In 1975, Siam Cement Group (SCG), the largest cement company in Thailand, entered the paper industry when it decided to acquire Siam Pulp and Paper Company Limited (Siam Paper), SCG’s then supplier of cement bags.
Siam Paper’s initial role was to provide packaging for SCG products, but this all changed in 1979. Looking to expand its business, Siam Paper became the first Thai company to manufacture pulp from bagasse (a fibrous residue made from crushing sugarcane stalks) for producing kraft paper (a rough paper used for product packaging). Abundantly available in Thailand, the use of bagasse allowed Siam Paper to rapidly grow and in 1979 it was listed on the Thai Stock Exchange. In 1983 it ventured into the printing and writing paper business and was the first company in Thailand to use alkaline sizing during production, an environmentally friendly process which makes paper acid free, significantly increasing its longevity.
By 1992 Siam Paper was manufacturing over 120,000 tons of pulp a year. It eventually became a holding company of other SCG paper subsidiary companies, which all combined and became SCG Paper. Siam Paper and the other subsidiaries continue to exist as separate companies; however all of their products are manufactured and commercialized under the SCG Paper name. Activities such as research and development (R&D) and commercialization are centralized under SCG Paper. Continually innovating quality products, SCG Paper has gone from a simple pulp producing company to one of the most profitable arms of the SCG conglomerate, enjoying success in domestic and international markets. It is now the largest integrated producer of paper products in Thailand and the Southeast Asian region, developing printing, writing and packaging paper and corrugated containers through an environmentally friendly production process.
Research and Development
Innovation has thrived at SCG Paper through its creative research and development (R&D) programs. The company’s vision is to be a leading R&D center in the paper industry, driven to adding value to products which meets customer needs and enhances their quality of life. This plays an essential role in strengthening and maintaining the company’s competitiveness in the global economy. Building on Siam Paper’s first R&D success using bagasse to manufacture pulp, SCG Paper created the Product and Technology Development Center (PTDC) in 1992. The PTDC handles advanced testing services for products and manufacturing processes and is divided up into six clusters that focus on the different areas of SCG Paper’s business, such as biotechnology, paper coating and packaging technology. The R&D laboratory also has a technology knowledge management center, which oversees such activities as technical training for new employees and facilitates skill-based management.
In 2003, SCG Paper set up a special Technical Development Committee (TDC) comprised of managing and production directors from SCG Paper’s three largest factories to encourage R&D of new innovations. SCG Paper also collaborates with universities, government research institutions and other SCG subsidiaries in its R&D efforts. Combined with its internal R&D resources, these collaborations often yield significant positive results.
One such example is the development of the “Mira Board” product, a special paper laminated with metalized PET (polyethylene terephthalate, a plastic polymer commonly used for beverage containers) that has a smooth, glossy finish and is water-resistant. Mira Board first came about in the late 1990s, when Southeast Asia was experiencing a recession and SCG Paper needed a new product. The R&D department looked at what was going on in other markets and saw there was demand for high quality coated paper products, especially in markets such as the United States, but growth was inhibited because such paper was expensive. High quality coated paper was traditionally manufactured from chemically treated white pulp that is laminated with a specially treated film and then polished on a sheet by sheet basis. The high cost associated with it meant that it was only used on expensive products.
The R&D team at SCG Paper saw vast market potential for such paper if costs could be lowered. Researching ways to lower costs while taking customer requirements into consideration, they found that production costs could be lowered by using 100% recycled paper that could be laminated in rolls instead of individual sheets. Lower production costs meant lower prices for their customers, which translated into expanded market access. Marketing its innovation as Mira Board, it became one of the company’s most successful products, with applications varying from special security seals (such as for computer software) to display boxes in department stores. Thanks to Mira Board, the company’s exports shot up and it was able to not just survive the recession, but turn a healthy profit.
Mira Board is not only an example of SCG Paper’s innovative R&D, but also of the importance it places on creating environmentally friendly solutions. In 2009, the company developed another environmentally friendly product: a special coffee sleeve for True Coffee, one of Thailand’s largest cafés. This unique coffee sleeve is made from recycled paper and comes with SCG Paper’s ThermoZense, a special heat indicator on the sleeve that turns from red to white if it is hot. SCG Paper produced 100,000 of the sleeves exclusively for True Coffee. Other important innovations from SCG Paper’s R&D department include specially designed paper pallets meant to be used as an alternative to wood pallets and Triple Wall, a paper board used for manufacturing corrugated containers.
These products are an example of how SCG Paper’s innovative R&D has allowed the company to survive a recession, expand into new markets and continue to create new value for its customers. In addition, the company also continues to foster creativity in its employees through participation in SCG Group’s “Power of Innovation Award,” which recognizes successful innovations through a one million baht (฿) prize.
SCG Paper manages all issues and general affairs related to intellectual property (IP) created through its R&D with its Technology Management Office (TMO). The company places much importance on enhancing its competitiveness with IP, evident through its strong R&D, and believes that innovation has much greater value than simple price cutting. SCG Paper’s IP management strategy is to secure IP rights (IPRs) for all of its major innovations and names in target markets. This inhibits copying and keeps the company competitive among its rivals. Patent applications are a very important strategic means the company uses to preempt infringement, and SCG Paper is convinced that its corporate image is enhanced through the proactive use of IPRs for its inventions, industrial designs and names.
The company’s TDC is also actively involved in the encouragement of developing and managing new IP and protecting it with IPRs. It also runs training programs to help SCG Paper’s employees become more knowledgeable in how to develop and take advantage of IP and IPRs. In 2004 the Company set up a special committee to encourage the production of innovative products and has engaged outside experts to promote innovation and creativity in its paper and packaging business especially through the training of its personnel to be more knowledgeable in producing innovative products. In 2008, SCG Paper underscored its commitment to quality R&D by allocating more than ฿6 billion to its R&D efforts and IP management.
Trademarks and Patents and Industrial Designs
SCG Paper has over thirty trademarks for its various products registered with the Department of Intellectual Property of Thailand (DIP). The trademarks are registered by Siam Paper and other SCG Paper subsidiary companies, all of which also use SCG’s well known elephant trademark. In 1999, SCG Paper was granted a patent by the DIP for its innovative process involving the storage of bagasse with the use of lactobacillus, one of the most clinically studied beneficial bacteria. In addition, SCG Paper has applied for and obtained industrial design protection for eight cargo pallet designs.
Commercialization and Partnerships
SCG Paper uses a combination of its own resources and loans to commercialize its products. It manufactures and distributes of all its products itself domestically. International commercialization is undertaken either directly through its subsidiaries or indirectly through various exporting partners. Nearly thirty percent of SCG Paper’s products are exported to over twenty countries.
In 1996 SCG Paper expanded its kraft paper business by signing a joint-venture contract with United Pulp and Paper Co., Ltd. (UPPC), the largest kraft paper manufacturer in the Philippines, in order to build a paper mill and expand its market reach to the Philippines. In 2007, SCG Paper opened its first paper factory in Vietnam through a new subsidiary, Vina Kraft Paper Company Ltd., to provide high quality paper products to the Vietnamese market. SCG Paper also has corrugated box plants in Malaysia and Singapore.
SCG Paper’s innovative use of R&D and IP protection has been a huge success for the company. In 2007, it had total revenue of over US$1.3 billion, making it Southeast Asia’s largest paper company. SCG Paper is the third most profitable arm of the SCG conglomerate (after the cement and petrochemical divisions). In the first quarter of 2010, the company posted net sales of ฿12.55 billion (approximately US$387.5 million), up 30% year-on-year, and earnings increased by 308% to ฿974 million (approximately US$30 million). In addition to its economic success, SCG Paper’s enduring commitment to innovation and value has earned it many awards, such as the Deming Application Prize from the Union of Japanese Scientists and Engineers, the Thailand Quality Award (a Thai government sponsored award recognizing overall quality of a company), the Total Productive Maintenance award from the Japan Institute of Plant Maintenance and the Thailand Prime Minister’s Award on three occasions for quality management, productivity and safety, respectively.
The IP-Growth Link
Built on the continual innovation through fostering IP development through creative R&D, SCG Paper has been able to develop quality products, create a strong brand name and transform itself into one of the most successful Thai companies in the world. SCG Paper’s growth is intrinsically linked to its IP strategy, and the company is an excellent example of how IP can be used by companies in emerging countries to stimulate economic growth.