In the third month of spring, when warm breezes gently caress the air and all things awaken, the earth quietly dons its green mantle. The willow trees, once described as “hanging down countless strands of green silk,” hastily shed their winter desolation to welcome the first signs of verdure. This mirrors the sales performance of Beijing Zhenhengli Printing Machinery Co., Ltd. (hereinafter referred to as Zhenhengli) in the first half of this year. Having weathered the biting winter winds, the company now welcomes a spring brimming with boundless hope! As the market leader in China's single-cylinder printing press sector, Zhenhengli has experienced sales fluctuations over its nearly decade-long history. Yet, following last year's sales winter, the first half of this year has seen a remarkable turnaround! What underlying factors drive this sales recovery? To explore this, our reporter interviewed Mr. Feng Yan, Executive Director of Zhenhengli.
Reporter: Mr. Feng, hello! First, how do you interpret Zhenhengli's improved sales performance in the first half of this year?
Mr. Feng: Hello! The sales recovery since the start of this year stems from multiple factors working together.
First, as the single-groove machine market approaches saturation, we've proactively implemented a series of measures. Currently, China's entire printing press industry faces the challenge of low-level repetitive construction. While production capacity is substantial, added value—including technological sophistication, automation levels, and reliability—remains underdeveloped. At Zhenhengli, we are actively seeking international partners to gain access to cutting-edge technological support. Simultaneously, we are intensifying our investment in independent R&D to achieve breakthroughs beyond our current capabilities. Significantly enhancing efficiency, added value, and per-unit utilization is paramount—not merely pursuing production capacity and quantity!
Second, single-cylinder gravure presses align with cigarette packaging manufacturers' environmental requirements. As national inspections of environmental standards intensify, tobacco producers impose increasingly stringent demands on printing ink odors, solvent residues, and related factors. Eco-friendly machinery is becoming the new favorite among tobacco manufacturers. Among various printing methods, flexographic printing produces fewer residues than gravure printing, yet gravure printing generates significantly less residue than screen printing—the method currently used by many manufacturers! Take Shenzhen Jinjia's Hefei branch as an example: they recently purchased our single-cylinder gravure press to replace their existing screen printing equipment!
Thirdly, the reduction in competitors. Currently, the installed base of single-cylinder gravure machines in China exceeds 500 units. The primary manufacturers of single-cylinder gravure machines are Zhenxiangli, Shanghai Ziming Machinery Co., Ltd., and Shanghai Hairun Printing Machinery Co., Ltd. Shanghai Hairun has recently successfully transitioned into producing inspection machines and exited the single-cylinder gravure machine market! Moreover, based on our own estimates, the combined market share of the two Shanghai manufacturers previously fell below 30%, while we consistently commanded 70%! Thus, the exit of competitors is another reason for our current win-win market situation!
Reporter: Oh, I see! Mr. Feng, beyond the reasons you mentioned, considering the development history of single-cylinder gravure machines in China and your company's journey, what further insights do you have?
Mr. Feng: Over the past 20+ years of China's reform and opening-up, alongside the continuous development of the market economy—particularly the rapid growth of industries like food, beverages, cigarettes, pharmaceuticals, health products, cosmetics, detergents, and apparel—the demand for gravure printed products has surged, with increasingly stringent quality requirements. Consequently, China's gravure printing industry has experienced explosive growth, evolving from nothing to something, and expanding from small to large scale!
The first single-revolving cylinder printing press in China was developed by Taiwanese engineers based on the 01 offset press, priced at over 1 million yuan. It was later installed in Zhejiang Province. The arrival of this press caused a sensation in the printing industry at the time, filling a significant market gap domestically! Industry insiders viewed the single-revolving cylinder press as innovative and highly profitable, with seven or eight companies eager to adopt it. We ourselves were under immense pressure, unable to sleep well at night! Yet competition is beneficial. It was precisely this competitive environment that drove Zhenhengli to excel in both technical capabilities and after-sales service! The rapid advancement of gravure printing has significantly transformed China's printing landscape. Offset printing accounts for 42%, gravure printing 22%, letterpress printing 20%, flexographic printing 8%, and other printing methods 8%. Industry estimates indicate China has over 7,000 gravure printing and related enterprises. Among these, more than 2,000 specialize in folding carton gravure printing for cigarette packaging. Yet, only three manufacturers produce single-color gravure presses primarily for cigarette label printing. Shanghai Hairun's exit further reduces this number! Statistics also indicate that China has approximately 2,200 cigarette brands. In 2002, cigarette production reached 34.3 million large cartons, generating nearly 140 billion yuan in annual tax revenue for the state. The annual output value of cigarette packaging printing is about 9 billion yuan. Despite recent national adjustments, production volumes remain substantial. Since its founding in 1999, Zhenhengli capitalized on the high demand for single-color gravure machines in the cigarette label sector, achieving rapid growth. The first prototype was launched in November 1999, followed by successive second, third, and fourth generations. Sales surged in 2003 and 2004, reaching an annual output value of 30 million yuan by 2006! By this point, we had accumulated substantial customer resources and capital, prompting us to purchase land and prepare for constructing our own new factory. The newly commissioned facility, located in the Songzhuang Town Industrial Park of Tongzhou District, spans 30 mu (approximately 5 acres). It features an 8,000-square-meter production area, 4,000 square meters of office and auxiliary space, totaling 12,000 square meters of gross floor area. However, sales in 2007 dropped to just 15 million yuan, presenting an unfavorable outlook. This was primarily due to the national tobacco industry consolidation since 2004-2005, which shifted manufacturers' preferences toward machines suitable for rotary printing. This oversupply situation forced us to adjust our strategy, entering a comprehensive restructuring phase. It's like the stock market—there are ups and downs!
Reporter: Adjustment period? Chairman Feng, could you elaborate?
Chairman Feng: Indeed! Zhenhengli has now entered a new phase of restructuring, though certain core elements remain unchanged. Take our single-depression machines, for instance. Mention single-depression machines, and Zhenhengli comes to mind; mention Zhenhengli, and single-depression machines follow. “Zhenhengli” has become synonymous with single-depression technology! In cigarette packaging factories, you rarely see domestic machines—but if you do, it's definitely Zhenhengli! This is the result of our collective efforts over the past decade, and we won't relinquish our position in single-depression machines lightly! Our adjustments focus on minimizing the gap between our machines and customer expectations, ensuring our equipment meets client requirements to the greatest extent possible.
Additionally, we're prioritizing exports as a key future growth area! To date, Zhenhengli has exported a total of 15 machines, primarily to Southeast Asian countries such as Cambodia, Vietnam, India, and Lebanon. Correspondingly, we will intensify our efforts toward product internationalization, including enhancing product stability and gradually standardizing machine models globally. For instance, we will increase production of the 1020 model, as this large-format printing machine is in demand not only overseas but also in provinces like Guangdong.
Finally, adjustments have been made in the company's staffing practices. With the implementation of the new Labor Law, not only the printing industry but all employers have introduced new measures in their employment mechanisms. Due to declining sales, Zhenhengli initiated workforce reduction and efficiency enhancement efforts last summer, which will continue this year. However, we strictly adhere to the provisions of the Labor Contract Law in handling both dismissed employees and the compensation of current staff! This includes severance packages for dismissed employees, training programs, career planning, and social security benefits for those remaining. Crucially, there's been a shift in our employment philosophy! Zhenhengli has transitioned from primarily hiring externally to focusing on internal development, fostering a mutually beneficial relationship with our employees. We practice two forms of sharing: “sharing wealth” and “sharing knowledge and experience”! To date, I have personally mentored three vice presidents and one general manager. Regardless of whether these individuals remain with Zhenhengli, we have collectively contributed modestly to the industry and society. As Konosuke Matsushita of Japan once stated, “First comes nurturing people, then comes producing products.” Zhenhengli is striving to become a respected enterprise!
In summary, we remain humble despite our current favorable sales momentum. Moving forward, Zhenhengli will persistently enhance product R&D, improve after-sales service, and build bridges of trust with clients through integrity. We firmly believe that “Quality First, Integrity as Foundation, Technological Leadership, Continuous Improvement” will guide Zhenhengli toward an even brighter future!
Reporter: Excellent. We wish Zhenhengli every success in achieving this vision! Thank you, Chairman Feng, for granting us this exclusive interview!
Chairman Feng: You're most welcome! Thank you as well!
Company Background: Founded in 1999, Beijing Zhenhengli Printing Machinery Co., Ltd. is headquartered in Yousige Tower, Chaoyang District, Beijing. The company specializes in manufacturing double-size sheet-fed gravure printing presses and double-size sheet-fed flexographic printing (coating) presses for carton packaging. Equipped with advanced manufacturing processes and modern scientific management, the company boasts robust technical expertise and a comprehensive after-sales service system, including dedicated departments for training and maintenance. Its printing press demonstration center offers users full-service solutions including proofing and training. Sales and service networks are established in major cities nationwide. The company has been honored with the “National Outstanding Packaging Enterprise Technology Innovation Award” by China Packaging Corporation and the China Packaging Technology Association, and recognized as a “High-Tech Enterprise” by the Beijing Municipal Science and Technology Commission. Its YA1A1 double-sheet web gravure printing press was designated a “National Key New Product” by five national ministries and bureaus, and received the China Packaging Corporation Science and Technology Progress Award.