text/Pamela Ambler
Cai Zhiming stood next to the toys produced by his company. He hopes toys should be both fun and environmentally friendly. GORDON LUND FOR FORBES ASIA
Toys are nothing more than fun pastime for most people. But for Hong Kong billionaire Tsai Chi-ming, toys are a serious business. He said that his non-listed company, Rising Sun International, is the world's largest production toy manufacturer. He made his fortune by making toys in his early years, but now, Xuri International has all-inclusive businesses, covering industries such as automotive services, education, real estate development, jewelry and watch retail. Cai Zhiming has a wealth of up to 6.6 billion US dollars with this. At the same time, he is also the chairman of Rising Sun International.
latest diversification direction? Environmentally friendly plastic. Over the past two years, the 73-year-old business tycoon has invested $100 million out of his own pocket in Shaoguan, Guangdong to build a five-story high-tech bioplastic resin factory. His joint venture with a US company will settle in the building to produce environmentally friendly plastics based on NuPlastiQ bioplastics. It is expected to be officially put into production later this year.
So far, the new crown pneumonia epidemic has not dragged down the development of this new business, nor has it affected Cai Zhiming's other businesses. He said that as of early April, his factories in Shenzhen and Shaoguan had not been hit by the new crown pneumonia, and most of the workers were local residents. Cai Zhiming all thankfully said: "(Translated from English report, the same below) We are very lucky that no confirmed cases of COVID-19 were found, nor were there suspected cases." He said no customers have cancelled existing orders yet.
In 1972, Cai Zhiming, who was just 25 years old, founded Rising International, and has survived one crisis after another since then. Looking back on SARS in 2003, he tossed and turned and couldn't sleep for many nights, worried that SARS might invade his employees. In the end, no one was infected. This time, Cai Zhiming did not have the slightest mentality of luck and said that he had taken active measures to pay attention to the health of mainland enterprises.
solves the worries about epidemic prevention, and Cai Zhiming can make every effort to promote the development of biodegradable plastic companies. He placed a 10-meter-sized fish tank in his office at the Hong Kong headquarters, and an antelope head hung on the wall. Sitting in the office, the things he was holding looked nothing more than ordinary plastic shopping bags.
In an interview before the COVID-19 crisis came, he said: "(Environmental Plastics) will be a big business for us." The plastic bag is made of NuPlastiQ biomaterials, which can be mixed with ordinary plastics to make more environmentally friendly toys and other items. NuPlastiQ is environmentally friendly: it is made of plant starch rather than petrochemical products; if thrown into landfills or submerged water, it can be decomposed naturally.
In order to create a synergistic effect, the bioplastics factory is only a stone's throw away from Cai Zhiming's toy production base of nearly 2 million square meters in Shaoguan. The other party he joined hands to start the joint venture is BioLogiQ in Idaho, USA (Cai Zhiming is also a shareholder of the company). The Shaoguan factory not only produces bioplastics for the toy factory next door, but also uses bioplastics to make a large number of kitchen utensils, furniture and other products.
Although Cai Zhiming's US$100 million investment is nowhere near the bucket compared to his US$6.6 billion net worth, this is a hedge trick to deal with the increasing labor costs in the mainland. Labor costs have risen on average by more than 70% over the past decade. To solve this problem, Cai Zhiming invested millions of dollars to help automate his factory and reduce labor costs. He managed to reduce the total employee base from 80,000 at its peak in 2008 to 40,000 today. Cai Zhiming's company is not listed on the stock exchange, nor does he disclose the company's profits and losses, nor does he even disclose the company's revenue. However, he admitted that profit margins are gradually shrinking.
At the same time, due to adhering to the "Made in Mainland" strategy, Cai Zhiming felt the pressure was getting greater and greater. Instead of following other companies, he used factories in Southeast Asia to diversify production, he left all toy production in the mainland. He insisted that this was the right thing to do. He said the trend of moving Southeast Asia reminded him of 40 years ago, when the costs in Hong Kong rose and companies shifted their production focus to Taiwan.He sighed: "A few years later, Hong Kong companies moved back again because the cost in Taiwan soared, but it was difficult to recruit workers."
Therefore, Cai Zhiming's bioplastics can be said to kill two birds with one stone. He is trying to open up new sources of revenue and further break into businesses beyond toys. The main cost of toy production lies in plastic. Cai Zhiming is constantly moving upstream of the industrial chain, thereby managing the production costs of plastics and profiting from it. Given that green plastics are not limited to toys, this is expected to help the factory achieve economies of scale. Cai Zhiming's son Karson Choi is 34 years old and is the vice president of Rising Sun International. Cai Jiazan said confidently: "We will definitely go into production (this year). Once ready, we will start mass production."
Cai Jiazan (left) faces the camera and sits behind the toy supercar, which looks like the real sports car his father owns. Cai Jiazan plays an important role in the bioplastics business and is responsible for purchasing raw materials starch and other work. GORDON LUND FOR FORBES ASIA
As people's environmental awareness becomes stronger and stronger, the bioplastics market has high growth potential and broad prospects. According to data from Indian market research firm Fortune Business Insights, the global bioplastics market is worth as high as US$7 billion in 2019, and the annual growth rate in the next five years should be able to reach 16%. Cai Zhiming hopes to take advantage of the booming market trend.
Cai Zhiming predicted: "In the future, the world needs this (bioplastic)." Environmentally friendly plastics can be widely used in products such as toys, and the demand is increasing day by day. Jim Silver, CEO of New York-based toy review website TTPM, agreed: "Many toy companies have long used sustainable materials to make toys, and they also use sustainable materials in packaging."
Princess Elsa (left) and the Bump Fox brand Shark Baby Doll are two popular toys in Rising Sun International. Photo provided by Rising Sun International
Among them, Hasbro, Lego and Mattel have publicly promised to use more environmentally friendly materials to make toys.
However, competition in the bioplastics market is very fierce, with competitors including multinational companies such as Cargill, Mitsubishi Chemical in Japan and Total in France. Himanshu Vasisht, an analyst at Indian research firm Mordor Intelligence, said that bioplastics have lower profit margins than traditional plastics due to higher manufacturing costs. "As an emerging industry, [bioplastics companies] are generally losing money," said Ken Furst, head of polymer business at Freedonia Group, a research firm based in Ohio. "Profitability "depends on whether the application of materials can be improved and whether companies can sign large contracts with packaging consumer goods companies."
Cai Zhiming is confident that this joint venture can succeed. However, he is reluctant to elaborate on the company's competitive advantages or cost structure. But he revealed that because of the "secret recipe", the plastic produced based on NuPlastiQ is better than competitors, so the price can be higher. Cai Jiazan also promised that the emerging business would soon bring them "double-digit" profits. After all, his target market includes the mainland and the entire Asia. Cai Jiazan said: "Whenever you do business in the mainland, your size will immediately rise."
Cai Zhiming's partner BioLogiQ was founded in 2011 by Idaho entrepreneur Brad LaPray. Currently, LaPray is still CEO. Cai Zhiming invested in BioLogiQ for the first time in 2017 and has been planning to set up a joint venture since then (none of his equity and investment amounts have been disclosed). At that time, Cai Zhiming conducted 18 months of negotiations, and the joint venture was finally established in Shaoguan. BioLogiQ uses starch from mashed potatoes in the United States to make NuPlastiQ, but Cai Jiazan said that factories in China can extract starch from domestic corn or Southeast Asia cassava. He said: "We need to purchase a large amount of raw materials."
So how does Cai Zhiming's toy business compare with bioplastics in his heart? He smiled excitedly and said, "These plastics are more fun toys!"
massive toys
There are toys everywhere inside and outside Cai Zhiming's office, some for children to play with, and some for adults to play with. Two Rolls-Royce Phantoms and two identical black Porsches parked outside his Hong Kong headquarters adjacent to the Hong Kong-Shenzhen junction. These four cars are just the tip of the iceberg of his 70 hidden cars.Since 2005, Rising Sun International has operated a car service department in Hong Kong called Fastwheel, which is responsible for importing and providing services to high-end cars such as Aston Martin, Ferrari, Lamborghini.
Xuri International has a automotive service department, Fastwheel, which operates the import and export of supercars and service business. Photo provided by Xuri International
Cai Jiazan said that his father had two bulletproof cars but could not find a special store repair, so he started this business himself.
Cai Zhiming was born in Shanghai and grew up in Guangdong. When he was a child, his parents could not afford the type of toys produced in his factory today. So, when he grew up, he was filled with toys everywhere. Passing through the reception area, passing by retro Harley motorcycles and three life-sized statues of Roman warriors, the ping-pong table used in the 2008 Beijing Olympics was caught in glass outside and various trophies were displayed on the table. Following the spiral staircase, I walked into Cai Zhiming's office, with carpets under my feet and photos hanging everywhere for embellishment.
Cai Zhiming pointed to the photos he took at the NASCAR race in Phoenix, USA. He revealed that he had bought shares of NASCAR operator International Speedway for $2 per share and sold it at a top price of nearly $46 per share. Not only does he take a photo with actor Prischla, but also with US President Trump during the game. He said: "I went to the stadium with Trump, but we didn't have business dealings. We just watched the competition." Rising Sun International has maintained a long-term business cooperation with International Speedway to produce some NASCAR-branded T-shirts, utensils, trophys and mini racing cars for it.
He also closely combines his love for ships with his real estate business. His real estate team is looking for investment opportunities in residential and commercial buildings in Melbourne and Sydney respectively. At the same time, he drove three of his more than 20 ships to Australia. Cai Zhiming admitted: "I like Australia. I like the sea. I like fishing on the Gold Coast."
What Cai Zhiming loves may be his car and boat, but Cai Jiazan only cares about watches.
Yuyi Watch has 5 stores in Hong Kong and 20 stores in Macau, and plans to add more stores. Photo provided by Rising Sun International
He is the chairman of Yuyi Watches. The group is headquartered in Hong Kong and conducts high-end watch retail in Hong Kong and Macau.
Rising Sun International acquired the watch shop for HK$1.6 billion in 2010. Cai Jiazan proudly said: "We are now the largest watch retailer in Macau."
Backstory of Bioplastics
Although bioplastics are popular today, their roots can be traced back more than a century ago. The earliest plastic was called Parkesine, which is a bioplastic, invented from cellulose discovered from plants in 1856. In the 1930s, Henry Ford used raw materials extracted from soybeans to make some auto parts. Ultimately, petrochemical substances replaced organic matter and became plastic raw materials. It was not until the 1990s that new methods were discovered to give bioplastics commercial value. According to data from the European Trade Organization of Bioplastics in Europe, demand for bioplastics is growing; annual output has reached 4 million tons by 2016. Most of the demand is mainly for biodegradable bags and films, as well as containers such as cups.
Kent Furst, head of polymer business at Freedonia Group, a research firm in the United States, said that people were interested in bioplastics early on because they wanted to find cheap alternatives to petrochemical plastics. However, oil prices plummeted in 2015 due to the shale gas technological revolution, and plastic production costs fell accordingly. "People have made huge reinvestment in traditional plastics, and bioplastics are out of their minds," Furst analyzed. However, new technologies have reduced the cost of bioplastics and improved their quality, greatly enhancing the competitiveness of environmentally friendly plastics in packaging and disposable products such as utensils.
translation: Young Proofreader Joe
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