MANUFACTURE OF PLASTICS AND SYNTHETIC RUBBER IN

PRIMARY FORMS INDUSTRY ANALYSIS

A Final Paper
Presented to MR. NASH N. REGINIO
Faculty, Advanced Studies – Graduate School of Business
University of Southeastern Philippines
Iñigo St., Obrero, Davao City

In partial fulfillment of the requirements

for the course BA 2004 Managerial Economics

Derren Ivy Shine Venigas

January 2021
 Table of Contents

I. INTRODUCTION 1
II. INDUSTRY OVERVIEW 2
A. Company Overview 3
i. Vision, Mission, Goals 4
ii. Products and Services 4
iii. Financial Performance 5
III. DEMAND AND SUPPLY SCENARIO 6
IV. MARKET AND ECONOMIC ANALYSES 8
V. COMPETITIVE SCENARIO 9
VI. RECENT DEVELOPMENTS 12
VII. KEY INDUSTRY CHALLENGES AND OPPORTUNITIES 13
VIII. SUMMARY, CONCLUSION AND RECOMMENDATIONS 14
REFERENCES 15
 List of Tables

Table 1. Financial Performance for November 5

Table 2. Global Plastic Market Share, by Application 6

Table 3. Top 10 Philippine Imports from all countries 7

I. Introduction

This paper aims to determine the opportunities and

challenges that Plastic Packaging Manufacturers face within its
competitive market.

Plastics are derived from natural, organic materials such

as cellulose, coal, natural gas, salt and, of course, crude oil.
Crude oil is a complex mixture of thousands of compounds and
needs to be processed before it can be used. The production of
plastics begins with the distillation of crude oil in an oil refinery.
This separates the heavy crude oil into groups of lighter
components, called fractions. Each fraction is a mixture of
hydrocarbon chains (chemical compounds made up of carbon
and hydrogen), which differ in terms of the size and structure of
their molecules. One of these fractions, naphtha, is the crucial
compound for the production of plastics.

Packaging accounts for the largest application segment

in the Philippines plastics market. The prime reasons for the
growing application of engineering plastics, in the packaging
segment, are better wear and chemical resistance, ease of
molding, recyclability, puncture resistance, and high
mechanical strength. Some of the major applications of
engineering plastics, in the packaging segment, are as follows:
packaging of bottled water, flexible packaging, such as sausage
skin, flexible foils, such as shopping bag.

Increasing household and commercial applications for

containers, plastic bags, canisters, and tableware, among
others, are expected to drive the consumption demand for
plastics in the packaging sector, during the forecast period.
II. Industry Overview

The global plastic market size in United States was valued

at USD 568.9 billion in 2019 and is expected to grow at a
compound annual growth rate (CAGR) of 3.2% from 2020 to
2027. Increasing plastic consumption in the construction,
automotive, and electrical and electronics industries is projected
to drive the market for plastic over the forecast period

The growth of the construction industry in emerging

markets such as Brazil, China, India, and Mexico has been
instrumental in fueling the demand for plastics during 2018
and 2019. However, the recent outbreak of COVID-19 has
hampered the demand for plastic in various applications
including construction, automotive, electrical and electronics,
and consumer goods owing to a halt in manufacturing
operations, restrictions on supply and transport, and economic
slowdown across the globe.

In terms of revenue, polyethylene dominated

the market with a share of 25.7% in 2019. This high share is
attributable to the rising demand from the packaging sector,
which includes containers and bottles, plastic bags, plastic
films, and geomembranes. Polyethylene is majorly categorized
into two types, namely high-density polyethylene (HDPE) and
low-density polyethylene (LDPE). Low-density polyethylene is
used as a packaging material in consumer goods, food and
beverage, and industrial packaging applications. Whereas,

2
 HDPE is widely used in laundry detergent packaging, milk
cartons, cutting boards, and garbage bins.

Rising demand for packaged food, trays, bottles for milk

and fruit juices, crates, caps for food packaging, drums, and
other liquid food packaging owing to restrictions on the
movement of people to reduce the spread of COVID 19 across
the world is expected to drive the demand for polyethylene in
the coming years.

The market for Philippines plastics is expected to grow at

a CAGR of over 6% globally during the forecast period. Growing
demand from the end-user industries such as packaging,
electrical & electronics, as well as construction industry are
driving the market growth. Over-reliance on imports of raw
materials and finished plastics are expected to hinder the
growth of the market. The usage of plastics for packaging
products is expected to experience a fairly steady demand,
during the forecast period. Requirements for rubber gloves in
the healthcare sector, stretch films, garbage bags, and other
medical devices, are anticipated to witness greater demand, in
the coming years.

 Macondray Plastics Products Inc.

MacPlas is a manufacturing company based in Davao

with a proven track record in the production and supply of
varied polyolefin blown film products, polypropylene twine, and
polyethylene foam products. It started out as a supplier of
plastic film products that are vital to the production and export
processes of Mindanao-based exporters of cavendish bananas.
Since then, MacPlas has expanded to provide other plastic
products used by clients in food and beverage and allied
industries. In Luzon and Visayas, MacPlas’ products are sold
and marketed by Macondray’s Agro-Industrial Plastics Division.
MacPlas also maintains a strong emphasis on social and
environmental responsibility through training programs in
partnership with other institutions.

MacPlas Vision

The Quality Service Company of Choice

MacPlas Mission

To excel as the lead provider of quality plastic products and

services in our target markets; To exceed our customers’
expectations through innovative solutions and continuous
improvements; To consistently abide by the highest sense of
ethics and professionalism.

Values

Quality, Service, Innovation, Hard Work, Honesty and Integrity,

Professionalism, Discipline and Quality.

Products and Services

I. Agriculture (farming, livestock & poultry, fishery),

including water impoundment, & sanitary landfill
 Seedling Bag
 Ecomulch Film
 Grow Bag
 Rhino Film
 Pond Liner

II. Commercial & industrial (food grade, & non-food grade)

 Desiccated Bag
 Banana Chips Bag
 Bin Liner
 Chicken Bag
III. Banana Suite
 Vacuum Bag
 Plastic Insert
 Non-Impregnated Bag (Green&White)
 Impregnated Bag Green

IV. PE welding, installations, and plastic film printing

solutions

Financial Performance

For the Month of November

Sales 40,000,000.00

Less: Cost of Goods sold (19,440,000)

Gross Profit 20,560,000.00

Less: Selling and Distribution Exp (6,500,000.00)

Earnings Before Interest and Tax 14,060,000.00

Less: Interest 1,300,000.00

Earnings Before Tax 12,760,000.00

Less: Tax 3,828,000.00

Earnings after Tax 8,932,000.00

III. Demand and Supply Scenario

Table 1 shows that in terms of revenue, packaging dominated

the market with a share of 36.5% in 2019. This high share is
attributable to great demand from various end-use industries
including medical, construction, and electrical and electronics in
emerging economies.  The impact of the coronavirus pandemic on the
packaging industry is expected to remain moderate over the forecast
period. The demand for packaging for healthcare products, groceries,
and e-commerce transportation is expected to increase sharply, while
the demand for luxury, industrial, and some B2B-transport packaging
might show sluggish growth owing to several restrictions such as
stoppage of industrial production and lockdown of cities, imposed by
various governments across the world.

Table 1. Global Plastic Market Share, by Application

 Table 2 shows the increasing import purchases in the
Philippines with respect to plastic resin yielding to 11.. This shows
that the demand for plastic products in the country is continuously
rising despite the pandemic.

Table 2. Top 10 Philippine Imports from all countries

IV. Market and Economic Analyses

The competitive rivalry among plastic packaging manufacturer is

high owing to the presence of several players in the market for plastic.
The market is highly fragmented in nature with the larger share
occupied by medium and small enterprises engaged in the
manufacturing of plastic. The principal strategy employed by market
players is increased focus on high margin products and continuously
providing quality products to satisfy their customers.

Most of the manufacturer of plastic packaging materials

nowadays aims to be an ISO accredited company so that they can
compete with their target market. Food Industry Company usually
requires certain certifications specially those for exports, this is where
GMP, HACCP, BRC and HALAL come in.
In Davao, there are a lot of Plastic Packaging Manufacturer
arising in the market. These competitors offer a very competitive price
and large companies find it difficult to compete due to higher overhead
cost.
In terms of revenue, packaging dominated the market with
a share of 36.5% in 2019. This high share is attributable to great
demand from various end-use industries including medical,
construction, and electrical and electronics in emerging economies.
The impact of the coronavirus pandemic on the packaging industry is
expected to remain moderate over the forecast period. The demand for
packaging for healthcare products, groceries, and e-commerce
transportation is expected to increase sharply, while the demand for
luxury, industrial, and some B2B-transport packaging might show
sluggish growth owing to several restrictions such as stoppage of
industrial production and lockdown of cities, imposed by various
governments across the world.
V. Competitive Scenario

PEST Analysis

P E S T
Political Economical Social Technological
1. Business Cycle 1. Lifestyle 1. Impact of Internet
1. Tariffs Policy Stage changes (Online Sales)

2. Interest and 2. Brand and 2. Speed of

2. Employment Law Exchange Rate company image Technology Transfer

3. Environmental
Regulations 3. Inflation Rate 3. Innovation

5 Forces Model

Threat of New
Bargaining
Entrants
Power of
Buyers

Rivalry Among
Existing
Competitors
Bargaining
Power of
Suppliers
Threat of
Substitutes
Threat of New Entrants

1. Buyer's switching cost is low

2. Increased bargaining power of suppliers

Bargaining Power of Suppliers

1. Different options on suppliers abroad

2. Domestic suppliers are now HALAL and BRC Certified

Rivalry Among Existing Competitors

1. Most competitors have strong finance support

2. Competition among plastic manufacturer is extreme particularly in

pricing issues.

3. New Chinese competitors will come starting next year

4. Capability of competitors

Threat of Substitutes

1. There are multiple substitute systems in the market and most of

them are cheaper

Bargaining of Power Buyers

1. Buyers are sensitive to price change

2. Food Industry buyers requires certifications from ISO, GMP
and HACCP
3. Buyers can compare different alternatives easily with the
information of internet
 Internal (For present)

SWOT ANALYSIS
S-Strength W-Weaknesses
1. Highly professional macplas team 1. Limited capabilities in the food packaging (high barrier film,
2. Certifications and accreditations in the printing, etc.)
food grade industry 2. High MOQ requirements to start with a new order
3. Most prefer supplier for food and primary 3. Timeliness of delivery
packaging 4. Lack of working capital
4. Open to innovations and new 5. Unfavorable head office and retails store location
development of products 6. Marketing collaterals (brochure, flyers, racks, etc.)
5. Product reliability and good quality 7. Refresher trainings on sales and update in the industry
6. Flexibility in providing services, terms and 8. Lack of marketing personnel(market industry study)
pricing 9. Low sales volume
7. Trusted brand 10. Working Environment
8. Available Credit Lines (up to 325 Million) 11. Poor communication
9. Reviving of SAP System 12. Policies not yet in place
10. Manpower Competency 13. Slow response on PDCA
11. Capacity (560MT) 14. No rewards & recognition
12. Organizational Capability 15. No management development program
13. Good products to sale 16. No marketing development program
14. Strong relationship to customer 17. No cost analysis for expenses (Operations & admin cost)
15. Good partner relationship with supplier 18. Recycling Plant under utilization
16. Strong support from top management 19. Bunawan (Twine) Plant under utilization
20. No Interest charges for late payment (Collection)
21. No clear organizational/employees performance measure
22. Different plant sites

External (For future)

O-Opportunities T-Threats

1. Gain new customer globally 1. Weather Threats

2. Innovative products produced 2. Competitors Capability
3. Explore and expand Salt liner market 3. Increasing incidence of Fusarium wilt or Panama wilt that
4. Increasing number of new buyers in the would result in reduction of productive areas to growers.
export segment favorable for our export 4. Competition among plastic manufacturer is extreme
plastic packaging products. particularly in pricing issues.
5. SME new markets for cacao, coffee and 5. Additional new and advance machines, extruders on some
coconut - value chain competitors.
6. Gaining more customers in the industrial 6. Aggressiveness of offering discounts and on time deliveries
markets Re. certificates and CRT ( order now deliver in the afternoon)
7. Requirements for chicken bag not limited to 7. Unfavorable and adverse effect of climatic condition to
Mindanao (Bounty and SMFI) bananas as compared to previous years (extreme weather
8. Expanding awareness on lining for landfills condition)
and waste water management 8. New Chinese competitors will come starting next year
9. One of the basic requirements on the 9. Interest Rates/ Borrowing rate
construction industry(moisture barrier) 10. Stringent government regulation
10. Expansion into trading of other packaging 11. World Market Price of Resin
requirements like stretch films and 12. FOREX Rate
geomembrane 13. Leased Hold (Rental)
11. Holistic approach in dryers and tunnel
12. Open for tolling to machines not fully utilize
13. Adaptation to new products into
biodegradables
14. Partnership with distributors with sales force
to expand market coverage
15. DOST Vertical Helophyte Filtration system
technology - slaughter waste water
treatment
16. Government Initiatives (R.A.) (ex. Requiring
communities to have their own water
collection and impounding system)
17. Input VAT Refund from Department of
Finance
18. World Market Price of Resin
19. FOREX Rate
20. Increase COMMINDUS Market
21. Increase Agriplas Market
22. Improve supplier relations
VI. Recent Developments

Plastics are not biodegradable and end up either in landfills or

as litter on the land and in waterways, including the ocean. Plastic
can take hundreds of years to decompose and while it does so, the
process releases toxins into the soil and water. To counter this
problem, at least 27 cities in the Philippines banned the use of
plastic bags after the national Philippine Ecological Solid Waste
Management Act of 2000, by passing ordinances that prohibit the
sale, distribution, and use of plastic bags as primary and
secondary packaging materials for dry goods and as secondary
packaging materials for wet goods.
VII. Key Industry Challenges and Opportunities

 Plastic Ban
 The rising concerns about traceability
 Coping with new technological advances
 Improving efficiency at manufacturing plant
 Imported raw materials amidst COVID-19 outbreak
VIII. Summary, Conclusion and Recommendations

The proponent analyzed market trend for both local and

international. The arising demand for plastic products requires
strong commitment and connection to its target market. Despite
the pandemic, its demand continuously rise and competition is
very strong due to entry of Chinese manufacturers that offer
very low prices.
MacPlas should start expanding their capabilities to cope
up with competitors local and even international. MacPlas may
also search for new local suppliers so that delays in shipment
from abroad will be minimized and commitment to customers
will be realized since delays are inevitable specially because
pandemic is still present.
References

https://www.mordorintelligence.com/industry-reports/philippines-plastics-market

https://www.grandviewresearch.com/industry-analysis/global-plastics-market

https://macondray.com/businesses/macplas/