2009 Year End Shareholder Update
Jan 6, 2010 12:20:00 PM
Dear Shareholder,
2009 was a challenging year for Biopack Environmental Solutions. After a tumultuous 2008 during which we settled into our new factory in Jiangmen, China, we found ourselves in the midst of the fallout from the global financial crisis. Although difficult at times, we are pleased to report that we came through the year with a continued sense of optimism as we were able to achieve important goals and objectives that we had set for ourselves.
We made solid headway at our new seven acre factory. In the latter part of the fourth quarter of 2008 we completed the installation of a new seven stage water treatment facility, increasing efficiency and reducing fresh water consumption. This process allowed us to move into the manufacturing of colored product in an environmentally friendly manner as water could then be treated and reused. These and other new product advancements created additional differentiation in the marketplace and helped us win new business. As we broadened our product offering and established real operational efficiency we focused on pursuing a focused market expansion which included opening new distribution channels in the US, Canada and Asia.
Looking forward to 2010, we intend to continue to add exciting new products, most importantly our “coated” or barriered offering, a first to market product that opens up new and lucrative sectors such as frozen food, meat and others. We also look to aggressively expand our marketing presence worldwide. We have had solid success in Europe and we plan to continue to work with our valued partners as we move into our next market expansion phase. We look forward to growth in the North American markets as well as Asia and Africa and, as we reach the second half of 2010, we hope that order volume will drive us towards further expansion of our production capabilities.
Market Outlook
In its current Sustainable Packaging fact sheet, Industrial giant E.I. DuPont Nemours and Company estimates that growth in sustainable packaging should reach 25%-30% per year, compared with the overall packaging industry's anticipated growth rate of 4%. DuPont notes that 44% of consumers say their ‘green’ buying habits remain unchanged despite the current economy, and a third of consumers say they are more likely to buy green today than previously.
This is consistent with another new study from Pike Research, which says that sustainable packaging is a fast-growing segment of the global packaging industry that will grow to 32% of the total market by 2014.
Clearly Biopack is in a fast growing market, and we are reassured that environmental issues continue to be at the forefront of global policy and consumer concern.
Expansion
In July of 2009 we announced that we had entered the United States packaging market through our US distribution partner, Biopack America.
In the United States, consumer and legislative trends appear to be supporting a switch to biodegradable packaging products; cities such as Seattle, and 30 municipalities in California (including San Francisco) have recently banned or restricted the use of Expanded Polystyrene (EPS or more commonly known as Styrofoam) in "to-go" containers. We believe that this evolution towards environmentally friendly products, coupled with widening political support for the restriction of polluting products, makes the landscape for sales growth in the US for sustainable, eco-friendly packaging ideal.
During the year, we announced the addition of a Canadian distributor. We were also proud to achieve entry into the Asian sustainable packaging market, through sales of our green fruit trays to city’super, which is a high end supermarket chain with stores in Hong Kong and Taiwan. We are excited by this development, as the Asian market for our superior product appears to be maturing faster than we had anticipated.
Innovation
Perhaps our most significant achievement of 2009 was our reaction to a customer order for a water resistant or "coated" tray. We designed, tested, manufactured and shipped this new custom-made coated fish tray upon request to meet the packaging needs of a large international food retailer. Our eco-friendly, 100% biodegradable and compostable coated fish tray was specifically made to complement an existing product within this retailers Sustainable Seafood Program, a 10-point policy which dictates how seafood is purchased and sold based on social, ecological and economic considerations.
We spent considerable resources to develop this coated tray; we believe that our response validates a demand that we had identified in the market for a more water and moisture resistant tray for large retailers and represents a significant new market opportunity for our company. Sustainable packaging for this new large market segment includes frozen food and entrees, ready-made meals, fresh and frozen meat, cut fruit and vegetables, baked goods and, of course, the seafood market. Our coated trays deliver advantages across a wide spectrum of applications and are presently undergoing evaluation from food processors of multiple industries in both Europe and North America.
For example; mushroom trays, a large market segment that lends itself well to the adoption of sustainable packaging in this segment. Testing has proved that our trays have an advantage over conventional petroleum-based packaging as well as other uncoated fiber based packaging. A carefully formulated coat weight on our trays balances the need to permit moisture vapors to pass through the packaging against the need to control absorption and prevent spoilage of the contents or the rigidity of the new innovative tray. If successful this would represent a true advancement in the sustainable packaging of a multi billion dollar produce category and represent a first mover opportunity for Biopack.
Product diversification and the ability to adapt to corporate and consumer demand will remain at the forefront of our new product initiatives. Our research and development department will continue to push forward in developing innovative solutions for our customers’ needs. At present, several new and exciting projects are under development for new and existing customers alike.
Topsealing
In early results from European test labs, transparent film has been successfully sealed through the application of heat to the tops of our trays allowing customers a number of packaging options previously unavailable. This film is peelable by hand, but does not lose its bond through regular handling. This is something that had previously not been possible with molded fiber products without using a plastic coating on the tray, defeating the sought after sustainable, compostable and biodegradable standards that we strive to achieve.
A topsealed tray has many benefits. Consumers are able to see the contents of the tray with the added bonus of an air tight seal. This is a preferred presentation style for many ready-made and frozen meals. This also has potential applications for industrial packaging where consumers demand to see the product inside, yet security in the packaging is required for retailers. Suitable partnerships are being formed with lidding film makers to jointly test and commercialize this technology for the sustainable market. During the coming year, we hope to be able to offer this completely biodegradable, compostable and sustainable topsealing solution to customers seeking these packaging options.
MAP
One of the largest costs to retailers is spoilage. Modified Atmospheric Packaging, or “MAP”, is a packaging style that allows the oxygen inside of a package to be replaced with a nitrogen mixture to slow the aging of the contents. MAP is growing in popularity and we intend to continue to focus research and development efforts on MAP.
Outlook
We anticipate a successful 2010. We have taken the necessary steps to expand our production, our product offerings and increase margins with diversification into other areas of the packaging market.
The global market for environmentally friendly packaging continues to grow at a fast rate, and we are now positioned in Europe, North America, Asia and South Africa. During the coming year we hope to further expand our sales and development of existing as well as new markets; increasing our penetration and product offerings there.
2010 will be a year to focus on increasing production, maximizing our efficiency, continuing to lead through innovation and growing our company into one of the dominant players in the global sustainable packaging market.
Sincerely,
Biopack Environmental Solutions
Gerald Lau
CEO
Safe Harbor
All statements other than statements of historical fact that are included in this update and that mention activities, events or developments that we believe may occur in the future are forward-looking statements. The use of words such as "anticipate," "continue," "estimate," "expect," "may," "project," "should," "believe" and similar expressions are intended to identify forward-looking statements. Forward-looking statements in this letter include statements concerning Biopack’s intent to grow its markets and add new products, its anticipation that order volume will increase to a level that would require expansion of its existing production facilities, that there are significant growth opportunities in the coated tray, topsealing and MAP market segments, its ability to continue to react to the need for innovative solutions to customer needs and its anticipation of a successful 2010. Forward-looking statements are subject to known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. Risks that might cause actual results to differ from these projections include, but are not limited to, those discussed in Biopack's most recent Annual Report on Form 10-KSB and other documents filed by it from time to time with the U.S. Securities and Exchange Commission.
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