Zhuhai Zhongfu Achieved Resplendence in Beverage Packaging

While China's beverage industry has been developing rapidly, beverage packaging has also become rich and colorful. For currently most popular PET (polyester) beverage bottle, there are more and more varieties and novel exteriors.      Zhuhai Zhongfu Enterprise Co. Ltd. (SZ:000659) is the largest specialized manufacturer of PET bottle in China, mainly engaged in the production and sales of PET beverage bottle, bottle embryo series, bottle label and other supporting products. The company has annual production capacity of 5 billion PET bottles, 4 billion bottle embryos, 5 billion bottle labels and 3 000 tons of LDPE (low density polyethylene) and LLDPE (linear LDPE) plastic film and shrink film. Its products are used in the packaging of beverage products such as soda beverage, tea beverage, fruit juice beverage and bottled water, mainly providing supporting service for beverage manufacturers such as Coca-Cola, Pepsi-Cola and Uni-president.      The company's A share was publicly traded in Shenzhen Stock Exchange in Dec., 1996. The company has gained rapid development with its operation income increased from the RMB490 million at initial public stage to RMB1.64 billion in 2004, increasing by as high as 3.3 times; its total asset increased from RMB740 million to RMB4.72 billion, increasing by as high as 6.4 times; its stockholder's equity increased from RMB370 million to RMB1.84 billion, increasing by 5 times.

1. Back on beverage giants      Zhuhai Zhongfu has established strategic cooperation relationships with multinational beverage manufacturers such as Coco-Cola, Pepsi-Cola (“Two Colas”) and Uni-president. 70% - 80% of PET soda bottles produced by the company are sold to “Two Colas” which occupies over 50% of the soda bottles purchased by “Two Colas”. The number of thermal bottling bottles sold to “Two Colas” also exceeds 50% of the purchasing quantity of “Two Colas”.     The cooperation between Zhuhai Zhongfu and “Two Colas” can be traced back to the 1980s. Relying on the powerful shoulders of “Two Colas”, Zhuhai Zhongfu developed rapidly. Within 3 years, its annual production value rapidly expanded from more than RMB8 million to surpassing RMB100 million. Zhuhai Zhongfu did not stop to enjoy its fruits, but improved its forward pace, converting the profit to more advanced equipments, technology and high quality materials.     After mid-90s of last century, “Two Colas” quickened domestic expanding pace, opening bottling plants throughout China. Zhuhai Zhongfu established the operation strategy of closely following “Two Colas”. Where “Two Colas” built plants, where Zhuhai Zhongfu built plants. Along with the deepening of cooperative relationships and the need of market competition, a closer “united production mode” was developed.

2. Construct whole country layout      PET bottle manufacturing sector has characteristics of large investment and high technology, small product unit price, light weight and big volume, relatively high transportation cost. In addition, beverage is seasonal product. The plant should run with high load during selling season which puts strict requirement for the timely act of supporting supplier. The company adopted the strategy of forming a number of bottle embryo supply centers throughout the country. Currently more than 10 bottle embryo supply centers have been built in 8 cities of South China, Mid China, East China, Southwest, Northwest and Northeast areas, distributing by radiation in some dozens of bottle blowing plants of 25 cities throughout the country.

3. Extend industrial chain      The company adopted the strategy of extending to up and down stream surrounding major operation. The cost of company's major raw material PET (bottle grade polyester chip) occupies over 65% of production cost, therefore raw material supply stability and purchasing pricing put rather big impact to the company's operation efficiency. In order to ensure PET supply, at the end of 2002, the company and Hong Kong Zhongcheng Chemical Fiber Co., Ltd.(Chinese phonetic alphabet) jointly purchased the PET production equipment and relevant facilities of Sichuan Guangkang Chemical Fiber Co., Ltd. to incorporate Zhongfu (Guanghan) Chemical Co., Ltd. and form the PET capacity of 30 thousand t/a which can satisfy 1/3 of the company's need for raw material. What was more important was taking Guanghan Polyester as the company's PET material R & D base to develop special PET material, satisfying the material need of developing new packaging product.     The company also actively extends to down stream with the development of bottling service. The company specially set up Futian Plant to be in charge of labeling processing operation. Currently it has set up labeling thermal bottling plants in Zhongshan, Changsha, Xi'an, Kunming, Zhengzhou, etc, producing fruit juice and tea beverages for companies such as Coca-Cola and NESTLE. In addition, the company also produces bottled drinking water for beverage manufacturers such as Coca-Cola. Currently the company possesses 20 OEM water production lines with annual capacity of more than 1 billion bottles.

4. Pay attention to Sci-Tech innovation       The company has built up a leading science and technology research and development center in China. The center has a group of outstanding products designers and mold manufacturing engineers, has built a complete system for PET packaging design, simulation and experiment, and has introduced from foreign countries a series of advanced computer numerical control production testing and experiment equipments, as well as high precision processing machine tools and instruments.