TISSUE GROWTH

Turkey 2020 | INDUSTRY | INTERVIEW

Lila Group is upgrading machinery to compete in the global market for tissue products, from Turkey to the US.

Orhan Öğücü
BIOGRAPHY

Orhan Öğücü has been the chairman of the Lila Group since 2007. After graduating from Gaziantep Private College, he went to the UK to study mechanical engineering at the University of Manchester. Graduating with a master's degree, he returned to Gaziantep and worked as a lecturer at Middle Eastern Technical University. He started his career at Güneydoğu İplik manufacturing. In 1984, he established the Lila Group and a yarn spinning mill with his father and brothers.

Lila Group was established in the mid-2000s as its parent company's investment into the tissue sector. How did the tissue sector fit into the larger company's competencies, and why did you choose to invest in this area?
Before entering the tissue business, we started in the textile business in Gaziantep, where we have more than 250 years of history in textiles. At the beginning of 1980s, we relocated to Istanbul. We were one of the five largest textile companies in Turkey but wanted to diversify and began looking for opportunities in different industries. We decided on the tissue sector because the paper industry is a big industry, and the tissue sub-sector is one of the fastest growing parts of it. The tissue industry's growth follows demographic and economic trends—as long as the GDP and population of a country is growing, tissue consumption will increase. In the tissue industry, there are two main production components—the paper mill and spinning mill. We are a fully integrated tissue company. That is why we invested in both. When we started our tissue business in 2005, we constructed greenfield paper mill facilities in 2006 and made our second machine investment in 2012. On the spinning side, we started our first converting facilities in 2008 and expanded our converting capacity again in 2010 and 2015. Our production capacity is currently 150,000 tons per annum. We are also investing in the third tissue machine.

How does your sales strategy differ in Turkey versus internationally?
We are a major player in the Turkish market. Within the FMCG sector, we distribute all our products to every city of Turkey and at every sales point similar to multinationals in Turkey. Internationally, we compete with all of the major multinational FMCG companies. We export about 75% of our production, and about 70% of our revenue comes from the export business. Today, we export to 78 different countries. Internationally, we export to many converters, who buy our paper product and convert it to tissue to meet the needs of their specific end users. We are competitive internationally because every customer is extremely important to us, big or small, and we serve them all with the same attitude and in the same manner.

What market conditions in the US led to your entry and growth in the market?
The US is a large country, and the demand in the US is extremely important for us. Mills in the US are mostly from the 1970s and 1980s and are outdated compared to the technology we use in our mills. These market conditions are some of the important aspects to our expected growth in US market share.

As a fully integrated tissue company, you compete in two separate—but related—industries. How does your operating strategy differ for each?
Looking at the two divisions—fully integrated versus converters—fully integrated companies hold about 85% of the global market share, while the remaining 15% is held by independent converters.

How does Lila Group's investment timeline differ from its multinational competitors?
For tissue production investments, multinationals make their decisions based on a period of five years. We make our decisions and react much faster than multinationals. Our investment period is about 2.5 years. Our third machine investment decision was made at the end of 2017, and we expect to have the machine running by the end of 2019 or early 2020. That will be a 50% capacity increase, which means another 75,000 tons per annum. At the same time, we are increasing our converting capacity. Today, our converting capacity is 100,000 tons per annum, and we will increase it to 120,000 tons. With the new capacities, we will serve the existing regions that we are selling today, though there are at least another 120 countries that we have not reached yet. Our target is to reach other 25-30 of those.