From Left: Jack Tsai, Jeffrey Huang, Elic Hsu and Morrisen Kuo
One thing you notice when you talk to the senior management of NanPao is that they have a vibrant energy about them, and a willingness to change paths mid-stream to seek the optimum solution. This culture comes from the top and is embodied in NanPao’s CEO Elic Hsu. Upon joining NanPao as the Head of the Business Planning Department, Elic worked directly under Mr. Huang Ching-fang, the Chairman and CEO at the time. According to Elic, it was from Chairman Huang that he learned the importance of R&D and innovation to NanPao’s success. Says Elic, “Our largest customers are the Tier 1 global footwear brands, and we are the top supplier for several of them. They have come to see us as a reliable source for total adhesive solutions for their cutting-edge athletic shoe designs, and we differentiate ourselves from our competitors by providing adhesive solutions that are environmentally friendly and adapted for use with a wide variety of high tech and traditional materials. We have won many supplier and industry awards. For example, in 2019, one of the top brands held a global supplier summit at their headquarters. All of key suppliers attended, sending their top chemical engineers as representatives. NanPao won the ‘Best Adhesives Vendor’ award. Early this year, the same Tier 1 brand held its second biannual global supplier summit. Our engineering team was once again awarded the ‘Best Adhesives Supplier’ award and took home one more award, “Innovation and Excellence in Sustainability”.
More than 1/3 of NanPao’s employees have R&D or Technical Expertise
“Of our more than 3,000 employees globally, 900 are R&D or field application engineers; and many senior management positions in both sales and operations are filled with former R&D personnel. Branded footwear vendors know that when NanPao comes to visit, we are not the ones who will be wearing expensive power suits in a pursuit to impress, rather we are coming with new ideas, better solutions and practical technical advice. For example, when one top customer was looking for a way to automate application of adhesive to the outer sole, we developed an adhesive that could be applied by spraying. There are multiple challenges in accomplishing this. The adhesive must have a consistent composition so that it is evenly applied when sprayed. It must have a low enough viscosity so that it does not clog the nozzles or the supply tubes, and the client required that the adhesive be solvent-free and environmentally friendly. We developed a sprayable self-drying product well ahead of our competitors and also worked with equipment suppliers to choose the nozzles that were best suited to apply the adhesive.”
NanPao’s Market Leadership in Footwear Adhesives is Built on Innovation & Service
Jack Tsai, the Executive GM of Sporting Goods Adhesives & Materials, is a fiercely competitive yet incredibly amiable man who has forged close relationships with all the top athletic footwear brands. Says Jack, “Over the past 50 years, athletic shoes have become increasingly specialized for specific sports, as the quest to gain a competitive edge has intensified. The athletic shoes made by Tier 1 brands have frequently become famous for their technological innovations and iconic appearance. They are collected, have launched fashion trends and are now an indispensable component of many consumers’ every-day apparel. Brands have sought to court elite athletes seeking a competitive edge while simultaneously attracting the buying interest of the mass consumer. Over the years, when the top brands have tried to introduce new materials, upgrade and debottleneck their manufacturing process or gain that extra edge in adhesion that would facilitate new designs, they have increasingly come to us at the ‘design in’ stage. This is the key reason we continue to gain increasing order allocations from them and continue to increase our share of the overall athletic shoe adhesives market. It is because we provide solutions for the best-selling, most technically advanced shoe models. So, when the top brands take market share, so do we. And, when their competitors want to create their own shoe designs, they also come to us. The Tier 1, Tier 2 and Tier 3 brands all know that whether your need is the most cutting edge, environmentally friendly shoe adhesive or a legacy adhesive for a more basic shoe, NanPao has the solution.”
Modern Athletic Shoes Demand a Comprehensive Adhesives Solution
“Let me give you quick tutorial on the shoe manufacturing eco-system,” says Jack. “Tier 1 brands have as many as 1,300 different models of shoes offered for sale on their websites. In their production process they use materials such as synthetic and natural leathers, EVA Foam, polyester, rubber, cotton, and many more”
Jack pulls out a diagram of a shoe (see below), and continues, “Here are the key areas of the shoe that require adhesives, but that’s just the beginning. The shoe manufacturing process entails three main steps: preparation of materials, stitching and lamination of various components and assembly. There are at least 20 different areas of the shoe that require the use of adhesives. Each shoe component has its own unique material properties and requirements for flexibility, breathability, waterproofing, appearance, shock absorption and elasticity. The materials are prepared with a cleaner, then a primer before application of the adhesive, which is sometimes followed by the addition of a hardener. We supply all of these products as part of a total adhesives solution that is unique to each particular shoe.”
The Key Areas in an Athletic Shoe which require Lamination and Bonding Adhesives
He pauses, then says with emphasis, “Make no mistake. The stakes are high. Our adhesives are used in shoes worn by world class athletes in the Olympics, on the basketball court and on the soccer pitch. Should they fail and cause injury, irreparable damage could be done to the reputations of our branded customers and NanPao Resins Chemical, not to mention the potential legal liability. Our product doesn’t weigh much; it accounts for less than 3% of the shoe bill of materials and it is not even visible to the consumer; but it is a critical component on which the function and longevity of the shoe depends. If we do our job well, you’ll be happy with your shoes, but never know that NanPao played the starring role in holding them together. But I can assure you that our customers know, and they are not likely to switch to an unproven supplier when their reputation is at stake. This is one of the reasons that our industry has developed into an oligopoly with only a few main suppliers – the up-front investment in polymer science, resin formulation and shoe industry know-how is just too great.”
Specialty Adhesives: Using the Golden Sample System to Develop New Areas of Dominance
Morissen Kuo is the Executive GM of NanPao’s Adhesives & Specialties Business Unit and has been spearheading the company’s effort to turn current product verticals where NanPao already has a strong competitive position into businesses that are as big or larger than the company’s footwear adhesives business. In 1H21, adhesives accounted for 72% of NanPao’s revenues, with footwear adhesives contributing 40% of total sales, while Specialty Adhesives contributed 32%. Says Morrisen, “All of the adhesives NanPao produces are technically ‘specialty adhesives,’ including footwear adhesives. However, our footwear adhesives business has grown so fast that it was split out on its own. Sporting goods adhesives have long been an area of strength for NanPao. In fact, few people know that we produce lamination adhesives for 30% of all basketballs made in the world, and for 50% of the baseballs sold in Japan. Moving forward, a key focus area is adhesives for functional textiles in sportswear applications. The global footwear brands are also top players in this area, and we have an existing relationship with them in footwear. However, it is still early days, and we anticipate that it will take a while to break through.”
“The global markets for personal hygiene, flexible packaging and tape & label adhesives are markets that individually have as much or greater potential than footwear adhesives. To accelerate growth and enhance profits through production economies of scale, we are employing the golden sample strategy to these markets. A ‘golden sample’ is a product for which: a) there is a large global market for a major application; b) NanPao’s R&D team can develop an adhesive with Tier 1 performance at a competitive price; c) NanPao is able to manufacture the adhesive with a high level of cost-efficiency. For the past two years, we have been identifying the golden samples within the Specialty Adhesives business unit and we are preparing to concentrate our R&D, marketing and sales efforts on these products.”
R&D Will Continue to Lead the Way
Adds Elic, “We will always stay true to the culture of innovation that was first established by Dr. Huang over 60 years ago. R&D spending was 3.2% of sales in 2020, with key focus areas being high performance footwear adhesives, advanced footwear materials and additives, functional textile glue, non-woven adhesives for sanitary and medical applications, adhesives for flexible packaging and pressure-sensitive adhesives for optical films.
Secular Growth in Existing Product Areas is Also Very Promising
Summing up, Elic says, “If we consider only our existing product lines, the growth outlook for NanPao is bright. We have high expectations for the Golden Sample effort within our Specialty Adhesives division; and Footwear Adhesives have the potential to continue leading our revenue growth. Average shoe ownership per person in the US & EU is 6 pairs, but it is only 3 in Asia. Top Global and Mainland China brands see Asia, and India in particular, as the next driver for growth in their business. So, while the global athletic footwear industry is projected to grow at 5-6% annually by research firms, our major customers are seeing their footwear revenues grow faster than that. As our branded clients continue to emphasize innovation, high performance and the use of green materials, we see great opportunities to grow our market share in footwear adhesives even further.”
If you would like to arrange a meeting with NanPao’s CEO Elic Hsu, please contact yvonnehuang@qtumic.com.
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