A. Definition of the Industry

The Philippine Exporters Confederation Inc. (Philexport) defines Packaging as the totality of products, services and systems used to prepare goods for preservation, transport, distribution, storage, retailing and consumption. It is intended to ensure delivery of the product to consumers in acceptable condition and at the most reasonable cost. It is a heterogeneous industry. With its inherent characteristic of being an interlinking business concern to other industry sectors and subsectors, the Packaging Industry provides a distinct advantage in developmental efforts with an edge in growth potentials and prospects for both domestic and international markets.

B. Major Components of the Industry Cluster

The development of the Packaging Industry in the Philippines dates back to 1919. In Cebu, it is believed to have commenced in 1958 with the establishment of the Visayan Glass Factory. With the setting up of the bottling plant in San Miguel Corporation (SMC) in 1968, the Packaging Industry made a mark in the province. Other companies were also set up, including the Wes Paper Products in 1973, Avenue Industrial Corporation in 1978 and about forty (40) others.

The industry consists of at least four (4) subsectors according to type of materials used: paper-based, metal-based, glass-based and plastics- based (rigid and flexible.) The fifth subsector is composite materials but is still a very small segment in the Philippines.

C. Industry Size, Location and Growth

In October 1993, the Department of Trade and Industry- Cebu conducted a survey to determine the present status of the Packaging Industry in Cebu. Of forty nine (49) survey questionnaires sent, sixty percent (60%) or twenty one (21) respondents were retrieved representing the four (4) product groups, based on raw materials used: paper-based, glass-based, plastic-based and metal-based (tin cans.)

Of the twenty one (21) respondents, twenty (20) are manufacturing companies of which two (2) are exporters: San Miguel Packaging Products and Wilson Food Incorporated. Republic Glass Corporation is distributor. dealer of products and does not manufacture.

In terms of legal status, of the 21 companies, fifteen (15) are corporations, four (4) are single proprietorships and two (2) are partnerships. The total work force of the surveyed 21 companies is 2,148 of which 1,711 are involved in production and 437 come from the administrative division. Of the 2,148 employed, the glass-based subsector is employing some 43.40% or 932. Of this, 25% come from the paper-based subsector (537), 21% from plastics-based subsector (466) and 9.9% from metal-based subsector (213).

Of the twenty one (21) companies, six (6) are operating for over twenty (20) years, the other six (6) for more than ten (10) years, four (4) for over five (5) years and five(5) for less than five (5) years. The Visayan Glass Factory is the oldest (1958) seconded by the San Miguel Packaging Plant (1968). Companies with less than five (5) years of operation include Faithope Industries Inc. (1989) and Southern Pulp Molding Corporation (1991). Please refer to Annex 1 for the List of Packaging Companies.

D. Economic Importance of the Industry

A study conducted by the Agribusiness System Assistance Program (ASAP) in 1994 shows that ninety five percent (95%) to ninety eight (98%) of the locally-made packaging products are sold in the domestic market. Demand for them largely depends on the sales performance of user sectors such as food and beverage, pharmaceuticals, cosmetics, toiletries, garments, gifts, toys, housewares, export industries, among others. Direct exports account for only two percent (2%) to fifteen percent (15%) of the total packaging production. Indirect exports may account for another five percent to ten percent (5%-10%), so that in sum, the foreign market contribute seven percent (7%) to fifteen percent (15%) of the total sales of packaging.

About sixty percent (60%) of the total packaging industry output is used by the food and beverage industries. The largest users of metal-based packaging products are producers of processed meat and fish products, powdered milk, fruit juices, biscuits and edible oil. For rigid plastics, the toiletries and cosmetic industries are the largest consumers. As in other packaging subsectors, the largest users of glass-based and paper-based products are in the food business.

E. Markets of the Industry

The size of the Packaging Industry’s world market cannot be ascertained since it encompasses multiple product lines such as bottles, corrugated cartons, plastic-based materials, tin cans, packaging containers, paper-based materials, wooden crates, among others. As of October, 1998 internet data from the Strategic Industry Research and Analysis (SIRA) revealed significant information.

Packaging is a US$ 260 Billion industry across East Asia. While Japan, China, Korea, Thailand and Australia dominate supply ad demand, recent large investments in production capacity in Indonesia, Malaysia and Taiwan have significantly increased the region’s share of world packaging output. Despite currency volatility in Asia, packaging demand is projected by SIRA to increase by around 4.7% compound per annum over the period 1997- 2003. The Japanese and Korean markets are however forecast to record annual growth of less than 1% over this time period.



China is one of the most interested packaging markets in the region. So far, virtually unscathed by regional turmoil, its packaging industry is forecast to expand output by almost nine percent (9%) in 1998. Most of the new production is focused on plastic film an bottles, and some strong paperbound gains. Glass production is expanding at a slower rate and only due to increased beer output. Canned products may actually decline for the first time this year, as a result of materials’ substitution mostly by plastics.

F. Infrastructure

Of the twenty one (21) companies surveyed by DTI, six (6) plastics- based companies use major raw materials of polypropylene resin, polythelene resin and high density PP. Sources of raw materials for plastics are Cebu, Manila, Korea, Singapore, US and Saudi Arabia. The plastic-based companies produce two (2) kinds of items, plastic- based and flexible- based. These include containers, galons, bottle/shell crates and plastic bags.

Four (4) paper-based companies use kraft liner and medium paper, sourced from Australia, US and Picop. The major product lines manufactured by paper-based companies in Cebu are corrugated carton boxes, labels/ packaging stickers and egg trays. The machinery of the paper-based companies come from Taiwan, Japan and the US, with an age life of less than ten (10) years.

Two (2) glass-based companies use silica sand, limestone, soda ash and cullet sourced from Australia, Vietnam, Palawan, Danao, Cebu and Magadi, Africa. Two (2) other metal-based companies use tin plates source their raw materials from Japan. The glass-based companies produce commercial and industrial tumbles, bottles for cosmetics and pharmaceutical, beer/ beverage and wines/ liquor. The subsector use machinery from Europe, Japan and the US.

Two (2) manufacturers of metal-based products have varied product lines. General can lines for oil-based companies are produced by the Philcan Industrial Corporation. Food grade tin cans are produced by the Oriental Tin Can and Metal Sheet Manufacturing Company Inc. Corrugated cartons, tin cans and caps are also produced by the Treasure Island Industrial Corporation. Some machinery of the metal-based subsector have been acquired in the 1950’s.

G. Business Climate

Based on the government’s Export Development Plan, the Packaging Industry is challenged to form into an association in order to implement and achieve the World Competitiveness Program, ultimately establishing the Packaging Center in Cebu. Likewise, the Association of Petrochemical Manufacturers of the Philippines said they have asked President Joseph Estrada to raise import tariffs on polymers to approximate other ASEAN countries and give industrialization a big push and wean the country from a decade of being a mere importer of plastic raw materials.

Motivated by the survey conducted by DTI, the respondents formed the Packaging Institute of the Philippines- Cebu chapter (PIP), in 1994. PIP was duly registered with the Securities and Exchange Commission (SEC) in October, 1994. Please refer to Annex 2 for the 1999 PIP Calendar of Activities.

H. International Trade and Investments

Of the 21 companies surveyed by DTI in October, 1993 nine (9) are paper-based and plastic-based small-sized companies with assets between Php 1 Million to Php 10 Million. All 3 glass-based companies have assets above Php 40 Million Pesos.

In terms of sales, the glass-based subsector contributes the highest sales at Php 1,863,200.00 (70%) of the compounded total sales of the four (4) subsectors from 1990 to 1992. But among the seubsectors, it is also the glass-based subsector that has registered a decrease of sales from 1990 vis-à-vis sales in 1992, compared to other subsectors.

The major clients of the Packaging Industry in Cebu belong to the sectors in food, handicrafts, pharmaceuticals and cosmetics. The glass-based subsector exports to China, Australia, Japan and Europe. Other subsectors focus in the domestic markets, particularly Cebu and Manila.

I. Opportunities Driving the Industry

There is an Asian market that provides enough challenge for Cebu-based producers to respond to the demand. Likewise, the domestic market is also an equal opportunity to play with the onset of an open economy or competing with the global markets within the country. More so, the formation of an association will set future plans that will benefit those belonging to the packaging industry mainly in terms of policy changes that will ultimately lead to responding to market demand/ access, technology changes, cost control reduction and productivity.

J. Requirements for Growth

• For the five (5) paper-based companies, production capacity has not been fully maximized due to ‘undervolume of the business’;
• These same companies cannot export because of price competition due to high material cost.
• Very erratic market; strong competition from Manila supplier and high freight cost on raw materials that are not available in Cebu;
• Unfair competition of unregistered manufacturers;
• For seven (7) glass-based companies, there is inconsistent quality and limited supply of cullet;
• For the same companies, unfair price competition from imported drinking glasses and bottles;
• For seven (7) plastic-based companies, they see a problem with sudden brown-outs that disrupt production;
• Environmental concerns and the non-biodegradable characteristic of plastic;
• Scarcity and inferior quality of moulds and machineries;
• Plant location and capital; and
• For one (1) metal-based company, lack of supply of tin plates allocated by National Steel.

K. Recommendations/ Courses of Action

• DTI should encourage more manufacturers that will need packaging;
• Allow tax-free importation of materials;

• More cullet entrepreneurs should be encouraged;
• There should be a glass/bottling recycling program;
• Machineries and equipment of cullet suppliers be upgraded;
• Additional technology be made available;
• Possible suppliers should be tapped.

Generally, there is the desire to expand and improve production by acquiring more modern machineries and equipment or upgrading present ones and by developing technical skills of personnel through tie-ups with foreign companies. The Republic Asahi Glass Corporation hopes that the Cebu depot would be a processing/ cutting center where there will be packaging and trucking services. The company also plans to build a warehouse.

Annex 1

List of Packaging Companies

Annex 2

PIP 1999 Calendar of Activities

Seminars

• June 25, 1999
  Specialized Seminar on Paper/ Paperboard and Corrugated Boxes
  Manila Galleria Suites

• July 22, 1999
  Specialized Seminar for Rigid Plastics

• August 26, 1999
  Specialized Seminar for Flexible Packaging

• September 29, 1999
  Specialized Seminar for Packaging Graphics

Other Activities

• October 22, 1999
  National Packaging Congress

• October 21- 24, 1999
  Packaging and Food Processing Technology Exhibit

World Trade Center

• October 27, 1999
  PHILSTAR Search for Packaging Excellence Awards Night
  
  
  
  

Packaging Subject

A packaging elective subject is being offered to graduating engineering students (all disciplines) at the following universities:

Adamson University; and University of Santo Tomas

Likewise, a special packaging course will be offered to professionals (regardless of profession), at the De La Salle University- College of St. Benilde.

For those interested in these activities, please call the PIP Secretariat at telephone numbers 8445661 to 69 local 226 (look for Marion) and local 361 (look for Edwin) or send your communications at fax number 8172936.