The Sunday Times, in association with Competitive Malta - the foundation for national competitiveness - is co-ordinating a series of interviews with its members to put forward the opinions and comments of foundation members on issues relating to national competitiveness. In this interview, Andy Gatesy, chairman and CEO of the Toly Group, shares his views on Malta's future as a base for manufacturing.
Toly is one of the success stories of Malta's manufacturing sector. What is in the pipeline?
Last year, Toly Malta celebrated 35 years of successful co-operation in Malta and I know that there are not too many companies who can boast similar success. I took over as chairman and CEO of the Toly Group in 1991 when my father, Dr Zoli Gatesy, passed away.
When I joined the Toly Group in 1985, Toly was a UK company with a satellite factory in Malta. Today, Toly is a very different company. It is a global company with its headquarters in Malta.
The group board are all based in Malta, four of the six chief officers are based in Malta, and so, the strategic decision-making is led from Malta.
Toly specialises in the production of luxury packaging for the cosmetics industry. Chanel is our largest customer and we are the main global supplier of all their compacts. We also supply many of the leading brands such as Boots, Avon, Yves Rocher, Sephora, Estee Lauder and P&G, to name a few.
For many years, Malta was Toly's only manufacturing plant, however, due to customer pressure, we recognised the need to extend manufacturing into Asia.
In November 2005, Toly officially opened a factory in Shenzhen, China. This was followed by an additional three sales/trading offices which were opened last year. In January 2006 Toly Asia opened in Hong Kong, in May 2006 Toly Korea opened in Seoul, and in July 2006 Toly India opened in New Delhi.
In the cosmetics business, the west is a mature market and with the economies of India and China opening up, we see a lot of opportunity. In addition, our new offices in Asia are able to source complementary products that are indigenous to these markets for Toly to present to its global customer base.
Does Malta still feature in your growth strategy?
At the beginning of 2006, the executive management laid out a five-year plan to double our business, 2005-2010. In 2005, the Toly Group had total sales of €35 million and the plan was to achieve €70 million by 2010.
This is a very aggressive growth strategy for a mature company operating in a mature industry. Our first year's budget (2006) was a 20% growth.
Did you achieve this growth?
Yes. In 2006, the Toly Group grew by 28 per cent which is a record for Toly and what was really interesting, was that this growth was across all areas of business.
Toly Malta increased its output by over 10 per cent which was the highest growth since 2002 despite the opening of Toly China. So one could say that China was good for Malta.
In addition to this tremendous growth, the Toly Group also won five new key customers which is an unprecedented result as, normally, a company like Toly would add a key customer once every two or three years.
Out of these five key customers, three of the jobs will be produced in Malta, so Malta is still a vital part of our growth strategy.
This year has started even stronger than 2006. Our budget for 2007 is a further 20 per cent growth and at the end of March, we were already ahead of target with a record order book that is 80 per cent higher than this time last year.
So our biggest challenge at the moment is keeping up with capacity.
What is the future of Malta's manufacturing industry?
This is a question which I asked (Industry Minister) Dr Austin Gatt recently and his answer was that the future of manufacturing industry in Malta is high-tech.
I think the next question should be what does high-tech mean. To many, it may mean automation or computer-operated machines, but it should also encompass being able to offer a unique product or a unique business process that can protect your margins and increase the value added content.
The future of any industry has to be competitiveness. If we are competing with a pair of hands, then we will lose, as we all know that a pair of hands in India or China is much less than a pair of hands in Malta.
So how is Toly competing in Malta?
Well, we are tackling the issue of competitiveness on different levels. Firstly, we have invested a lot in automation. In fact, our manufacturing concept and approach to automation is as advanced as any of our competitors anywhere in the world. Our automation is all built locally in Malta and our challenge each year is to increase the output with a reduced labour content.
Last year, we won the repack of the Rimmel colour cosmetics line which is Coty's most successful mass brand in colour cosmetics. We built large tools and fully automated the manufacturing process such that on one line, we could produce over 80,000 compacts per day.
In China, we could not have produced this at a lower cost and in China, the issue of logistics would have worked against us.
On the other hand, there are products that make sense to be produced in China. Our strategy is to try to keep the high volume products in Malta where we can justify automation and then switch the lower volume, more manual production to China.
Another way in which we are competing is using a concept of clustering. Toly has set up four clusters around us in Malta. Two of these, D-Square and Farma Plastics, are involved in injection moulding. They are all run by former Toly employees and as small units they have a lower overhead cost and so help us to compete on commodity-type moulding.
Clusters also give us the flexibility and additional capacity that is needed to work in our industry.
Our third focus is innovation. We are perceived as a highly innovative company. Innovation is not just in terms of new products but also in terms of manufacturing processes and our business approach.
We need to find ways to differentiate ourselves and be different. We need to offer our customers a unique experience. We call this 'The Toly Experience' and it has to come from each and every employee who comes in contact with our customers.
I believe that manufacturing in Malta helps us offer this unique experience.
Do you feel that there is sufficient co-ordination between Government, the University, Malta Enterprise and the other institutions to ensure that the country has the right product to offer for manufacturing-related FDI?
First of all, I am a strong believer in the future of manufacturing industry in Malta. I have also been critical in the past to ensure that the government focuses on creating a competitive framework.
At the moment, in the press there is a lot of hype about Smart City. I believe that Smart City is a good thing for the country as a whole, but I do know that many foreign investors, particularly in the field of manufacturing, are concerned.
First of all, Government should have a more balanced approach towards promoting manufacturing industry alongside Smart City.
There are so many successes in Malta today but unfortunately, it is only bad news which is published in the local media. This has a strong effect on employment in manufacturing-based industries. There is a shortage of technicians and when we go to schools or speak to parents about pulling students into the manufacturing industry, we get little response as the picture has been painted that manufacturing industry will not survive. This is wrong.
There is a future for manufacturing industry and it will be based on the creativity and ingenuity of the Maltese people.
For Toly, our Maltese workforce sets the standard and creates the new processes that we will eventually transport to our other manufacturing plants. Today I travel extensively around the world, but nothing gives me more pleasure than spending time in our factory here in Malta, interacting with the staff - the operators, the technicians, the engineers and the administrative personnel.
It is like a breath of fresh air seeing the enthusiasm, the commitment, the creative spirit and the passion to succeed.
Business is not about machines, but it is about the people. Toly is a people company and it is the people in Malta who can set it apart as long as all the stakeholders believe in this and are committed to making this work.