-art, not just in China, but on a global level,"​ Schuermann told AP-Foodtechnology.com. He says that Yili's plant is one of the most integrated productions sites found in Asia, with both filling machines and the downstream equipment such as drinking straw applicators, multipackers and palletisers installed in horizontal lines. SIG places a strong emphasis on the flexibility of its equipment, with filling lines capable of switching in a few minutes from one format to another, or changing between volumes, and this allows its large customers to easily diversify their product ranges. Schuermann says the firm also has an advantage in China since it set up a packaging plant in Suzhou. "We're really locally rooted now and can offer shorter logistics and better customer response,"​ he said. The group does face competition from domestic packaging suppliers but there are no providers offering a full filling system. This has allowed SIG, along with fellow European packaging giant TetraPak, to make substantial gains in China's dairy market. "We're growing very fast at the moment, significantly higher than the company's average,"​ noted Schuermann. The group made 15 per cent of its total €1.2 billion sales in 2005 in China and south-east Asia, an increase from the 12 per cent share of the prior year. And this is set to grow further in 2006. SIG is also hoping to benefit from demand for packaging of liquid foods, another of its key focus areas. Ready-to-serve soups and sauces are still a new, niche market in China but set for growth as wealthier, urbanites seek out more convenient products. A first deal with Campbell's in China is likely to lead to additional customers for SIG. For the moment though, the group's Asian customers must still import all of the filling machinery from Europe. Schuermann declined to reveal whether there are any plans to move some of the production closer to these growing markets.