LD PACK: The output value exceeds 600 million RMB
Undoubtedly, 2023 will be a year full of challenges and variables. Under this era, "internal competition" has become a key word. In the face of fierce competition and changing market, it is particularly important for enterprises to deal with the difficulties and look for breakthroughs. Recently, LD PACK received an invited interview from the editorial department of PACKAGING FOREFRONT. Now, let's see how LD Pack broke through the dilemma and reversed the trend, and what is the forecast and outlook for the market prospect in 2024.
Interviewees:
Zhong Jianchang
General Manager
LD Packaging Co., Ltd
1. Business Performance in 2023
The operation performance in 2023 did not meet our expectations. Sales and profits were basically the same as in 2022, and the output value exceeded 600 million RMB. It was considered that 2023 will be the most difficult year in the past decade, even harder than the year of the global economic crisis in 2008. After the epidemic has passed, the economy in China did not recover as much as we had expected. Instead, the domestic consumer confidence was seriously weak and market demand was weak. The orders in the first quarter were quite good, and orders in the second and third quarters dramatically decreased. Until the fourth quarter, from October, the order volume slowly picked up, but it was not as good as the peak season in the same period last year. In 2023, in addition to the pharmaceutical packaging, the overall orders of food, FMCG and other products were declining, including our downstream brand customers, who were also suffering with not much sales growth, but different degrees of decline. All industries were got into serious internal competition.Even though the government has introduced many encouraging policies to support the development of small and medium-sized enterprises and reduce the taxes and fees, people still lack confidence in the future, and enterprises do not have the confidence to expand investment. Although the land taxes and fees in many cities are down and down again, they cannot attract enterprises to invest and set up factories.
Export Orders
Our domestic and export orders account for 50% each, mainly exported to Europe and the United States. Many companies' export business has been affected, so did we, but not too much, instead, there has been a slight increase. In order to avoid the impact of the trade war between China and the United States on foreign trade, it is found that many enterprises export their products to the United States through Mexico and Vietnam. Because the United States is tariff-free to these two countries, the export volume of these two countries has increased significantly in recent years, but this is all a skirting of the border, which is not sustainable. Once the US government finds out, the punishment is also quite severe. So a more compliant, longer term operation is to build a factory there.
Difficulties in building factories overseas:
We built a factory in Vietnam two years ago. The factory construction has been completed, but it is still in the stage of trial production. Due to the impact of the COVID-19 pandemic and other aspects, the process is very slow and we are facing many difficulties that we never expected, including the low work efficiency of local government, complicated formalities,and the increasing land costs and rents(similar to the land cost in China); besides, the recruitment is also difficult, because too many Chinese enterprises have set up factories in Vietnam, most of which are small and medium-sized enterprises with small scale, resulting in increased labor costs and failing to find the right employees. So overall there is no significant advantage to build a factory in Vietnam now. Meanwhile, if you build a factory in Mexico, the risk is even greater. It's still not known how many Chinese enterprises have been cheated there, unless you have a very strong financial strength and background. The same is true in India, where factories have been built and equipment has been installed, but it is not possible to put them into production. Therefore, if enterprises plan to set up factories overseas, they must carefully consider all kinds of risks and problems that may be encountered.
Outlook on overseas markets:
No matter developing Southeast Asia or European and American markets, the key lies in the positioning of your products. The high-end products with technological innovation and strong functionality can be promoted vigorously to the European and American markets, so as to improve the profit and added value of products. If the company's products lack competitiveness with low technical content, it will be more difficult to develop the European and American markets. So this kind of products can be sold to the Southeast Asian market, but it should be prepared to fight the price war, because the Southeast Asian market is also involved in the intense internal competition, no less fierce than that of China. In addition, if the company develops Southeast Asian market through agent middleman, it may result in slim profit margins, unless you go directly to the customer.
LD PACK mainly participated in two international exhibitions in 2023, one is Interpack 2023 in Germany, and the other is EXPO PACK in Chicago, United States. Our export orders are mainly from European and American markets.
