This introductory session included some statistics based on INDA's 2000 US Nonwovens Industry Estimates, provided by Ian Butler, INDA's Acting Marketing Director:
• Since 1992, birth rate has been static, and diaper sales have declined from 18.5 billion units to an estimated 17 billion units in 2002, due to improved performance. However, coverstock use has grown from 0.2 m 2 /diaper 10 years ago to 0.38m 2 /diaper last year due to its increased use in cuffs and new uses in backsheet and fastenings.
• 11 billion square metres of coverstock were split between diapers (68%), adult incontinence (15%), training pants (9%), femcare (5%) and underpads (3%).
• Todays diapers contain more than 75% nonwovens (by dollar value).
• INDA expects future diapers to be even thinner, with better fit (elastication of components), better softness (finer fibres and softer resins), and better absorbency (better cores - air laid a possibility).
• Current market share figures put Pampers/Luvs in the lead with ~40%, Huggies with ~35%, Tyco/Paragon with ~20%, and other private label ~5%.
• The North American market used 2.1 billion m 2 of nonwoven in wipes, 70% of this being consumer wipes and 30% industrial and institutional.
• Baby wipes accounted for 56% of the Consumer wipes total, 25% was Household, 10% Personal care, 5% automotive care, and 4% wet toilet.
• Household was the most dynamic sector, growing at about 20% year from a 400 million m 2 base in 2000 due to a proliferation of products tailored for specific uses e.g.
• Hard surface wipes (Chlorox, Mr Clean)
• Electrostatic dusters including mitts (Swiffer, Pledge, Endust)
• Disinfecting wipes (Mr Clean)
• Polishing cloths (Pledge)
• Glass cleaners (Chlorox)
• Specific products included a Vileda equivalent to Swiffer (Ex Static?), Swiffer WetJet with its diaper like absorbent pad and spraygun for cleaning fluid.
• The Sage range of microwavable bathing wipes now had competition from a Kimberly Clark product.
• Personal care wipes comprise Body and Femcare (52%), Wet Toilet (28%), Make-Up removal (12%) and Adult Incontinence (8%).
• Olay “Total Effects” cleansing wipes used a laminate of spunlace (soft side) and apertured/textured tissue paper (exfoliating side)
With regard to the wet-toilet sector, while the folded products were established and doing well, it was too early to judge the product - the initial burst of sales being due to pipeline filling.
Dr James Smith of the University of North Carolina – Chapel Hill, one of the top economic forecasters in the US opened the conference proper with an overview of the US economy.
• In his view the recession is over. He expects to see 4.2% growth in 2002 then 3.2% p.a. for the rest of the decade. (He admitted being more optimistic than other forecasters)
• Putting this in perspective, growth over the last decade averaged 3.2% and that had been the best decade since the 1650's.
• 2000-2001 was the third recession in recent times, the first being the oil-shock of 73-75 and the second being caused by the Louvre Accord in 90-92.
• However the Christmas quarter of 2001 was 5% above the same quarter in 2000, and January 2002 showed excellent consumer confidence.
His view was based on several factors:• Many people had refinanced their mortgages, releasing a total of $130bn of extra spending power into a total economy of $10 Trillion.
• Government had committed $19bn to stimulate growth
• Government defence spending was increasing sharply.
• The dollar will remain strong: $1.5bn/day of new investment is flowing into the USA .
Globally the opportunities for economic growth are unprecedented if freer trade can be developed:
• Half the world's population now live on less than $2/day and 1.4bn people on less than $1/day.
• Half the world's population have never made a phone call, and 90% have never flown.
• China is now a member of the WTO and great opportunities will arise from freer trade with it's 1.2 billion people
• Unfortunately the Chinese opportunity is long-term. Their GDP per capita last year ($450) was the same as it was in 1900 and that gives it about the same impact on the world economy as Texas . (“It'll be 50 years before it can have the same impact as California !”)
• India will be the world's most populous country in 20 years, but its GDP per capita is only half that of China.
In comparison, every school in the US is now on the Internet and every freshmen is expected to have a laptop.
Will nonwovens continue to grow? It's a no-brainer. Disposables make life easier and people are getting wealthier. Of course they're going to grow.
Asked about the Euro economy, Dr Smith felt it was not in good shape. The big four, Germany , France, Italy and Spain were all showing slow growth. The UK was doing better, but here the strong pound was killing manufacturing industry, a fact that would lead the UK into the Euro sooner rather than later. The exciting possibility for Europe related to it's potential for geographic expansion. When the next 6 countries waiting in the wings are allowed in, the expansion of the workforce will allow more growth. Turkey (the Mexico of Europe) would be next, and maybe even Russia would follow. With the EU being similar in size to the US now, it would soon become an economic force to be reckoned with.
Raphael Valdez of BFA S.A. reviewed the prospects for nonwovens in this customs union comprising Argentina , Brazil , Paraguay and Uruguay , a market of 219 million people with a GDP of $900bn. Imports amounted to $86.7bn and exports to $84.5bn. The union is as yet “imperfect”, perfection being defined as zero internal tariffs and identical external tariffs irrespective of country. (The EU was a perfect union by this definition) Duty levels varied from zero to 35% on imports, the top level being applied to the politically sensitive textile imports which unfortunately included nonwoven fabrics. Nonwoven products duty varied from 28% to 35%.
Mercosur produced a total of 88,000 tonnes of nonwovens per year, spunbonds being the majority (68,400 tonnes/year), followed by card/thermal (18200 tpa) and air-lay (1400 tpa). It imported 11,000 tpa and exported 10,000 tpa, giving a 0.4kgs per-capita consumption of nonwovens or about one-tenth of the US figure. Growth potential was therefore obvious.
Moves towards expansion of this economic union, first with the Andean countries, could be expected to start at the end of 2002, then with the USA in 2003 and with the EU in 2005. Also in 2005 Mr Valdez expected the first moves to a Free Trade Area of the Americas , i.e. a union of all 34 countries of North, Central and South America to commence with a few products. He recommended nonwovens producers to start positioning nonwovens for the South American market now and to get NW's included in the agreements for these further integrations. Now was the time to plan installation of production facilities in the region forboth roll goods and finished products. The landed price of nonwovens imported from the US would be 50-55% above the FOB price, and this was unlikely to change before 2010.
Peter Bohlander presented year 2000 economic data for northern hemisphere countries to the east of Bangladesh . Total population in the countries considered was 2 billion growing at rates varying from 0.18 to 4.1%, with China 's 1.2 billion population growing at 1% distorting the statistics. The region was adding 114 million consumers every 5 years. In terms of GDP, the total of $7.3 trillion was dominated by Japan 's $4.7 trillion and China 's $1.1 trillion, Mr Bohlander pointing out that China , with 10 times the Japanese population, would soon be the biggest economy in the region. Annual income per capita averaged $3,617 with Japan , Honk Kong and Singapore all around $24,000. In China , the wealthiest 400 million people earn on average $2400/year. 9.2% of China 's GDP comes from exports to the USA , compared with 31% of Malayasia's GDP and 4.7% of Japan 's.
Local Factors of importance for US companies wishing to trade in the region:
• Religion: more so after Sept 11 th . The radically Islamic areas ( Indonesia and Malaysia ) will be difficult.
• Ethnic Heritage: Cultural differences between Japan , China , Korea and the Muslim countries will prevent it being a homogeneous market.
• Environmental laws: Korea and Japan are strict, others less so, but all will become tighter and hence less favourable to disposables.
• Endless red-tape. Need to hire local experts.
• Lack of respect for Western patents, copyrights and trademarks. This should get better with China in the WTO, if it sets an example.
Asked at what per capita income people start buying disposables, Mr Bohlander felt this would happen as earnings went above $10-12,000 per year, commenting that 100 million Chinese in the coastal region were already in this category.
Scott Burns, P&G's Assistant Director of Global Nonwovens Purchasing, in what appeared to be their third paper intended to raise their visibility in nonwoven industry circles, described what customers were now requiring from their suppliers. At the top was an ability to provide products with Unique Value and to do this to P&G's satisfaction, a supplier would have to focus on 4 key areas:
• R&D, leading to proprietary technology which could readily be commercialised globally.
• Building strong relationships with P&G at a personal level, and constantly renewing these. (Companies are perpetually reinventing themselves)
• Cost management: constantly striving to be the lowest cost manufacturer, working closely with P&G on reducing all other costs. (“Anything that does not add value for our customers is waste”)
• Having global presence linked to regional excellence.
Echoing the theme of his European colleague Dr Raine Schoene at the Outlook conference in Monte Carlo last September, he emphasised that P&G had a unique ability to commercialise good ideas, but were now increasingly looking to their suppliers as a source of those ideas. They hoped to be able to partner companies who could deliver proprietary technology from “platforms flexible enough to support multi-generational opportunities.”
Mr Burns placed great emphasis on the importance of relationships and the need to create and manage unique bonds with feedstock and equipment suppliers. Relationships, especially those which were strong outside the business environment would be needed to build both short- and long-term successful partnerships. He felt trust was the key and recommended Jordan Lewis's book, “Trusted Partners” to those who were interested in exploring his theme more deeply. He also felt that suppliers should recognise the importance of women in these relationships: P&G's products targeted women, and P&G's development teams were necessarily heavily staffed with women. Suppliers who fielded all-male teams were probably missing something.
Interestingly, P&G were finding that smaller privately-owned companies had the advantage of being able to take a longer view (no quarterly reports to shareholders to worry about) and made excellent partners. Furthermore, an analysis of P&G's customers showed that Hispanic and African Americans were the most loyal, and suppliers should know that P&G is committed to rewarding these groups wherever possible. Minority-owned businesses (and businesses owned by women) were always welcome in Cincinnati .
Mike Brands, President of Partnership by Design expanded on the benefits of customer and supplier working together in a true partnership. It was entirely logical that such relationships would achieve more than the simple “buy-sell” sort, and with raw materials being the largest component of hygiene products costs, the closest possible relationships with suppliers was especially important. These can only be built with top management support; information sharing has to be total, the two companies operating as a single entity for their mutual benefit. Sharing mechanisms included joint teams responsible for R&D, Manufacturing etc, all being controlled by a Steering Committee comprising the top management of both companies.
Measurement of the key elements of the total process was necessary to provide the vital feedback leading to the next round of improvement. The key areas for attention and measurement in a hygiene product company were:
• Material Quality at all points in the production chain to be measured and constantly reviewed – especially for impact of raw material variations on finished product cost and quality.
• Service: how the supplier supports the customer in shipping, handling returns, rejects etc.
• Cost: Price is less important than a suppliers ability to optimise his process to suit the customer, and most important of all is total collaboration on the design of new products with an agreement to share the wealth generated by improvements.
Rusty Thompson of H.B.Fuller Co. reviewed the benefits of supply chain management. He was in favour of expanding the definition of purchasing to include any corporate expenditure, even staffing, software, education and training. Suppliers must be increasingly fast, flexible and efficient, providing on-line access for ordering, checking the progress of orders, shipment quality etc.
Customers should reward suppliers willing to provide this on-line information by providing:
• Accurate forecasts of future demand
• Longer term supply agreements
• Standardised specifications
• Help in developing mutually beneficial new technology.
Anthony Breitzmann (standing in for Fran Narin) observed that 95% of the patents issued currently were useful for decorating the inventors office and little else. Nevertheless, skilled analysis of the patent databases could yield useful information about companies and their strategy. Mining this information had allowed his company, CHI Research, to patent a patent-analysis method which correlated with stockmarket value of technology companies. USP 6,175,824 provides the details but the key point was that patent counts had to be weighted with “quality measures” such as citation impact, science linkages, innovation speed, countries covered, and percentage maintained as opposed to lapsed.
• The more a patent is cited by other patents, the more useful it is and the more successful the owning company is likely to be. (Key inventions spur others into innovation in an attempt to capitalise on the novelty or get round the original patent.)
• Leading edge inventions tend to cite links with scientific literature rather than other patents. Incremental inventions tend to cite other patents.
• The faster the technology cycle time, (the time between current patents and the previous generation cited) the more successful the company.
• Significant patents are filed in the most countries.
• Costs of maintaining patents are not insignificant: companies only spend where the patents have a payback.
The method works best on the US patent database, but fails with Japanese patents (no citations). It can be applied to most other countries. It works only with industries where patents matter such as pharmaceuticals, biotechnology, telecommunications, semiconductors, chemicals, plastics, automotives, aerospace etc., but in these sectors patent indicators are a better predictor of stockmarket success than the traditional financial measures (P/E ratio, earnings, sales etc.). A fund based on patent indicators would have outperformed the S&P 500, Dow and Nasdaq in the last 3, 5, 10, and 12 years. In comparison 95% of mutual funds have been outperformed by the S&P 500 in the last 5 years.
David Bucheck, Technical Director of 3M's Nonwoven Technology Centre reminded us of the importance of a continuous flow of new products, and of the success 3M continues to have in generating such a flow. They spend $1bn of their $17bn turnover on R&D and last year launched 500 new products. Their strategy mandates >30% of sales must originate from products less than 4 years old. Put another way that means over $1bn new products business every year. Key elements of achieving this goal over many years are:
• Recruiting creative people. (Resist the temptation to hire the experienced: recruit the best new college graduates at a designated rate regardless of the economic climate)
• Demanding market-driven customer-led innovation. (Get into the customers back-room and seek unarticulated needs)
• Encouraging strong inter-R&D group communications. (Technology belongs to the company, not the individual. “The more networking and sharing we do the better our odds for success”)
• Creating an atmosphere that rewards initiative and is never destructively critical of mistakes
• Allowing everyone to spend one day a week on their own pet project – if they want to. This is the most important factor in establishing a culture of innovation.
• Formally rewarding success with Honours and Awards.
For long-time 3m watchers, one recent change of approach was apparent. In response to a question, Mr Bucheck commented that they were now looking at licensing technologies they were not using. In the past the importance they attached to serendipitous development meant that even unused technologies would be kept “visible” and never, never, sold.
Richard Porticos of the Chlorox Company reviewed the history of antimicrobial wet-wipes from their unsuccessful introduction in the 80's (“products that overpromised and underdelivered”) to their re-emergence based on better substrates at a time when a higher premium could be placed on their convenience and ease of use. The category now provided excellent returns, said to be $135million at retail, using $20million of nonwovens amounting to 125 million square yards in 2001. (Projections for 2005 were $175m at retail or 165million sq. yds.) Chlorox now involve their substrate supplier in Focus Group discussions because the feel of the wipe has proved to be at least as important as its functionality, and suppliers need to hear this direct from consumers. Mr Porticos underlined the importance of new substrates to sustaining the growth in the wet-wipe sector.
• The jury is still out on the subject of antibiotic resistant organisms arising from the widespread use of antimicrobials
• Air-laid and spunlaced fabric technologies were converging to the extent that either could now be used, even in canisters.
• Mr Clean Wipe-Ups nevertheless used air-laid in the tubs and refills, but spun-laced in the canisters.
• Lysol Sanitized used spun-lace only.
Richard Jenkins of Jenkins and Wilson P.A. defined intellectual property as ideas, expressions of ideas, corporate image, processes products and machines, consumer goodwill, ways of doing business, computer programmes and more. The laws of patents, trademarks, copyright and trade secrets protect such property.
Patents protect ideas. (Anything under the sun that is made by man can be patented ( Diamond v. Chakrabaty ), and the converse is also true - nothing occurring in nature including the natural laws that are used to describe nature, can be patented.) Copyright protects the expression of ideas, trademarks protect distinctive goods and services and the Uniform Trade Secrets Act protects trade secrets.
• In practice an invention must be useful, novel and non-obvious to obtain a patent. Establishing non-obviousness is the source of most debate – and patent agents fees.
• You can patent products, processes, methods and machinery. Product patents, being most easily policed, give the best protection.
• Patents give you a 20 year legal monopoly from the filing date – but it usually takes 2-3 years to prosecute the patent leaving ~17 years for exploitation.
• Patents are “Pending” during this prosecution stage, and while not enforceable, this does deter the competition from copying.
• Since 1995 in the USA , it has been possible to file working manuscripts as Provisional Patents to get an early filing date, moving to a full patent one year later if all is working well. This extends the patent's useful life by 1 year.
• Since November 29 th 2000, patents are published 18months after filing unless you can make a case for non-publication – usually only possible if there will be no subsequent foreign filings.
• Foreign patents can be filed up to one year after US publication.
• Filing a PCT patent for $3-4000 gives “world patent pending” coverage for 30 months. Country-specific patents can then be filed at ~$5000 per country.
• Patents do not necessarily give you the right to practice your own invention. There could be a dominant patent which you would need to licence first.
• If your patent is an improvement which interests the owner of the dominant patent, then cross-licensing becomes possible.
• Patents can be used to stop imports of allegedly infringing goods. The so-called “rocket-docket” can hold imports in the port until a decision is reached.
• A re-examination procedure now allows a valid patent to be challenged for only $10,000 to $20,000
• Design Patents are possible and these have a 14 year term.
Esther Kepplinger, Deputy Commissioner for Patent Operations at the United States Patent and Trademark Office provided some insight into the problems created by the disruption to postal services caused by Sept 11 th and Anthrax. Delayed mail and mail disintegrating following irradiation has reduced patent filings to 85% of the expected level. This amounts to 8600 patents below target since 9.11 despite a huge increase in faxes (45,000 pages in December c.f. 8,000 in September). However since the American Inventors Protection Act (1999) the patent term can be adjusted to compensate if the USPTO takes too long to process the application. Applications filed in the US on or after 29 th November 2000 are now published 18 months from the earliest filing date unless the inventor declares that foreign patents won't follow. Applications filed on or after June 8 th 1995 can now be re-examined. Patent filing directly on the Internet will be encouraged at www.uspto.gov.
Deborah Lickfield of Lickfield Consulting LLC covered similar territory to the preceding two speakers. New information:
• Patents can be invalidated if the inventor list is incomplete. She cited a case where an excluded inventor joined another company and was legally able to grant a licence without reference to his previous employer.
• Technical Disclosures are increasingly used to stop others patenting technology you are not interested in commercialising.
• Since Jan 1 st 1996, you can infringe a product patent merely by offering to sell a similar product, e.g. in a telephone call to a potential buyer.
• You can lose your right to patent by offering samples without the cover of a confidentiality agreement. However the use of samples in a Focus Group would not be a problem providing the samples were retained by the inventor.
Inventors of new materials faced some really tricky problems arising from their customers right to patent new end-uses, thereby restricting the suppliers ability to sell the new material. The supplier could of course take out application patents where new uses could be foreseen, but this tended to aggravate potential customers even if free-licences were promised. Pre-sampling agreements to the effect that any new applications discovered in the course of evaluating the new material were to be owned jointly by customer and supplier were one possibility, but many customers were reluctant to agree to this. Perhaps the best approach for the supplier was to brainstorm all possible applications and make a technical disclosure to prevent anyone cornering the market for new applications.
Monday 28 January 2002
INDA’s Vision 2002: New Orleans 20-23rd January
Source: INDA Vision New Orleans Jan 2002