They point to the acquisition last July of an 80% controlling interest in the Tin Thanh Packing Joint Stock Company (Batico) by SCG as the clearest evidence of the company’s intentions.
Since 1995, Batico has been operating out of an 18,500 square metre manufacturing facility located in Long An province and it currently holds a 40% market share in the southern region, said a company representative.
In addition, Batico is pumping another US$4 billion into a 55,000 square metre state-of-the-art facility, which is under construction near its present location in Long An equipped with all the most recent technology, tools and amenities.
The company boasts a customer base that includes prominent brand names the likes of Nestle, Bayer, Henkel, Dupont, Kinh Do, CP, Trung Nguyen, Walmart Gau Do, Vifon and Vinamit.
Previously, SCG had also acquired minority interests in two other leading plastic firms, namely Tien Phong Joint Stock Company and Binh Minh Joint Stock Company, opening the door to future acquisitions.
According to a company sales representative, the Tien Phong Joint Stock Company possesses strong distribution networks throughout China, Laos, Thailand, Cambodia and Myanmar.
In the local market, it has nearly 300 sales offices and controls a 70% share of the northern market. In addition, it has numerous sales outlets in China, Laos, Thailand, Cambodia and Myanmar.
The Binh Minh Plastic Joint Stock Company has 600 sales offices across the country and operates two 90,000 square-metre manufacturing plants, according to its General Director Nguyen Hoang Ngan.
Plans for another 150,000 square metre plant are in the works and expected to be approved, which would triple the company’s capacity. Details of the funding for it have not been disclosed, but presumably SCG would be a key player in the deal.
General Director Ngan said currently SCG hold a 20.40% of Binh Minh Joint Stock Company shares and hinted it may move to take over a controlling interest in the company in the coming time.
SCG is proving to be a formidable competitor in the plastics industry and putting heavy pressure on domestic manufacturers to step up their game as they are finding it incredibly difficult to keep up, Ngan said.
The production capacity of domestic plastics manufacturers is just not large enough, and they have many limitations including mass production capacity, technology, machinery and labour.
As a result, they cannot service big orders, Ngan underscored.
Most domestic manufacturers also import 80% of their raw materials for production, which results in substantially higher transport costs and they don’t have well developed supply chains compared to their Thai competitor.
Additionally, they are plagued by old outdated machinery and equipment, whereas SCG utilizes advanced and environmentally friendly equipment and technology and invests heavily in research and development.
Another major drawback for domestic firms is the lack of skilled workers capable of operating new-generation equipment, Ngan said.
Speaking at a recent seminar, a representative from Duy Tan Plastic Company openly acknowledged “SCG is a heavyweight in the industry and very competitive,” noting they offer their customers a three year payment plan with no interest.
Domestic firms simply don’t have the financial strength to match the payment plan and are losing their customers business based on this single factor alone and as a result, many will most likely be forced to close their doors or sell out to a larger company.