AIMING FOR 50% EXPORT RATE

Turkey 2020 | INDUSTRY | VIP INTERVIEW

TBY talks to Mr. M. Süleyman Öncel, Chairman of the Board of Sentez Grup, on export rates, sourcing raw materials, and Industry 4.0.

Sentez Grup was originally founded to serve the packaging needs of Selçuklu Holding, but later developed into a global packaging producer. Can you outline the most important steps along Sentez Grup's timeline?

The purpose of Sentez Grup's establishment in 1992 was to manufacture boxes for pharmaceutical companies. Later on, when Mehtap Kitchenware joined the Holding, we started manufacturing boxes for housewares as well. Realizing that it is a promising market, we had decided in 2002 to increase our packaging production using our experience in the pharmaceutical sector. We had a three-step investment process. In 2003, we made our first phase investment in machinery and facility. We moved to a 2,500sqm facility from a 500sqm facility. We soon established a new facility of 18,000sqm. We also expanded through our subsequent acquisitions of Gül Offset and Naturel Packaging, two of the leading packaging companies in Turkey. We held three facilities, employing roughly 550 people. In order to benefit from the shared competencies of these structures, we decided to gather these three facilities under a single roof in 2011. As a result, in 2014 we completed these investments. Since that year, we have been operating in our current Dilovası Facility, which has 55,000sqm of indoor area. Our operations here are an example of an industrial profile that is rarely seen around Turkey; even around the world. The logic underlying our establishment is to be able to produce any kind of packaging the customer may demand.

How has the growth of the food sector driven Sentez Grup's expansion and helped shape its product offering?

The increase in the volume of our business and the packaging industry could only be possible with the growth of the food sector first. Today we hold a market share of around 1%—which is quite large considering the size of the global market. We constantly develop and produce various products ranging from inner packages to outer packages and flexible packages in order to fulfill all the packaging needs of our customers, which are mainly from the Fast Moving Consumer Goods (FMSC) industry. We target a balanced growth in these packaging groups within the framework of our customers' demands. Since our establishment had commenced its operations with cardboard packaging, our production volume in this group is larger than the flexible packaging group. Currently, 25% of our packaging is flexible and 75% is cardboard. We are one of the three largest cardboard packaging producers in Turkey. We continue our efforts to balance our flexible package production and cardboard package production.

What percentage of Sentez Grup's overall revenue comes from exports and in what markets are you working to expand your market share?

Our current export rate is around 25%. However, we plan to increase that figure in the near future. In the short term, we work towards the goal of attaining a rate of 35%, and then reach a balanced export rate of 50%. We primarily export to European countries, and the neighbor countries of Turkey. We want to achieve diversified export customers. To achieve this, we have recently begun cooperating with an American firm that has facilities at various different regions of US. The trading volume of the packaging industry is much higher in the US, so it is our most important target market in the first phase. There is also a huge trading volume with our southern neighbors as well. Iraq is a major market for us, but the political situation there affects the business tremendously. In a relatively tranquil period, we see a serious volume of business, but when there is a conflict then the business suddenly comes to a halt. Likewise, Syria has the same problem. If everything goes smoothly in world politics, that would be a huge benefit to Turkey's exports. Looking to Europe right now, we are primarily engaged with northern Europe. We also aim to expand to central European countries.

What are the biggest challenges you face in the sourcing of raw materials?

Our pricing is mostly based in euros in our domestic sales and exports. Sometimes our suppliers can give their prices in dollars. The fluctuations in USD/EUR parity may cause problems in our costs time to time. This is not an operational issue related to the supply chain. Yet, we have alternative suppliers that can offer pricing in both currencies. Of course, such supplier shifts do not always occur easily. Our top priority is always maintaining quality. A couple of years ago, the Chinese government shut down many cardboard facilities due to environmental concerns. This had a huge impact on world trade. Aside from the increase in paper prices, firms were forced to find alternative suppliers. Recently the trade dispute between the US and China, and the restructuring of global trade cause the producers to act much more carefully and sensitively.

Over the short term, what are Sentez Grup's investment plans and primary objectives?

We plan to make a huge investment especially in machinery and facility in the near future since we had arrived to this stage with continuous investments. Quite recently, we had signed a subscription contract worth of EUR6.5 million with Heidelberg, one of the leading companies in offset printing technology. Thanks to this investment, we can now produce what we used to produce with four machines using only two machines. This is an agreement that includes indirect control and lots of support elements. We have new machines and their capabilities are excellent. We have a capacity that will fulfill our mid- and long-term targets. We have a project that we have been working on for seven years to develop our Enterprise Resource Planning (ERP) system. We are working with a Portuguese company to achieve that upgrade. Currently, all of our ERP modules are integrated with each other. However, the project requires a second step, which we started in 2018. We have an intense schedule to complete this upgrade within the next 18 months. We named it the “Completion Project,” as it is a project that will finalize all of our other projects that we have done so far within the scope of Industry 4.0. It is a structure, which enables the control and tracking of all processes within our facility. Right now, we can do it with a 60% flow rate. It is a project that will increase that rate to 100%. From now on, we will put emphasis on increasing efficiency.