Sanchez S.A. Continues to Prosper

By Charles Thurston, Ink World Correspondent | 10.16.09

Mexico’s Sanchez S.A. is consolidating its manufacturing capabilities and expanding its network for technical assistance to customers, to continue to hold – if not increase – its lead as the largest ink manufacturer in the country, said Ernesto Sanchez, the director general of the family-owned company, in Mexico City.

The center of the consolidation is the Mexico City facility, which is being expanded to a 30,000 metric tons per year capacity, replacing finishing capacity at the company’s four other locations, including Tlalnepantla, Monterrey, Guadalajara and Culiacan. The Tlalnepantla plant, located on leased property, was scheduled to close in late September, Mr. Sanchez said.

“The consolidation will reduce labor costs, save miles of freight transportation and decrease 40 metric tons of material that we had coming or going; this will lower stocks so that we can do more business on a just-in-time basis,” he said. “We also will be using new technology, including an automatic dispensing system at the expanded facility.”

While the company will not be adding additional capacity overall, Sanchez still manufactures “about half” of the ink now produced in the country, with Flint Ink following as the second largest in-country manufacturer, Mr. Sanchez said. “It is difficult to assess the Mexico manufacturing volume of the multinationals like Flint and Sun, because they are increasingly sourcing from their mother plants in the U.S. or elsewhere,” he said.

Now that the Sanchez family has fully reacquired the company, growth has been plentiful.

“Sanchez used to be 48 percent owned by Total-Elf, the French oil company, until our family bought back the shares in 2001,” said Mr. Sanchez. “That’s why we are growing faster now,” he added.

A Growing Ink Market

Mr. Sanchez anticipates that market growth to continue.

“Our expectations of market growth is one to two times the growth rate of the gross domestic product,” Mr. Sanchez said.

This growth is being driven differently by market segment, Mr. Sanchez said. “Flexographic printing now is replacing gravure as the big packagers switch,” he said. “Sanchez is doing very well in flexo now, with volumes up 7 percent over the first half of this year by weight. The flexo market may grow only 5 percent this year but we’ll grow 7 percent by taking some share,” he predicted.

“Our overall ink sales are up 3.1 percent through July, but the newspaper segment was flat and other segments may only be growing at 1 percent this year,” Mr. Sanchez said. “The book segment is very flat but the government books help. The heatset segment has been helped by inserts, without which there would be a huge crisis in the segment. Screen printing is flat and has been hit by new digital printing methods. Sheetfed inks are doing quite well; we are selling Toyo inks from Japan in this segment.”

Sanchez is looking to also grow through its distribution network.

“We have 20 of our own ink stores now, but it is not our strategy to grow through more of these. Our distributors are opening more branches, instead,” Mr. Sanchez said.

Mr. Sanchez said that the export market provides opportunities for the company to grow.

“Export has only been about 4 percent of production in the past, and we are not happy with this, so we have changed our way of doing business in export markets, replacing distributors with our own subsidiaries,” said Mr. Sanchez. “We are operating our own subsidiary in El Salvador now and doing quite well, going directly to the big packaging companies to sell both solvent-based and water-based gravure and flexo inks. This operation will serve as something of a pilot for changes in other countries in the region where we compete.”

While Mr. Sanchez does not anticipate opening a subsidiary in the U.S., the company recently replaced its Phoenix-based distributor with a distributor in San Antonio, he noted.

Supporting Customers

Technical support has been one of the greatest areas of change in the way Sanchez now does business. “Technical support is growing a lot; we’ve doubled our staff over the recent past and have people working in-plant for over a dozen customers at color matching, dispensers, labs, presses and quality control, often working nights and on weekends, where required. That’s something that didn’t exist a few years ago,” said Mr. Sanchez.

According to Jesus McKelligan, manager of operations at Sanchez, “What is most important for future survival in the market is service. So we think that technology is the biggest thing we have to supply to our customers, and we have to be close to them to supply it.”

The company now employs approximately 200 people in technical support between its own labs and in-plant locations, he added.

Since Sanchez also produces varnishes and flushes, the company has increased its ability to provide full solutions to customer problems rapidly, he added.

“Customers can’t wait 15 days to get a technical answer from the U.S.,” Mr. McKelligan said. “We try to provide it by the next day.”

Training is paramount to that goal, he said. “ We have people training continuously with our research lab; training is not just a one-time event, because you need updates to know what happens in the market one month, six months or a year later,” Mr. McKelligan said.

With its emphasis on quality and customer support, Sanchez S.A. is poised to maintain its leadership position in Mexican ink market in the years to come.