The key to Vinda’s success has been a longstanding commitment to sustainability and innovation.

CEO’s Message丨Christoph MICHALSKI

There were significant challenges that Vinda had to overcome in 2018, and the biggest of all was the surge in wood pulp cost affecting Vinda and the whole industry. To alleviate the cost pressure, we raised prices for our products, optimized portfolio mix, and continued to implement cost-saving initiative against a backdrop of strong competition. The double-digit growth in the top-line has proven our strength in innovation, marketing, price & channel management and execution capabilities. We also limited our margin contraction to a small extent, which demonstrated the strength of our brands and our discipline in cost-control. Moreover, we effectively managed our gearing level, foreign exchange risk and working capital.

In respect of the development in various product categories, I am glad that our team enriched the portfolio of tissue products with new, value added products such as Vinda Deluxe and Tempo Cotton. They will be able to play an important role in mitigating the cost pressure and consolidating our profitability in the future. Tork and the whole business of away-from-home hygiene products also saw solid growth in sales and business development. Our operations in Southeast Asia as the biggest contributor to the revenue of our Personal Care business continued to achieve steady growth, thanks to its effective brand activation and product upgrade. Our business of incontinence care in China also made significant progress in developing distribution channel and achieved satisfactory growth in sales of pants.

Sales channel in China is undergoing a revolution. The booming e-commerce and “O2O New Retail” seem to have altered the practices and even the markets of traditional trade. In the past couple of years, e-commerce has been our fastest growing distribution channel, 2018 was no exception. A good example to show our leading advantage in e-commerce is that Vinda had topped the chart in sales at various major e-commerce platforms during Double-11 Festival. Down the road, we will continue to fortify our online leadership. We will as well continue to cultivate the penetration of offline trade.

As to the supply chain, we continued a disciplined capital expenditure spending. Our factory in Yangjiang City, which is our 10th factory in mainland China, has been put into operation since July 2018. Strategically located in the Guangdong-Hong Kong-Macau Greater Bay Area, this new, state-of-the-art factory greatly bolsters our capability to meet the growing Tissue demand in southern China and to export to Southeast Asia. Additionally, we are equipping production facilities for feminine and incontinence care in China to meet Chinese consumers’ needs.

The key to Vinda’s success has been a longstanding commitment to sustainability and innovation. In 2018, we continued to go beyond the environmental compliance when reducing emissions, water consumption and non-recyclable waste. We ensured ethical and sustainable business practices in our supply chain when sourcing raw materials. Currently, we are running various innovation projects covering product benefit enhancement, development of new product assortments, and international patent registration. They will all add impetus to our development.

Facing high raw material cost and uncertain economic growth impacted by trade tension between major economies, deleverage situation in China and exchange rate uncertainties, we believe that 2019 will be another challenging year for Vinda and the industry. Yet, I am optimistic about Vinda’s development. Even if macroeconomic headwinds might affect the consumption growth momentum in the short run, we do not see any systemic disruption of consumer sentiment. Meanwhile, we are encouraged by the growth in per capita demand for tissue and personal care products, consumption upgrade and the tax reform in China. In 2019, we aim to maintain the sales growth momentum and improve margins through product portfolio enhancement and stringent cost control at all business functions and units. We also strive to improve our return on capital employed, working capital management and cashflow.

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