Operations Report

Daewang: taking on global giants on quality and price

TW meets the 88-year old power house behind a remarkable independent tissue producer determined to prosper debt free

“We plan to invest without loans from the banks,” chairman Kim Chang Gyu

“My aim is to continue to run a successful business … without debt”, says Kim Chang Gyu, chairman of Daewang. That simple statement of intent will give you some idea of the quiet strength which has underpinned this family firm from inception to the present day, and will no doubt propel its prospects into the future. Kim has been there since the start in 1986, of course, and even though his sons and daughter are now on board and fully committed to piloting the firm forward he is still very much at the helm, hands on the tiller at 88 years young. As befits his longevity in the industry, the business strategy is tried and tested too, short and long term with a keen eye to sustainability, all in the context of the distinctive Daewang mantra. “People are using more and more products all over the world and our raw materials will be finished in 100 years. So the target must be to reduce our energy outputs and raw material costs. And to exist without debt. That’s my market strategy,” he says with his customary conviction.

The company’s paper production area, part of the Soryongdong site

Products at the converting facility

He greets TW, trade mark cap in place, in the office of the Soryongdong site. It is located in an industrial complex in Gunsan city, which is located in the North Jeolla Province three hours by bus south of Seoul and was once a small fishing village. The production site is low key, efficient, well ordered… as I’ve already come to expect. Of his short term concerns he says, through a translator: “There is some oversupply in the South Korean marketplace, so we are increasingly having to adapt to that and be resourceful and innovative. We have made investments and will continue to do so, but I want the company to do all of this without debt. We need to secure our future.” He is warm and enthusiastic throughout the interview and tour of the plant. There are expansion plans in order to continue to be competitive – but Kim adds that the growth will be “very slow, a continuous development”. He is looking into the Awayfrom- Home (AfH) market, and a new mill will be built and up and running by the end of this year in order to expand the company’s current product offering. A new Toscotec Steel Yankee has also been signed for and will be installed this year in order to replace an “old-fashioned small machine”.

The site’s converting facilities

“We plan to invest without loans from the banks. It’s just more secure. Once up and running, the Steel Yankee will be used to produce products for the AfH market, there is a lot of opportunity there because people in South Korea are increasingly needing this type of product. And on the back of this investment, our products will be good quality but also low priced. We are able to transport the products cheaply so there is a lot of opportunity there as well.”

A new converting line will likely follow. He adds that the products of competing companies are “too expensive”, and also that competitors such as Kimberly Clark are heavily involved in the diapers market, which Daewang isn’t. “But in terms of tissue, we can match companies such as Kimberly Clark in South Korea.”

Chairman Kim: “We are producing quality products cheaper than our rivals so I can enter any market … my aim is to be number one.”

In total, the business will then have five machines, producing 80,000 tonnes per year. It has its own brands, and Kim says there is strong local demand, but in order to adapt they are exporting products as well. “There are good prices available for export products,” he adds. Some 40% of the company’s output is now made up of selling to supermarkets.

As for the South Korean market, he says current demand for toilet tissue “will remain flat”. However, opportunities are there: with the company’s investment, it will produce new products that have “good quality and low production costs”. “Kimberly Clark was producing great quality products, but we are now doing the same only cheaper. With that, I can enter any market. My aim is to keep the business largely at this size but to be number one, with no debt, and so the investments are helping us reach our goal.”

As for the financial crisis affecting large parts of the world, he warns that no industry is immune. Daewang, though, is much less susceptible than most. Just listen to the mantra.