A Shot in the Arm
CME explores opportunities in packaging solutions for midsize and small tobacco companies and in areas like format changes, spare parts and mechanical and electrical upgrades with larger tobacco players. | Photo: CME Automation Systems
Boosted by a significant private equity investment, CME Automation Systems is strengthening its offerings to the tobacco industry and other sectors.
By George Gay
In October, Tobacco Reporter had the opportunity of speaking with Paul Knight, the CEO of CME Automation Systems, which, two months earlier, following the receipt of what it described as “significant backing from private equity,” had announced in a press note that it would be looking to invest in strengthening its offering to its international customers in the pharmaceuticals, cannabis, tobacco and other fast-moving consumer goods (FMCG) sectors. Following are excerpts from our conversation.
Tobacco Reporter: Is there overlap as far as you are concerned in the concepts underlying the technologies and performances of the machines used by the pharmaceuticals, cannabis, tobacco and other FMCG sectors, if not in the machines themselves?
Paul Knight: The overlap is in some of the underpinning technology, not in the specific machine platforms. Some of the technology overlap is in our concepts for product handling, filling and packing. Our passion is for helping drive industries forward by improving production optimization.
Will the investments specifically in tobacco machinery technologies form a significant part of the overall investment?
We will definitely be expanding our offerings to the tobacco sector as part of our investment program, much of which will be around life extension and aftermarket support products.
Does this mean that you have confidence in the longevity of the tobacco industry? Or do you think that with the right developments CME can increase its share of a decreasing market for tobacco packaging equipment?
Yes, we do have confidence in the longevity of the tobacco industry, and we have confidence in our ability to increase our share of the marketplace with our new investments in mind.
When you talk of the FMCG sector, do you include vaping products, or do they comprise a sector that you do not serve or intend to serve?
Yes, we do work in both vaping and heat-not-burn sectors and anticipate strong growth as consumers move in bigger numbers toward these products from combustibles.
Where will the overall investment be targeted mainly—at taking on more engineers, perhaps, obtaining new design tools, or investing in artificial intelligence (AI)?
The investment is being targeted in several areas, particularly marketing, sales channels, new product development and existing product enhancement.
In what areas, if any, does AI play a part in your overall operations or will play a part in the future?
AI is starting to make an impact in the administrative areas of our business, and over the next several years, we will see it start to make its way onto machine platforms for predictive maintenance and self-diagnosis.
Will you be investing in new facilities, perhaps outside the U.K., given the challenges thrown up by Brexit?
Yes, we will be looking to move elsewhere within the U.K. over the next one [year] to two years. But in all honesty, Brexit has not been an issue for CME outside of customs-related administrative changes.
Is this a brave time for an international player to be looking to expand, what with the various challenges facing manufacturing, including raw materials supply chain difficulties, inflation and rumblings about the demise of globalization?
Yes, it is; there are many risks in the macroeconomic and global political environment, but we believe counter cyclic investment is a good play for CME at our current stage of development.
In the August press note, CME said the new investor had identified “the potential to build on CME’s expertise and reputation for innovation, especially given the company’s recent success in developing new solutions for growth markets such as cannabis and clinical trials.” Could you describe briefly what form these successes took?
For clinical trials, we have developed a system called PACE, which is designed to automate clinical trial provisioning for multinational pharma companies. Our first customer is a consortium including Astra Zeneca and GSK. This is a huge opportunity for CME’s future. In the cannabis market, we now have our widest product portfolio and plans to put a footprint in North America.
Would you describe CME as a medium-sized player in the tobacco packaging field?
Yes.
How else would you describe CME?
CME is a business that is passionate about innovation, solving problems for our customers and markets, adding value to their businesses and ensuring their future success.
The press note mentions bespoke machinery. Do you regard this as one of your main strengths in the tobacco packaging field?
Bespoke machinery design and build is a strength of CME’s, but we do relatively little of this in the tobacco packaging sector.
What are your other strengths in this field?
A broad range of high-quality standard and flexible machinery products that cover the range of needs from small independent producers to multinationals up to 400 packs per minute.
Do you see change coming in the environment in which tobacco packaging machinery companies compete?
Change in our sector is already well underway! I think in terms of new packaging machinery, demand is moving toward higher speed equipment, particularly in the multinationals. We are not in the high-speed segment, so this leaves us to explore lower speed packaging in mid-size and small tobacco companies globally and in areas like format changes, spare parts and mechanical and electrical upgrades with larger tobacco players. There is also clearly a geographical demand shift away from developed economies to developing economies for combustible tobacco products and a shift toward vape/HEBB-style products in developed economies.
The press note does not mention who is providing the investment funding. Is there a reason for this?
The funder wishes to remain anonymous.
The press note does not mention the level of the funding either. Are you able to provide a rough figure?
It is a seven-figure number.
Is there anything else you would like to say about the new investment funding and how it will affect CME’s future?
The investment represents a new dawn for CME and our ability to focus significant investment capital on our target markets via new product development and product enhancement. We could not be more excited to have a committed investor that believes in our ability to grow into the future.
