Song Duong: on the brink of privatisation and expansion, TWM talks to director Nguyen Van Quan to get the latest on Vietnam’s tissue potential

Director Nguyen Van Quan explains the fundamental shift taking place in consumers’ tissue expectations across Vietnam .

TWM/1 What are your investment plans for the future?

“Years of investment by our joint shareholders Vietnam Paper Corporation (Vinapaco) has continued to strengthen the tissue making facilities at Song Duong tissue mill. While there are no plans to invest at the moment with Vinapaco, we will be privatised next year and there will be investment plans then.
“We started tissue production 10 years ago and we now make 10,000tpy, 80% of which is for toilet tissue and the remaining napkin. Facial tissue and towel are less important. After privatisation, we will be focusing on reinforcing our ability in these sectors.”

TWM/2 Will export remain a key business strategy for you?

“Initially we exported a lot of jumbo rolls as we didn’t have the tissue demand in Vietnam for what we were producing. We exported heavily to Taiwan, Japan and Australia in particular. However, we now just export between just 5-10%. We’ve reduced the amount we export as we are focusing more on the opportunities that are being thrown our way by the domestic market.”

TWM/3 How is the domestic market in Vietnam?

“We’re located 10km from Hanoi, so our market is in northern Vietnam and we produce tissue products mainly for cities because the price and quality is there. The tissue market is increasing every year by 15-20%. The main reasons why we are seeing this is because of how well Vietnam’s economy is doing. Also, years ago there was simply no tissue in Vietnam, so the market potential is now very large as urbanisation continues to happen very rapidly.

“In the past few years we haven’t been able to increase our production capacity in response to increase in tissue consumption in Vietnam, which has been a pity. But when we become privatised next year we will focus on the domestic market and also export even wider afield.

“We are also investing more in converting to increase the quality of the product but in the near future we won’t be investing in a new tissue line.”

TWM/4 What domestic tissue-buying trends are you seeing?

“There is an increased demand for products of high quality – the Vietnamese consumer wants a much higher quality than previously. As our paper machine can already produce high quality tissue jumbo rolls, next year we want to invest in another converting line to increase converting quality and capacity to meet an increase in demand for products of high quality.”

TWM/5 What are your main challenges?

“One of the main challenges is the presence of fake tissue products and other chaotic competition in the market.
Price increases are also an issue for us as we can’t absorb the increases that come from our raw material and energy suppliers. So the profit margin decreases! Competition here is definitely stronger because of it. We are also seeing paper companies producing printed paper products move into tissue production, which is adding to the competition.
“While not so many tissue products are here yet from China in the Vietnam market, in the near future we expect to have increased competition from China.”

TWM/6 And the main opportunities?

“There are many opportunities here because the market is increasing every year. We have a paper machine so we can produce high quality tissue and compete on quality. We also want to export to more countries. We want to export jumbo tissue and some finished products also, although there will always be a disadvantage doing that because of transport costs.
“In terms of the domestic market opportunities, we are also seeing a 10-15% growth in napkin products.”

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