A Model Of Flexibility

June 1, 2005

increased competition hits hygiene market

When asked about the state of the hygiene machinery market, Sanimac�s Mikael Bahlouli replied, �Things are not great, but they are not black.� And, Mr. Bahlouli, sales manager at the Rufina, Italy-based baby diaper and feminine hygiene equipment supplier is not alone. In fact, most hygiene equipment manufacturers, impacted by industry consolidation and increased market competition, share this same view of the hygiene market.

�Larger companies are challenging us to provide machinery that guarantees the highest process optimization to reach high quality standards,� explained Alessandro D�Andrea, marketing manager for Fameccanica.Data SpA, Teatino, Italy. �On the other hand, other companies, such as private label firms, look for efficient and flexible machinery that can easily and quickly implement new product features because they need to be prompt in reacting to changes in the hygiene market.�

Therefore, hygiene equipment companies have had to bring themselves closer to their customers. This has been achieved by establishing regional sales offices, improving response times and tailoring new machinery concepts to customer demands.

�The challenge for hygiene equipment manufacturers is to be able to deliver new machines as quickly as possible,� explained Fabio Zampollo, sales director at Garlasco, Italy-based SSP Technology SpA. �The big consumer product manufacturers are forcing other hygiene market players to follow them so machinery manufacturers also need to follow quickly.�

Taking It Up A Notch
New products and improvements in established hygiene product categories, including baby and feminine hygiene products as well as disposable growth areas such as adult incontinence items, training pants, bibs, nursing pads and hospital underpads, have left hygiene machinery suppliers continuously upgrading and adding new equipment components to their machinery lines to please customers.

�Machines need to be flexible enough to handle the new materials such as thinner materials and elastics in backsheets and topsheets,� explained Andrea Allar, sales manager for BHT Bicma, Mayen, Germany. �The machines must also be able to handle higher variations in web tension. Since materials tend to be thinner and more elastic, it gets more difficult for the raw material supplier to ensure a constant tension within the entire material, reel or spool. Also, processing such sensitive materials in a machine creates more challenges in keeping the web under control.�

SSP Technology�s B-6000 combination machine manufactures baby and adult diapers on one line, with no changeover time.

In addition to flexibility, Ms. Allar has also seen cost pressures heavily affect BHT�s customers. This has left the company searching for new areas in the production process to cut costs. Options are limited because hygiene product manufacturers cannot skimp on quality. �Customers cannot afford to sacrifice quality by using poor-quality raw materials, nor can they eliminate key personnel because they are needed to operate the machinery,� Ms. Allar explained. �For example, a low cost, thin standard nonwoven topsheet will never have the same wicking and rewet characteristics as a sophisticated three-dimensional film. A low-cost core made with standard fluff will never be as good as a core with high-density fluff mixed with SAP and covered with an acquisition layer. Therefore, the areas where customers want their savings are in their daily production, which is achieved with more efficient machinery.�

To enable its customers to handle the raw materials for thinner, high-performance hygiene products, BHT offers mat-forming equipment in its turnkey lines or as stand-alone upgrades. This component is ideal for the production of a three-layer fluff core in feminine hygiene products. The core features a SAP/fluff pulp mix in the middle and two outer layers of pure fluff. The core structure is compressed and pattern embossed to make an extremely thin, airlaid-like product. Other customer demands to which BHT is heeding include reduced downtime for unplanned stops, planned maintenance and cleaning, size changeovers and fine adjustment of machine settings.

Recent product improvements in hygiene have led Diatec, Collecorvino, Italy, to make all of its baby and adult diaper, sanitary napkin and panty liner machines equipped to handle components such as increased SAP and pre-formed cores. The company also custom builds its machines. �Our machines are prepared to meet the new materials and features of hygiene products,� explained Fabrizio Coladonato, commercial director of Diatec. �They are ready to receive any additional equipment needed. For example, baby diaper machines are ready to receive elasticized side panels as well as the pre-made core. Everyone is following the leaders of the hygiene product market and the market has become much more competitive.�

Due to constant product upgrades in the hygiene market, GDM developed its Extreme Modularity Concept for its machinery during 2002 and 2003. The concept includes manufacturing single, stand-alone modules (both mechanical and electronic) dedicated to specific applications. These independent modules can be added and eliminated by means of a simple plug in/off procedure to manufacture a variety of products. The fully servo-driven modules can also be separately tested and added onto the existing line according to the customer�s product needs. The concept meets the seven requirements that executives at GDM have seen for hygiene machinery: final product customization, flexibility, simplicity, performance, quality, competitiveness and standardization. GDM expects to incorporate its Extreme Modularity Concept into all of its production lines, including adult incontinence pull-up pants and baby training pants by the end of this year.

Other technological advancements on the hygiene machinery side include the development of combination machines capable of manufacturing a number of different products. SSP�s BT 6000 combo machine can manufacture baby and adult diapers with no changeover time. This not only saves space but also allows SSP�s customers to cut production times and subsequently save costs.

Partnerships are another way SSP is responding to increased demands from consumers. For the past several years, SSP has been a partner with BHT, a manufacturer of machines, to produce sanitary napkins, panty liners and light incontinence items. This synergy gives SSP more insight into other hygiene markets and has allowed BHT and SSP to approach their markets with more knowledge and capability.

�We exchange views, ideas, experiences and strategies for the development of markets,� explained BHT�s Ms. Allar. �BHT historically comes with experience, know-how and technology of machines for the �smaller� product range, such as panty liners and medium-sized incontinence products, whereas SSP has the classical background of manufacturing baby and adult diaper machinery.�

Brighter Times Ahead?
As manufacturers develop flexible, easy-to-operate and modular machinery featuring a range of services, outside challenges also exist in this market. Consolidation, for one, has been a double-edged sword for some manufacturers as newly merged companies develop new business strategies and ideas that influence machinery investments. In some cases, this might increase orders for machinery companies doing business with one of the merged companies, but oftentimes a merger or acquisition can reduce a machinist�s customer base, driving down sales and increasing competition.

Fameccanica�s new FI-U Premium machine manufactures bed underpads with an extremely wide assortment of different fluff core weights�from 36-200 grams per square meter.
�Consolidation can be positive, as larger companies with strategy and capital may more easily see the need and bring up the capital to invest in new equipment for the future,� explained Ms. Allar. �It can, however, be negative for the machinery supplier in the short term, when several small companies are merged together and their machine facilities become consolidated. For instance, five small companies would perhaps need two or three machines each to cover their entire product range for the market. But, as they acquire and become merged together, the entire product ranges can be spread out on existing machines in a more efficient way. This might postpone the need for new equipment. However, it seems that the positive effect has been more apparent, up until now, particularly with market and development strategies.�

Like BHT, GDM is also experiencing the impact of consolidation in the hygiene machinery market, particularly among private label baby diaper manufacturers as seen with baby diaper manufacturer Buggenhout, Belgium-based Ontex�s acquisition of Paul Hartmann, Heidenheim, Germany, in July 2003. Major retailers in developed countries were able to fill store shelves with high quality and attractively priced private label products that are increasingly gaining acceptance by consumers.

�Because of situations like this, GDM has the ability to cooperate with the bigger players, and we are profiting from a large-scale cooperation,� Mr. Konig explained. �The company that does the merging and the acquiring, like Ontex, continuously expands its production capacity and products, so the market becomes less fragmented and easier to serve.�

As baby diapers and feminine hygiene products reach maturity in developed countries, hygiene machinery manufacturers are expecting training pants and adult incontinence items to offer another outlet for their machines. Although training pants and incontinence products haven�t fully penetrated markets in developing regions, manufacturers are expecting the next several years to be filled with growth.

�There is a deep, renewed interest in the pull-up and training pant diaper market in Europe� said Giampiero De Angelis, commercial director of Fameccanica. �We are taking our 10 years of experience in this sector and widening it with more recent product structures like our FA-X Superstar TP, which is used for training pant production in the machine direction and the FA-X Superstar TXP for cross direction. Another interesting area is bed underpads, pet disposable pads and the recently introduced disposable changing pads.�

Because of the potential of these products, Fameccanica recently developed its high-speed FI-U Premium machine, which manufactures a wide assortment of different fluff core weights�from 36-200 grams per square meter�for bed underpads.

Executives at BHT are also keeping a close eye on the training pant market but are concerned that gains in training pants could take away share from baby diapers.

�There is a lot of interest, but there are still a lot of questions surrounding training pants,� Ms. Allar said. �Suppliers are asking themselves: �Will it be a niche or will it be a growing separate segment? Or, will it take away existing capacity from my baby diaper line?� In any case it could become be one of the most interesting fields in the next few years.�

Hygiene machinery manufacturers are also waiting to see how the adult incontinence market will pan out during the next several years. As the population ages in Europe, Japan and North America, more demands are expected to occur in the adult incontinence product category. Currently, customers want adult incontinence products to closely mirror baby diaper characteristics including incorporating acquisition layers, frontal tapes and elasticized ears. �These features are demanded because elasticized ears avoid material scrap in the leg cut-out,� Fameccanica�s Mr. De Angelis explained. �We are ready to provide this technology and even integrate it into our existing machines as upgrading kits.�

Catching Up
Geographical expansion is also providing new market opportunities for hygiene equipment suppliers. The most closely examined regions are Asia, South America and The Middle East. Equipment suppliers are examining the possibility of opening up new sales offices to target these markets. GDM, for example, is constructing a joint venture plant in Shanghai this year, and it already has offices in Sao Paulo.

BHT offers mat-forming equipment in its turnkey lines or as stand-alone upgrades. This component is ideal for the production of a three-layer fluff core in feminine hygiene products.
�For customers, the hygiene machinery market is about innovation, but for machinery manufacturers it is about competing against Chinese firms,� GDM�s Mr. Konig explained. �We plan to ride the growth wave with China, instead of having Asia taking us over.� GDM�s South American growth, meanwhile, has been tempered by political strife and pricing pressures. Despite this, GDM sees growth occurring in Brazil, Columbia and Chile down the road.

Sanimac, although a smaller player in the hygiene machinery arena, has established several agents in Turkey, North Africa and M
exico to better serve its customers and expand geographically. �I am seeing a lot of demand for upgrades in these regions, but they are not looking for an entirely new machine,� added Mr. Bahlouli.

As consumers in developing nations become more interested in high-quality feminine hygiene and baby diapers, and as established regions continue to demand a more diversified product base, manufacturers will face increased competition in coming years. Demands will continue to revolve around a need for flexible machinery while providing increased services and support of their customers. �Customers are demanding short delivery times for both new machinery and rebuilds due to the market pressure they are facing,� said Ms. Allar. �We need to find ways to respond to this requirement, since it is certainly not a passing trend. In fact, delivery times among machinery suppliers� customers will continue to get shorter and shorter.�

Other equipment manufacturers stress the importance of taking the right market approach by offering new, competitive products that will require increased research and development efforts. �The consolidation that we are experiencing means less opportunity to sell new machines, as production optimization is one of the first steps after a consolidation,� Diatec�s Mr. Coladonato concluded.

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