31/01/2022
Plywood industry has entered into cut- throat competition mode. Sri Lanka has around 40 operational wood panel processing factories practically that can be counted as plywood producing factories. Though in last two years alone, the production capacity has grown almost equal to 4000 units where as demand has remained same barring few months when it was a free orders flow. This analogy is not written statistically just because everyone in the trade can understand. The Ply Reporter thought to explain the changing dynamics of plywood industry & trade for its readers who look forward for some meaningful insight through this magazine as what is happening and what might be in store ahead.
This segment is still in comfortable position with market conditions because they are managing to get orders and payments as well. It is still better and satisfied though not highly profitable at present but in better favourable condition than ever before.
PLUS- Known Brand, Good quality, Capital, Able to convince new dealers, emotional connect
MINUS – No Clear policy, Convention spending approach, Not backed by research, ambiguity in pricing, Not able to make team, continuity
STATUS- Better, Trying to expand, Hopeful yet confused
This segment is full of such players who have once enjoyed good margins, demand and reputation but do not know how to deal with so many odds. Dealers holding on payments, exit of good people, complaints and too much competition against too little room for margins is making this category exhausted and tiered. They have good factory but loosing grip and direction with each passing month.
WE ALL KNOW NON-BRANDED!
Those factories who sell commodity and aim for a certain volume based price strategy, without caring much for its stamp, brand or name falls in non-branded category. The unbranded segment is more concern for net earnings instead of PAT and stay alert for day to day costing to compete on the basis of the lowest possible price. To sell its entire daily production, the player of unbranded segment often ignore cost sheet calculations and prefer to sell in hope of a margin and recovery of earning next day. This category may aim for any state or even a handful of distributors and operate on trust preference instead of policy base work culture.
This unbranded segment has been the single undisputed ruler in the plywood segment in Sri Lanka, where company owner decides all the company policies and change it on day to day ‘as per needs’. The unbranded segment is most loved by the traders and bulk buyers who have better paying capacity. The unbranded category takes no mention or tension of changing government policies until it reached on their door. The unbranded segment in plywood has long been undefeated, untamed and are those who have been a case study for branded, semi branded category players and marketing consultant always.
The price increase push by manufacturers is needed but over supply is blocking the implementation. Sharp rise in rubber wood timber prices has forced cheap manufacturers to losses whereas the branded and semi branded plywood manufacturers are operating on narrow margins. Hence the trade is beginning to compete fiercely by offering lower rate despite of unviable equation.
This is the time where reverse counting has started. WHO BLINK FIRST’ game has long begun. The ability to sail through the tough period of 2019 and 2020, the plywood units need to assess and take rational decision. It is true that, there is no fix parameter for success as it works differently for different players. But it is certain that “Plywood brands with good quality and genuine price will remain desired by retailers because they too have only few options if they wish to earn margins to bear the rising expenditure and present capital needs”. Following are few basic tips which may help the industries who have not yet found their direction.
Running a plywood industry need a daily cash flow for buying timber, veneer, paying wages, raw materials and other hundreds of expenditure heads. If an industry is facing fund crisis means somewhere the policy is faulty. Somewhere sales are not happening instead your industry is being taken for a ride. If payments are crossing 30-45 days tine means you are not wanted by the dealer, you are forcing yourself. Find your position and make it a priority to work with committed paying dealers or better to reduce production.
Margins and cash flow are much required for growth of any company, if it is not there, create more markets and widen your network. Revise you rate with updated cost sheet. The Mid Segment companies undoubtedly need banking support and they must work to align with new format. The scenario in coming months will be driven by capital rich players and times are very troublesome for weak ones. It's time for manufacturers to think, plan, implement wisely and not to follow other like sheeps.