Time to make a move
Rising labour costs in southern China have started to affect local labour intensive export industries during the past few years, forcing manufacturers to seek various solutions to reduce the impact of higher wages on factory product prices. David Hayes talks with Sunil Gidumal, Managing Director of GM Metal Packaging Ltd
Among manufacturers affected by growing labour costs are producers of tin plate decorative cans which are exported worldwide for a variety of uses, including packing gifts, confectionery, tea, coffee, stationery and many other items.
Guangdong Province, neighbouring Hong Kong, in southern China, is the country’s leading production centre for decorative tin cans. According to industry estimates, more than 20 factories produce decorative cans for the international market.
“Labour costs in southern China have more than doubled in the past four to five years. The one child policy is catching up; there are less young people in the labour force,” said Sunil Gidumal, Managing Director of GM Metal Packaging Ltd.
“For us we need to look at production automation in China. We have just ordered some automated can making equipment from Meltog of the UK, which we will install mid-2014. Now we are looking at tooling.”
Headquartered in Hong Kong, GM Metal Packaging’s factory employs around 200 staff and is located in China’s neighbouring Guangdong Province.
The plant is equipped with 14 production lines and can produce up to 90,000 decorative cans per day, depending on the shapes being made and the number of shifts worked.
Stamping machines range from 10 tonnes to 100 tonnes in size, each being designed to stamp, body form, emboss and make body curls, depending on the tooling fitted.
Decorative cans are produced in a wide variety of shapes, sizes and designs, with or without embossing. GM Metal offers round, square, oval and rectangular cans in various sizes, that can be printed according to buyers’ requirements.
“In 2013 we have done more mint and candy tins, which are simpler to make, but also more of the embossed and folded decorative tin designs which are slower to make,” Gidumal said. “Tea and coffee cans have done well with the launch of new flavours and blends – we’ve seen a pick up there.”
Unusual can shapes are available for printing as well according to buyers’ requirements. Hearts, stars, guitars and Disney characters are among the wide variety of can shapes that can be supplied on request.
“In the last five years we have seen some design changes. Previously, 4-colour printed designs were popular, now more elegant 2-colour printed designs are being ordered,” Gidumal said. “The market has changed in part, with a lot more nostalgic look items being ordered; but for kids’ items it’s always bright designs and very bright colours.
“Ringtons of Newcastle in the UK, for example, are doing nostalgic look tea caddies. They are a tea company and are taking antique tea caddy designs from their own archives to use. Ringtons supply tea and gifts. They are also using old pictures of their head office and their horse and cart delivery service to decorate their cans.”
Another nostalgic-look decorative can theme that’s recently become popular with some customers is the square shape folding tin can, the original shape used for decorative cans before production methods were developed to produce round cans and other shapes.
The body of the square can is made with a single seam and then fitted with a curled-in base, while the square lid is made with four seams, one in each corner.
“We are a decorative can company so we enjoy doing new designs,” Gidumal said. “If we did standard round and square decorative cans we would be no different to European manufacturers, so we must make sure we are different.
“Is it easy to do all these special designs? No; there is more tooling to set up and slightly more rejects. But it is cheaper to make these designs as hand labour is required, and European and American producers have more automated factories.”
European customers account for the largest share of orders that GM Metal handles, with the United Kingdom and Germany being the two largest individual markets.
About 65% of decorative cans produced in 2013 were shipped to Europe, while other important markets include the United States, Canada and Australia.
“Decorative cans are a western thing. You do not see many in Asian countries, where you get biscuits and confectionery in tin boxes, but not many fancy cans,” Gidumal said. “Maybe Asian middle class people spend less time in the kitchen, as they have servants to cook. Also, in western countries kitchen-diners are popular and decorative cans are part of kitchen decoration to hold ingredients and other items.”
Most cans are produced to buyers’ specifications. The minimum order depends on the design and the individual can’s moulding requirements.
Tea caddies are the largest category of tin cans produced, followed by biscuit and confectionery tins. Novelty cans used as gift items, tall round cans used to hold bottles of whisky and other drinks such as vodka and rum, and food cans to hold pasta and other kitchen items, are the other major decorative can categories produced.
“It’s hard to say if 2014 will be a good year. We have customers that have done well in 2013 and we will see if this continues this year,” Gidumal commented. “The gifts industry has come up with a few nice decorative can designs and these models have done well.
“Will this trend continue in 2014? It depends on the can designs and competition.”
Meanwhile, competition among decorative can makers remains strong according to Gidumal, with most customers comparing prices from several suppliers to obtain the lowest price.
“Business during the past year has been tough. People are shopping around more for prices; some have let their quality drop to get their price, but we are expanding,” Gidumal commented.
“We are setting up a new factory in Sri Lanka. We should be ready to start the first line in March. We wouldn’t look to expand if business was not picking up. We are looking to move some production from China to our new factory eventually as the labour cost is rising, the Renminbi is appreciating and labour is now harder to find in China.”
While some decorative can companies in Guangdong have started to relocate part of their production to less developed regions in China, where labour costs are cheaper, GM Metal Packaging has decided to expand production by opening a new plant in Sri Lanka, where operating costs are lower and where the company already has an existing customer base supplying tea exporters with decorative tinplate tea caddies.
GM Metal plans to open its new decorative can plant in Hanwella, Sri Lanka. Plans call for the factory to produce tea caddies initially and later begin to manufacture a wider range of products.
“We will cater to the local tea industry which we know well. We will start there and then slowly build up our production quality in Sri Lanka to our quality level in China, when we will start to export empty decorative cans,” Gidumal said. “We need to build up slowly, so that by the time we export the production quality in Sri Lanka will be the same as our Guangdong plant.”
GM Metal’s Sri Lanka plant is due to start up with about 150 staff. Equipment being installed includes two print heads for 2-colour printing and a coater from Crabtree of Britain. Ovens and stamping equipment will be imported from China.
To ensure the Hanwella plant’s products and working practices are acceptable to customers in Europe, North America, Australia and other markets, GM Metal’s plans call for the Sri Lankan plant to operate in compliance with British Retail Consortium (BRC) factory standards for packaging products.
“BRC compliance requires an annual audit. Our China plant is getting audited again during January 2014,” Gidumal said. “In China our HR and deputy HR managers, along with our group manager from Hong Kong, are constantly ensuring that the Guangdong factory is BRC compliant.”
GM Metal’s Sri Lanka plant will start up supplying the local market and later begin supplying overseas customers.
“We have several customers in the Sri Lankan tea industry and we will build on that. Some tea companies have their own tea brands and some pack tea for their clients,” Gidumal explained. “These decorative tea caddy cans are what we do already. Decorative cans for spices and biscuits also are possible.
“We will concentrate on the tea industry first which is what we know best and then move to other decorative can uses. We will look to supply Indian tea caddy clients from Sri Lanka as well.”
Once the Sri Lanka plant builds up production output to supply all GM’s local customers, the factory is expected to begin completing orders for European customers that are currently made in the Guangdong plant.
“It’s only when we start giving our European customers’ tea caddy orders to our Sri Lanka plant that we will free up some production capacity in China. That will help us bring down lead time for orders made in our Guangdong factory,” said Gidumal.