18 December 17 The Business Times by NISHA RAMCHANDANI
PACKAGING company Sealed Air Corporation plans to scale up its research & development (R&D) efforts in Singapore in the next two years as it seeks to expand in Asia.
Sealed Air, which is known for inventing bubble wrap, acquired polyethylene (PE) foam maker Fagerdala Singapore in October this year for around US$100 million and with it, a small R&D centre.
"We are planning to grow the R&D capabilities in Singapore significantly in the near future because of this acquisition," said Pasi Pesonen, vice-president (product care) for Asia-Pacific. Previously, the group's R&D was mainly carried out in other regions such as the United States.
While he declined to share figures, Mr Pesonen said that the focus for R&D would be on boosting headcount and capabilities as it seeks to better position its key products for the Asian market.
For instance, some of its solutions might need to be tweaked to be made more affordable or better suited to the logistics model in this part of the world. Parcels in Asia sometimes pass through more touchpoints vis-a-vis the US, Sealed Air said, citing research.
"When you want to go into a more competitive market, where the price is the only determining factor, we need to make these regionalisations," he added, pointing to the Chinese market as an example. At the moment, the design team is "very small" but Sealed Air hopes to ramp this up within the next two years. "We see Singapore as a hub. We want to control our Asian operations from here."
New York Stock Exchange-listed Sealed Air first established a presence in Singapore in 1984. Home to its regional office for the Asia-Pacific, the Singapore operation also has a packaging application centre and a manufacturing facility, which produces bubble wrap (among other things).
"(Fagerdala gives us) a bigger footprint (in Asia), closer to the customer, with capabilities we didn't have," Mr Pesonen stressed. "We didn't have fabrication, which means customising the end product to a single customer's needs."
Fagerdala, which chalked up US$80 million in sales in 2016, has 14 manufacturing facilities in total, of which seven are in China and one is in Singapore.
The acquisition makes Sealed Air the largest manufacturer of PE foams and third-party fabricator to China and the Asean market. It plans to leverage on Fagerdala's presence in Asia as well as its expertise in foam manufacturing and fabrication to boost sales in the consumer electronics, medical equipment and devices, automotive, temperature assurance, and e-commerce fulfilment sectors.
US-based Sealed Air earned revenues of US$4.2 billion in 2016, of which 64 per cent came from its food packaging segment - which helps extend the shelf life of food - and 36 per cent from product care solutions.
Product care includes automated packaging systems, cushioning solutions to protect goods during their journey, blocking and bracing for fragile or high-value items as well as surface protection, which include shrink film and bubble wrap. In particular, demand from e-commerce and third party logistics players is booming as e-commerce becomes increasingly popular among consumers, Mr Pesonen highlighted.
"We create value to end consumers and our customers in different ways. We want to reduce the damage which happens in product shipping," he said. "(It) is a huge cost, and dissatisfaction to end consumers if your product comes damaged. The other key way is efficient packing. Normally, the bottleneck in fulfilment centres is packaging."
Aside from speeding up the process, ensuring that the package is the optimal size helps save on costs and space, while reducing packaging waste. According to Freedonia Market Research, the protective packaging market stood at US$10.2 billion last year and is slated to grow at a compound annual growth rate (CAGR) of 8.6 per cent between 2016 and 2021.
On the customer front, Sealed Air tries to enhance the experience by offering packaging which is easy to open, easy to return and recyclable. In addition, a range of its bubble wrap can be customised to enhance the unboxing experience for consumers, with the company's logo, special colours or phrases such as "Happy Holidays".
While North America accounts for a little over half of the company's revenues, the Asia-Pacific today contributes 15 per cent and is its fastest growing region.
"We have started breaking ground in Asia this year in automation," said Mr Pesonen, adding that automation systems helps boost packaging speed in countries where labour costs or volumes are high. "That's a game changer in the market place."
Its FloWrap automated mailer system, for instance, allows e-commerce players to quickly create ready-to-ship, custom-sized polybag packages on site for items such as apparel.
Meanwhile, Sealed Air's Priority Pack solution allows its customers to pack items more swiftly, as well as to achieve consistency in packing. The latter means that packages are well protected, which reduces damage.
"Throughout Asia, we see great opportunities," Mr Pesonen said, adding that the group is keen to grow its business in key sectors in Asia, especially e-commerce and third party logistics.
Here in Singapore, Sealed Air serves industries such as aviation, electronics, general manufacturing, semiconductors and third party logistics.