Disrupt Before You Get Disrupted – Toly CEO Andy Gatesy

Marie-Claire Grima - 15th March 2018

Toly CEO Andy Gatesy shares his views about reinvention, re-shoring and the revolutionary changes shaking up the manufacturing industry.

Manufacturing is not an industry that generally tends to evoke images of futuristic glamour, but a visit to Toly’s innovation centre in Bulebel will quickly change that. Think of almost any beauty brand, from high-end luxe products to budget-friendly pharmacy standards, and chances are that its packaging was devised here in Malta. Toly, which creates innovative packaging for the beauty industry, counts 21 of the top 30 beauty brands in the world amongst its clients. It has offices all across the US, Asia and Europe, and factories in China and South Korea too, but the business is led from Malta, where talented designers dream up the beauty packaging that will dominate virtual and real retail shelves in the months and years to come.

Toly was founded by a Hungarian toolmaker named Zoli Gatesy, who fled from his homeland after the 1956 revolution and was accepted as a political refugee in the UK. By the mid-1960s, he had established his own company, building tools and injection moulding for the toy industry, but due to strong overseas competition and worsening labour relations in the UK, was forced to consider an alternative manufacturing location. He and his partners chose Malta, and set up the factory in 1971, which was the first to open up in what is now the Bulebel Industrial Estate. Although the company started out as general trade moulders, by 1975 the firm had developed a number of custom compacts for the European cosmetics industry, so Dr Gatesy decided to focus the company’s energies fully in this field.

“In 1991, I’d estimate that Toly was a €7 million business,” says Andy Gatesy, who took over the company from his father as Chairman and CEO 27 years ago. “We hit €90 million in 2017, growing 29 per cent in that year alone. Our target for this year is to hit €100 million – we thought we’d do it by 2020, but we’re now three years ahead of our goal. Building this innovation centre changed our business. We used to have one customer per month visiting the factory, but nowadays, we have three every single week. When they see what we can do in our innovation and design workshops, they all want to partner with us.”

Mr Gatesy says that Toly – which last year won the overall award in the first-ever Malta International Business Awards organised by TradeMalta – is a business that’s reinvented itself multiple times. “We’ve disrupted the traditional packaging business over and over again. In the 1970s, my father used to say Toly was an engineering business. In 1991, I said, ‘we need to change our thinking’ – so we presented ourselves as packaging suppliers that could create a beautiful package for our clients.”

“As of 2017, we’re different again – we’re now a solutions provider to the beauty industry. We believe we are the most creative team in this industry, and how have we achieved it? By investing constantly in innovation and creativity. For us, innovation consists of linking new trends with technology with different ways to improve the consumer experience. Our innovation centre moves directly in line with the way the fast beauty industry is growing, and that is why we’re growing – we’ve managed to create a really agile, diverse business model.”

More than one in every 10 people in Malta work full-time in manufacturing, making it the second-biggest sector in terms of employment in Malta, and Mr Gatesy believes the industry is at the start of a renaissance.  “Manufacturing in Europe was very tough for a number of years. There haven’t been any new factories built in Malta for 10, maybe 15 years, but all that’s changing. There’s a buzz because of what’s going on, and you can feel it. We’re investing €15 million in opening our second factory in Malta, and so are a number of other manufacturers in Malta, including Playmobil and Crane Currency.”

Why is the revival happening now, when so much of Malta’s economy seems to be focused on the tertiary sector? “There are a number of reasons why this is happening. First of all, when we opened up China in 2005, the labour cost was 1:11 – the ‘China price’. China was the factory of the world. Today, the labour ratio has risen to 1:2, so costs have gone up a lot. Second, there’s the dollar-euro exchange rate, which went from 1.4:1 to 1.1:1 USD vs EUR. At 1.4:1, Malta was around 30 per cent more expensive, but at 1.1:1, a lot of this price difference was wiped out. When you take into account freight and duty, businesses started to realise that products in Europe can be made at almost the same price. Third, there’s the issue of supply-chain agility. The time it takes to have products made in China, put on a boat, and sent here is around six weeks, and in industries like ours, where so much depends on agility and immediate reactions to trends, that length of time is unacceptable.”

“Fourth, lots of companies are starting to re-shore. We’re hearing the same thing from lots of different brands. The world is adopting a more protectionist approach – look at Brexit, and at Donald Trump – he’s encouraging manufacturers to stay in the US, talking about trade tariffs, and building walls. The shift to offshore is turning around. Last, there’s the question of sustainability. Many brands are saying that they want to make a serious commitment to sustainability. Is it sustainable practice to make products halfway across the world and then ship them back to your country just because it’s cheaper? Of course not.”

Mr Gatesy is realistic about the challenges facing the industry in Malta. “It’s tough to manufacture here because we have some major disadvantages. Locally, we have no suppliers and we have no customers. We have to import all our raw materials, convert them into products and export them again for sale.” Additionally, while he believes that Maltese authorities and Government bodies are generally supportive of the industry, he says that the European Union’s rules can put a damper on growth.

At the same time, he believes that Malta has a number of unexpected advantages, including its miniature size. “Size can be an advantage if you use it the right way. With our new factory, we’re giving up three units because we’re going higher, rather than wider. You can easily triple Malta’s manufacturing facility by building up instead of out. Plus, with Malta being so small, everybody on the island is an active stakeholder in order to make the country more successful. And don’t underestimate the skills of the Maltese workforce either – Maltese people are smart, hardworking, loyal, talented, and creative.The only problem I see is that with the new factories opening up, each company will by trying to take each other’s people, particularly those who are technically skilled, at least until the equilibrium settles down. We’ve been very vocal in saying that we need to relax the restrictions on bringing in people, both EU and non-EU nationals, and allowing them to work here – otherwise we’ll be choked.”

The major developments that Mr Gatesy believes will have an impact on the long-term future of manufacturing include increased awareness and outcry about plastics pollution – “there’s a whole industry that can disappear if certain materials are banned”; advances in 3D printing technology – “I’m convinced that in 20 years, our entire manufacturing process will have been replaced with 3D printing”; and China’s new role in the global manufacturing landscape, as it now focuses on developing its own internal market instead of making products to sell to the rest of the world.

“As long as Malta finds a way to support manufacturing and offset the disadvantages, I believe there’s a good future for manufacturing on the island. But if it doesn’t, if it ignores manufacturing and doesn’t invest enough in it, there’s a good chance manufacturing will disappear completely. We’ve seen it happen in the UK – it could happen here, too. We have to disrupt, before we get disrupted.”

This interview originally appeared in The Commercial Courier


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