Nepal Witness Significant Growth Over the Next 10 Years

  10 min 39 sec to read
Nepal Witness Significant Growth Over the Next 10 Years

Fabio Ferari is the general manager of SACMI Impianti - SACMI Group company. The SACMI Group is globally recognized as a leader in supplying machines, plants, and services to industries such as ceramics, packaging, food and beverage, meals, advanced materials, and many more. Ferari was recently in Nepal for the launch of Prime Ceramics Nepal which utilises SACMI's plant. In an interview with Madan Lamsal of New Business Age, Ferari discussed SACMI's involvement in the tiles and ceramics business, and the Nepali market. Excerpts:

Could you please tell us what SACMI is and what it does?

SACMI is a cooperative company born in Italy, in the town of Imola, in 1919. We have been working in different fields of activities, and one of the main fields is the ceramic division, which also includes the tile division and the Italyware division. We also specialise in advanced ceramics. Additionally, we have a division for rigid packaging and another division for advanced materials. We offer energy-saving systems with solar panels and have a wide range of activities. Our worldwide network consists of more than 80 subsidiaries with 5,000 employees to closely serve our customers. The reason why SACMI is in Nepal is to focus on the ceramic tile division and the equipment for ceramic tile factories, such as Prime Ceramic Nepal.

What exactly is your association with Prime Ceramics in Nepal?

We describe ourselves as a supplier, but we are much more than that with Prime Ceramic. We consider ourselves as partners. While it's not a joint venture, we believe that the business we conduct with them is based on more than just supplying goods. We share values, criteria, and a way of working. When we engage in business, our aim is to grow alongside our partners. This is a prime example where we strive to foster their growth and help them become the leading producer in the country, while expanding their business. We hope to be chosen again for future supplies and to contribute to the technological and economic growth of their business.

How did you come in contact with this Nepali party?

One of the partners of Prime Ceramics was already involved in the tile dealing business. They developed the idea of coming on the other side of the table. They came to Italy and consulates with SACMI as a prominent equipment supplier in Italy. From the very beginning, we felt they shared the same core idea. We didn't just provide them with ideas on how to proceed, but also acted as consultants, leveraging our worldwide experience to assist them in developing their business. We offered not only machinery but also suggestions, ideas, and expertise, striving to understand their specific needs and translate them into technological solutions.

There is a company called Prime Ceramics in India and SACMI is also present in India. Is there any link?

There is no link between them. While India and Nepal are neighbouring countries, the scenario of tile production is pretty much different. In the case of Prime Ceramics Nepal, they are just starting out in this industry. Therefore, we aim to provide our expertise and services to Prime Ceramics Nepal with the view that there is no prefabricated solution. We approach each project with a tailor-made proposal and project because every country has a different scenario, drivers, and keys to success. It is essential for us to understand and interpret these factors correctly in collaboration with our partners.

What aspects of Prime Ceramics attracted you for the partnership?

From the very first moment, we understood that they wanted to have two elements. They expressed a strong commitment to building a quality-driven company. This resonated with SACMI as we also dedicate ourselves to being a top-quality company in the tile equipment sector. When they came to us with the same spirit and values, we felt that we were sharing very deep values which were going much more beyond the business itself. 

Why did SACMI not put equity in Prime Ceramics and limited its role as plant supplier only?

The concept of equity is a matter of policy and governance. SACMI always aims to maintain a clear role in every relationship so that when we act as partners, we do so with a clear understanding of our respective roles. We never engage in equity arrangements with any of our customers because we believe in maintaining a healthy and confident relationship with each other. Mixing roles can lead to problems in the medium to long term. Moreover, the equipment we select for our customers is manufactured in various locations depending on capacity. We have equipment that is partly made in Italy, and partly in our facilities in India and China. The purpose is to maximise quality while optimising costs.

SACMI is present also in a number of locations including India. Is SACMI’s presence limited to engineering only or are you also into ceramics production?

Our business in India is very large and consolidated. We have been supplying equipment in India for a significant period of time. Additionally, we have a branch and subsidiary located in Ahmedabad, India, where we fabricate equipment. This allows us to serve the Indian market more closely and provide efficient after-sales services. In addition to equipment, we also supply rigid packaging systems in India, which is an important aspect of our business in the subcontinent. We have a very strong presence in India because it is the second largest market in the world. Consequently, it necessitates a comprehensive presence that encompasses not only commercial operations and after-sales services but also manufacturing capabilities.

Is there any opportunity to export to India from Nepal?

If you are talking about tiles, I believe there is a good opportunity. In fact, I had a conversation with Mr. Ashish from Prime Ceramics Nepal, and he told me that their plan in the medium term is to become an exporter to India. We believe that Prime Ceramics Nepal has the capacity and potential to be a competitive exporter to India.

Where was the plant that you provided to Prime Ceramics produced?

The machinery was manufactured in India, China, and Italy, depending on the specific features of the equipment. Our multinational structure allows us to optimise both price and quality, as the same item of the same quality may have different prices in different parts of the world. So we have to be cost-effective without compromising on quality. The choice of manufacturing location also depends on the nature of the equipment. Manufacturing in India, for example, was beneficial as it reduced transportation costs, which have been notably high in recent years. While engineering may be carried out in Italy, we deployed the execution of manufacturing in our subsidiaries, taking into account the production factors that offer competitive and convenient solutions for our customers. This approach prioritises customer satisfaction as the main criterion. Technology and design originate from Italy, while fabrication is conducted in various locations.

Italian ceramics are very famous worldwide and in Nepal too. And Nepal also imports a good quality of ceramics from Italy. So to what extent will the plant you provided substitute the imports? 

It will cover a large part of the demand. However, the market is segmented and diversified, driven by local tastes and preferences that are specific to different regions and places. While high-quality tiles from Italy may excel in terms of quality, they may not always align with the local aesthetics. This doesn't imply that Italian tiles are inferior, but rather that the aesthetic choices vary from area to area. One of the significant advantages of Prime Ceramics is their ability to cater to local tastes more directly and effectively. They can intervene in the distribution of tiles, which can be challenging to achieve from Italy due to logistical factors. I believe that both imported and local products will have a presence in the market. There is room for both.

SACMI also produces machinery for a range of industries including plastic, food and beverages and packaging. Have you supplied plants to these industries in Nepal?

Nepal is a country where we have entered the business scenario very recently. We have some interesting contacts in the rigid packaging sector. Additionally, we see potential in the food and chocolate sectors, although they are in the early stages of development. We eagerly look to bring it forward and make it happen like we achieved with Prime Ceramics. Our presence in Nepal is driven by our goal to grow alongside the company, the country, and the economy. Whenever there is a business opportunity, we strive to enter and become partners, just as we did with Prime Ceramics. We aim to contribute to the local economy, as we have done in many other countries before.

Is it possible for you to share estimations of the transaction that you are expecting from Nepal?

We can say that this market will witness significant growth over the next five to ten years. We expect our business to potentially increase two to three times more during the next decade. However, as this business is not consumable, our investment plans are also influenced by global economic trends. The past year was characterised by unpredictability, highlighting the need for careful consideration. We believe there is ample room for growth for, say, over 10 million euros turnover. Nonetheless, our goal is to expand our presence in the market fully capitalise on its immense potential.

What about the possibility of getting direct investment from SACMI and starting manufacturing plants here?

We always keep an eye on local manufacturing. However, it is essential for us to ensure that we have sufficient resources to efficiently serve the market while maintaining cost-effectiveness. When we identify a significant demand for our products and services, backed by a substantial number of plants and installations, we start working immediately. Nevertheless, we have local branches in neighbouring countries such as India, and we are planning to establish a branch in Bangladesh soon. These nearby branches can serve as hubs for providing services and support. When we observe multiple installations in a particular country, it is normal to also deploy local investment for manufacturing. However, reaching a critical mass is crucial in order to make such investments economically feasible.

Is there any difference in the taste of Nepali consumers in terms of design, colour or demand? 

Our technology is designed to be adaptable to the ever-changing tastes of the market. We have supplied Prime Ceramics with a digital technology printer that enables them to dynamically respond to the preferences of the market in real time. This feature provides a competitive edge to Prime Ceramics Nepal. Local tastes vary from era to era and evolve over time. The ability to be adaptive and flexible is ingrained within our technology. This is why Prime Ceramics believed in our technology, as we not only satisfy current market demands but also have the flexibility to meet future demands. 

You must have done a feasibility study before you started thinking about manufacturing here from your local partner. Any interesting findings? 

There are several crucial factors that make the production in this region highly appealing for ceramic tile manufacturing. The cost of energy is favourable, skilled manpower is available in good numbers, and the raw materials are readily available. When these three key factors align, it creates a conducive environment for business opportunities in the ceramic tile industry. I am confident that we will witness numerous investment prospects in the future, and SACMI will be there to support and collaborate with investors to transform these opportunities into successful businesses, just as we have done with Prime Ceramics.

Anything else before concluding?

I am pleasantly surprised to see the industrial and economic dynamics of Nepal. The country has shown a very intense will to grow to become industrially sustainable also on the manufacturing side. This is a good premise to elevate Nepal’s position in this emerging economy of the region. We will hear a lot about Nepal over the next coming years, and SACMI will be standing alongside Nepal to support this growth. 

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