Investment in the Cuban corrugated industry through a shareholding in the Spanish company, Trade Packaging SA
Klingele Group, the German independent manufacturer of corrugated base papers and packaging, is investing in the promising market of Cuba through its Spanish subsidiary, Klingele Embalajes. Klingele has a shareholding in the Spanish holding company Trade Packaging SA and will therefore operate two corrugated plants and a folding carton plant in Cuba in the future. Klingele is continuing its expansion plans, following the acquisition of a shareholding in the Scandinavian Peterson Group with six sites in Sweden, Denmark and Norway.
Trade Packaging S.A. was founded as a Spanish joint venture between the two families Ruiz de Huidobro and Penate who have worked in different packaging companies in Cuba for many years. Trade Packaging and Klingele Embalajes have been working successfully together for many years in the packaging sector.
Attractive market potential
Klingele's investment is being made in the wake of the economic reforms that President Raùl Castro introduced after the death of his brother, Fidel. These are mainly aimed at strengthening private enterprise and getting more foreign companies involved in the local economy.
Klingele is also now one of the companies who puts itself and its partner Trade Packaging in a strong competitive position with its investment. The percentage share in the Cuban packaging company Compacto Caribe SA could be increased to 51% with Klingele's shareholding in Trade Packaging, while the Cuban state will hold 49% in the future. This is an exception in the country characterised by its centrally planned economy where the state normally has a shareholding of at least 50% in joint ventures.
Trade Packaging previously held a share of 50% in Compacto Caribe with a folding carton plant in Palma Soriano and a corrugated plant in San Jose. With Klingele on board, the Cuban state is incorporating the two corrugated plants of the second Cuban producer, Cubapel, into the company that was formerly 100% state-owned. In return, investments will be made in both plants that were built in Havana and Santiago de Cuba in the 1970s.
Only two corrugated plants and one folding carton plant with a total of 263 employees remained after closing and relocating the production from San José to Havana. They are in a good position to supply the 11 million inhabitants on the over 1,000 kilometre long island.
Paper from Weener
Klingele is mainly contributing to the joint venture in Cuba with investments in machinery and technical know-how. The focus is on reliable machinery and technology that runs on a stable basis. Klingele is therefore opting for a new BHS Corrugated line in the Havana plant that meets the requirements in terms of production safety. Spare parts and support will be provided by BHS Corrugated Mexico.
An extensive investment plan of $20 million was approved to lay the foundations for future growth. Further investments are intended to be made, especially in converting machines, in the power and steam supply and in adhesive systems. The aim is to double the current capacity of around 40 million sqm of corrugated packaging in the plants in Havana and Santiago de Cuba.
There is also potential in the supply of the Cuban plants with high-quality corrugated base papers from the company's own paper mill in Weener (East Frisia). The paper currently used in Cuba does not meet the quality requirements for high-quality packaging; imports from Weener can achieve substantial improvements in this area – and expand the sales channels for the Weener paper mill at the same time.
Fishing and local industry
The demand for corrugated packaging mainly comes from the fishing and seafood sector, as well as the local tobacco, beverage and pharmaceutical industry.
Currently, around half of the demand is met by import because the appropriate production capacities were not available up until now, in particular for high-quality packaging. With a view to safeguarding the future of the industry, the objective of the state is to bring the corrugated plants to a competitive level and to strengthen the domestic economy. Klingele’s commitment gives it the opportunity to invest in a protected market with a solid price level at the same time and to break into a new sales market.
“Through our commitment in Cuba we get a great opportunity to participate in a market that is only just emerging,” comments Jan Klingele, Managing Partner of the Klingele Group. “Of course we have to manage certain country-specific risks, but there will be immense opportunities for us as a pioneer in the Cuban market. With our partner Trade Packaging we have an experienced local entrepreneur with an excellent network at our side, which gives us an outstanding starting position to lead the Cuban corrugated industry to success.”