Starting on a small scale in the 1980s, Fapsa has moved into higher gear with the aim to have 10% market share in Mexico by 2010. Another new PM is being planned, as is an increasing emphasis on private label.
Hugh O’Brian
For Mario Garcia, President of Mexico’s Fabrica de Papel San Francisco (Fapsa), the future is very clear. “We aim to have 10% market share in Mexico by 2010. We think that this is quite realistic since in 2007 we had about 8% of the market and have been increasing on the order of 1% per year for the past several years. By 2010 we expect the Mexican tissue market will be a bit over one million tons and we will have just over 100,000 tons when our newest machine, PM 5 is up and running.”
With Fapsa’s most recent paper machine, PM 4, having only started up in September 2006, it seems a bit surprising that PM 5 is already moving along so rapidly. But, says Garcia, there are good reasons for this.
“Actually we were a bit late in installing PM 4 as we had a paper deficit that was a little more than we would have liked.
By 2005 we were out of paper and had to buy about 10,000 tons of jumbos. So instead of PM 5 being early, I look at it as if PM 4 was late and now we are getting back on track to keep our paper supply and demand in better balance.
When PM 5 starts in 2009, if all goes according to plan, we will initially have a surplus of about 25,000 tons that we can export to the Southwest USA. But soon thereafter we will need it for our own customers.”
INITIALLY WORKED WITH CROWN ZELLERBACH. Fapsa is a 100% Mexican, family-owned company that got into the tissue business in the early 1980s based on an excellent cooperation with the venerable old San Francisco-based paper maker in the USA, Crown Zellerbach. Crown and Fapsa decided to enter the Mexican tissue market through a joint venture between the two companies. An old tissue machine was moved from a Potlach mill in Orange, California, to Mexicali, Mexico. And the name of San Francisco in the Mexican company’s name comes from the fact that Crown Zellerbach was based in that city. (More history of Fapsa can be found in Perini Journal number 17, March 2001).
By simply walking through the paper mill at Fapsa you can see how the company has moved up the quality ladder with respect to machinery. The original PM 1 that was moved from the USA is still running at Fapsa in Mexicali. PM 1, making tissue, and PM 2, making corrugating medium on an old machine moved from North Tonawanda, New York in 1988, are both rather antique looking units.
NEWEST MACHINE SPEED IN WORLD RECORD AREA. However, the newest tissue machines are a completely different story. PM 3 is a very modern Voith crescent former that was installed in 1999 and is the first new PM that the company built. This 2.7 m wide unit today runs at about 1,950 mpm. The latest machine at Mexicali, PM 4, is a state-of-the-art 2.7 m wide crescent former from Metso with all the latest technology to help it run at very high speeds. It is built for an operating speed of 2,000 mpm and has a design speed of 2,200 mpm. It has been running in late 2007 at 2,100 mpm and there are intentions to try to go for 2,200 mpm, which would put it clearly in the world speed record territory for tissue machines.
Dario Palma is the company’s Operations Director, responsible for papermaking and converting at the plants in Mexicali, as well as the converting plant serving central and south Mexico which is located at El Salto, near Guadalajara, in the state of Jalisco. He says he is very happy with PM 4.
“It has been running extremely well for us,” explains Palma. “It is a very solid, well-built machine that has been easy to start up. We have had good runs at 2,100 mpm and are now trying to see what we can do to reach 2,200 mpm. Speed is very important to us because we are running 2.7 m wide machines and it helps us increase production in a controlled manner. We have considered 5.4 m machines but we judge them to be too much tonnage at one time. Our market simply can’t handle that much production all at once, so we are more comfortable adding narrow but fast machines.”
GOOD WORKFORCE. Palma, who has been with the company for 20 years, feels that a key to Fapsa’s success is the good work force that it has built up over the years. “It sounds like a cliché, but our people are our pride. Workers in Mexicali are very hard working, loyal employees and we have a very low rate of turnover. We have to work hard to survive here, as we are located in a desert.”
In fact Mexicali is a border town located literally on the border with the USA in the Yuha Desert at the extreme northwest side of Mexico, just below El Centro, California. Water for the area comes from a canal which channels water from the Colorado River in the USA to the region. Over the years the area grew up as an agricultural center based on cotton production. More recently, in the 1990s following the signing of the NAFTA (North American Free Trade Agreement) numerous manufacturing plants or assembly plants became an important part of the local economy.
Eliseo Muniz is the company’s Converting Plant Director with responsibility for both the Mexicali and Jalisco plants. He is pleased to have the modern machines for converting but is also happy to have smaller older machines available when extra converting capacity is needed.
“We bought our first new Perini Sincro line in 1994 and are very happy with the operation. I would say that around 1994 our strategy changed to one of buying only new machines, and that has worked out very well for us in terms of efficiency and quality. But we still have some older lines that we use when we need them. We run them as swing capacity until we can justify buying a new line.”
The Jalisco converting plant was opened in 2001 initially as a warehouse for products made in Mexicali, says Muniz. Shortly thereafter a few converting lines were added and over the past couple years more have been installed as Fapsa has experienced good growth in this region, not far from Mexico City.
EXPANSION IN ALL AREAS OF MEXICO. Fapsa president Garcia says it is important to cover all regions of Mexico to supply the big national retailers. The group has a strong market share of around 30% in the northwest Mexico area, so future growth will most likely come in other areas of Mexico where Fapsa’s lower share offers better room for growth.
Garcia is confident that Fapsa’s ability to offer a value proposition which is better than its competitors will be the key to its growth. The focus, he states, is on technology, processes and equipment and doing the best in all those areas to control costs.
“Our philosophy now is to use state-of-the-art machinery, whereas 10 or 15 years ago we were buying used equipment. Our aim is to make the best quality products using modern tools but at a cheaper price.”
“In this manner, we can offer the customers and consumers better value and this will, we certainly think, help us to increase our volumes. As a slogan we are using ‘At this price, you’re not going to believe the quality’ and we are convinced it will work.”
Thus Fapsa has been able to move up the quality and output ladder at a nice pace, in step with, or perhaps one or two steps ahead of, the general market growth in Mexico. “We aim to grow at maybe 30-40% faster than the Mexican market in general, so that ensures that our market share is growing,” explains Garcia.
PRIVATE LABEL WILL BE A KEY DRIVER. The main focus to drive this growth will be Fapsa’s Hortensia brand, while at the same time aggressively growing in the private label or retailer brand area. “We have studied the European model and seen the rapid growth of private label there. We feel that with our own strong Hortensia brand, coupled with a much more active role in assisting retailers to develop their own private label tissue products, we have a good foundation for growth.” Fapsa estimates that PL tissue makes up about 15% of the total Mexican market today but that for the larger retailers and superstores it is greater than 20% and growing.
A GOOD BET. With 25 years of experience in tissue, Fapsa now seems to be moving into high gear. All indications are that it is the right strategy at the right time. The company’s strong cash flow is allowing it to move ahead already with the next paper machine which Garcia says will cost a total of around $55 million including all equipment and infrastructure. If all goes according to plan, the new machine should start up in 2009. Therefore it looks like a good bet that the goal of 10% in 2010 will be attained but that, of course, remains to be seen. .