In 1998, UPM bought a majority stake in the Changshu paper mill in China. Under a determined growth strategy, UPM has invested over two billion US dollars in China over the last two decades.
“The continuous investments we have made at the Changshu mill site demonstrate our strong, long-term commitment to China,” states Bernd Eikens, Executive Vice President, UPM Specialty Papers. “The launch of specialty paper and label release liner production was an important milestone. Now we are able to offer a wider selection of high-quality products that are produced on site in China,” says Eikens.
The UPM Changshu mill site is also home to UPM Raflatac’s labelstock factory, the Asian research and development centre, and the APAC Supply Chain Centre. UPM has strongly focused on sales and marketing in China, where it also sells pulp, plywood and sawn timber.
According to Eikens, UPM’s strategy is to achieve a strong market position by focusing on carefully selected product segments, such as high-end office paper. “The demand for high-end office paper is growing, but its consumption in China is still much lower than in Europe.”
The changing Chinese shopping basket
UPM is preparing for future growth by investing more at the Changshu mill. The production capacity of paper machine 3 will increase when the second supercalender is ready early in 2020, making UPM one of the biggest label release paper producers in Asia.
Online sales, which is especially strong in China, mainly drives the demand for label materials. “Forecasts indicate that China will represent 60 per cent of global online sales by 2020,” observes Eikens.
Another area of growth for label materials is the food industry. Chinese consumers used to buy groceries from street markets. Now they increasingly prefer supermarkets and choose packaged and labelled goods for their shopping baskets.
Growing together with the customer
The rapid change of the Chinese economy and paper market has been witnessed first-hand by Eddie Chan, Vice President, Sales for UPM Specialty Papers in China.
“Two decades ago, no one would have believed the fast, stable growth of China’s economy, which is clearly visible in paper products, too. Working in sales is rewarding and exciting, since we can grow together with the customer,” says Chan. He recalls that 20 years ago, China had only a few local paper producers in addition to UPM. Since then, other big international operators have established a foothold in the market.
“The quality of the competition is increasing, too. UPM has provided high-quality products to its Chinese customers from the outset, but over the last decade, local competitors have also raised their product quality,” Chan explains. He believes environmental performance gives UPM a special competitive advantage among Chinese customers. Foreign companies operating in China already see the value of paper products made from certified raw materials.
Trust in UPM
UPM’s customer base in China consists mainly of wholesale dealers of paper products. In many product groups, products are also sold directly to end users such as printing houses. Chan interacts with customers on a daily basis, and he knows exactly what they expect from their paper product suppliers. He is proud that UPM is known for its consistent product quality, reliable service and comprehensive logistic solutions.
Chinese customers also value long-term commitment – and long-term business relationships are indeed at the core of UPM’s business in China. “A good customer relationship is comparable to a good marriage. Everything is based on mutual trust and in-depth knowledge about your partner. So why change your partner if it all works?”
Photo: Tuomas Harjumaaskola