MMVB 2009: Premier brand in paper products (NTPM)

MMVB 2009: Premier brand in paper products

Monday, 23 November 2009 00:00

A chance encounter with a paper mill during a trip to Taiwan in 1973 sparked the idea of NTPM, the manufacturing company behind paper product household names Premier tissue paper, Cutie Compact toilet roll and Royal Gold tissue paper.

The coach that NTPM founder Lee See Jin was travelling in had stopped at a bus stop in Taipei when he noticed mountains of waste paper stored outside a factory. Curious, he went in to enquire and discovered that the factory was recycling wastepaper to produce joss paper and toilet paper.

“They bought 1kg of waste paper for 8 sen but sold 1kg of processed toilet paper for RM1.20! I didn’t understand the business in detail but I was thinking of the big amount of profits!” says Lee, who could not but compare it with the rice-milling business he was in with its profit margins of around 1% to 2%.

Two years later, Lee set up NTPM with RM1 million in funds from his own pocket and minority shareholders, but it wasn’t till four years later that production began. Despite the promise of huge profits, Lee says the first few years were “difficult”. The company only broke even in 1983 and began to turn a profit in 1984, says Lee in a recent interview at NTPM’s Bukit Jelutong sales warehouse and office. NTPM’s manufacturing plants are located in Nibong Tebal, Penang and Parit Buntar, Perak.

For its FY2009 April 30, NTPM recorded RM46.31 million in profit after tax on the back of revenue of RM358.56 million. Its 2009 annual report attributed the 41% jump in profit before tax to increased sales, softening of commodity prices towards 2H of FY2009 and improved efficiency in operations and distribution.

NTPM, which takes its name from its paper mill in Nibong Tebal, has come a long way since its founding. In 1986, in a move to expand the business, NTPM diversified its product offering from toilet tissue paper and joss paper to include serviettes and eventually, box tissues.

Premier has managed to grab more than 50% of the Malaysian market for tissue products because of quality and price, against its closest competitor, a multinational with about 25% to 30% market share, says Lee’s son Chong Choon.

In 1995, NTPM introduced the brand name Premier to showcase “first” and “excellence”, said Lee who spoke in English peppered with Mandarin and Hokkien phrases, which Chong Choon then translated, during the interview.

“In the past we had a number of smaller brands for paper tissue but as the business became bigger, we could not have so many brands. Manufacturing, delivery and warehousing would be a problem so we chose to continue with the brands that recorded big sales. We found that ‘Premier’ was easy to recall and had recorded good sales so we kept it,” says Lee. Cutie was the other brand that the company kept.

The success of the Premier brand didn’t come about by accident. NTPM works with a creative agency to come up with the idea for the packaging — it believes attractive packaging grabs consumer attention. Its sales and marketing team then works on the design and promotion drawing on in-house market surveys as well as Nielsen market research, says Chong Choon, who is NTPM executive director.

Over the years, NTPM’s marketing strategy has evolved from below-the-line strategies such as in-store promotions to billboard advertising and eventually, to a mixture of outdoor, below-the-line and above-the-line advertising. But “it’s not just about advertising”, says Lee.

“If your products are not good or are expensive, people have more options now and will always choose the good and cheap ones,” he says.

Besides spending on in-store block display space, NTPM also distributes samples to allow customers to try the products.
Distribution has also played a role in its success. NTPM’s business model of doing away with the middleman enabled it to reap higher profits. Even in the 1970s, its strong integrated distribution network set it apart from its competitors.

“While others only produced semi-finished paper products or jumbo rolls, our paper mill manufactured jumbo rolls, converted them into finished products and distributed them directly to the retailers,” says Lee.

Today, NTPM sells its products to retailers, hotels, factories and wholesalers, and has a total customer base of 10,000. Chong Choon says the company hopes to double that figure in three years’ time.

Lower costs have also enabled the company to compete against bigger rivals. When Premier was launched, there were other smaller local players and a multinational that produced box tissue products.

“That was the opportunity for us to step in. If they wanted to lower their costs or quantity [to compete], it would have affected their profit margins. Being a Chinese company, our expenses are kept very low, unlike Western counterparts, which have high salary benefits,” says Lee.

In 1986, NTPM penetrated the Singapore market, which was then importing toilet paper products from China. Not only was the quality nothing to shout about, the shipping time took 10 days. With its fleet of 130 trucks to deliver the products nationwide, NTPM could get its products to Singapore in a shorter time and for less. Besides Singapore, the company also has leased warehouses in Penang, Kelantan, Pahang, Melaka, KL, Johor and Sabah.

During the 1997 Asian financial crisis, NTPM began shipping to Hong Kong, which also sourced its paper products from China. Currently, NTPM exports to Southeast Asia, Australia, West Asia, the US and Africa. Overseas markets contribute a third of the business, with the remaining two-third coming from Malaysia.

Besides Premier, paper product brands under the NTPM group include Cutie Soft and Royal Gold. In 2003, the company diversified into personal care products, introducing its Intimate brand of sanitary pads, and Diapex baby diapers a year later. In September this year, NTPM streamlined its operations by relocating the personal care division from the existing tissue manufacturing plant in Nibong Tebal to its new RM2.9 million manufacturing plant in Parit Buntar, Perak.

Despite being up against more established brands in the fast-moving consumer goods sector, Intimate managed to increase sales by some 17% for the FY2009 ended April 30. Lee says the company hopes to grow the personal care segment to 50% of the business in three years’ time. It contributed about RM50 million of the group’s revenue for FY2009.

Lee, who looks much younger than his 70 years, may not have understood the paper product business when he started out. But he understands that it’s not just enough to have a good brand.

“If your brand is good but your costs are high, that means you can’t make a profit,” he says.

As such, he keeps a close eye on costs. In fact, listening to him talk about flying economy and staying in budget hotels on business trips, the word “frugal” comes to mind. And any investment he makes has to bring in a profit.

“My philosophy is, if it doesn’t bring in profit, I will not invest in it,” says Lee, who controls 42% of shares in the company.



*This article appeared in Malaysia's Most Valuable Brands 2009, the special focus pullout of The Edge Malaysia, Issue 782, Nov 23-29, 2009.

http://www.theedgemalaysia.com/management/155742--mmvb-2009-premier-brand-in-paper-products.html