I have always been of the opinion that there is nothing as costly as stagnation in an industrial enterprise, more so in the Indian label industry. There is either growth or recession; anything that stagnates starts to deteriorate. Growth or change is inevitable and an imperative part of any enterprise.
The industry maybe facing momentary slowdown due to circumstance, but on a year-on-year basis, the label industry continues to register nearly double-digit growth. The slowdown in the manufacturing sector is expected to end and the economy is slated to lookup once a new stable government takes charge after general elections. India has no dearth of investors who drive growth in an industry that registers automatic growth consistently. Not all growing industrial segments experience the entry of new entrepreneurs besides expansion moves from existing companies.
There are at least three types of expansion initiatives in the Indian label printing industry: First, it is the existing printers who, in response to the need of their natural growth, have to invest in new capacities. Secondly, it is the commercial offset printers facing slowdown due to the impact of the internet, who are expanding into the label industry. Then, it is the new investors who are flush with funds, maybe due to some real estate deals, who have no knowledge of printing but on hearsay or with prospective partners, make investments in label presses.
With investments growing in an unregulated environment, it is likely that there is creation of excess capacities. The pressure to break even for the new entrants into the industry escalates and they start making desperate sales, bringing down prices, and putting margins under pressure. This creates difficulty for existing, established printers. As a result of this situation, we find printers complaining of a slowdown and difficult situations arising out of haphazard capacity growth.
Despite such situations, the label market has segmented substantially and each segment has individually started to branch out and register growth (which translates to overall growth on a national level). However, due to reasons explained earlier, the industry is cautious but still growing.
Segmentation of the self-adhesive label industry is a very important part of its growth and evolution.
Previously, a label printer would indulge in all types of stickers. These include plain stickers to printed, hot foiled and decorated labels. With the passage of time and investments being made in high-end equipment, it has all changed. The sticker became an engineered product called label. The size of the label industry is measured largely by the amount of labelstock consumed by it. The industry is segmented into various segments like the plain labels or variable information labels, pharma labels, product (FMCG) labels and the innovative/security/special labels.
Strange as it appears, the largest consumption of labelstock comes from a segment that has the least investment in equipment and the least margins. The plain label or the VIP label segment producing price or gun labels, A4 labels and barcode labels accounts for the largest share of labelstocks consumed in self-adhesive labels. This also is the segment that has the lowest margins, due to less value addition.
Converting these does not really need very high-end machines with enhanced capabilities, neither does it need the expensive slitting and inspecting equipment. Most of the time, converters are just diecutting and finishing. These converters are always under pressure to drive in large volumes to stay afloat due to decreased profitability. With low initial investments (and because of new entrants into labelstock manufacturing ready to fund their working capital needs with required raw material on credit), there is a rapid growth in the number of entrepreneurs in this segment. It is interesting that with so many new entrepreneurs, even though in the micro and small sector, they are likely to eventually settle down and start growing to higher levels providing further impetus to the growth of label industry.
The pharmaceutical labels and product label segment is perhaps the face of the self-adhesive label industry. It is responsible for producing the highly engineered, converted and decorated labels. This segment accounts for bulk of the investments made for acquiring sophisticated European and American branded label presses. The label printers make huge investments to upgrade their capability not only in printing, but also in expensive inspection and quality enhancing finishing equipment to meet the exacting demands of their customers. These days, it is a difficult situation for the established players when they are pitched against new entrants who in their efforts to service their investments are ready to forego margins and create intense competition in the marketplace. This makes it difficult to justify returns on investments. This may appear to be a win-win situation for the print buyers. However, in the long run these new entrants may not be able to sustain their customer’s demands for quality control, tight schedules and short runs that cannot be catered to, in view of reduced margins. The pharma sector has in recent times faced slowdown due to circumstances at a global level. However, in view of the growing health concerns of a large population locally, this sector cannot remain down for a long time. It is thus that printers continue to invest even while exercising caution and restraint.
The top end of the label industry these days seems to be a miniscule segment that is foreseeing high growth and higher margins. It also is attracting the highest investments in equipment with multiple capabilities in combination printing processes, decorating and diverse converting methods. For obvious reasons, there appears to be less competition in this segment. This segment is perhaps the most innovative for its indulgence in creating products that stand apart from the mainline products. Some of the label products that this segment offers are: high security labels, booklet labels, lottery labels, document security, etc. Printers in this segment have acquired and continue to acquire additional capabilities like producing linerless labels, online siliconizing and gumming. This enables them to print subsurface or on surface. The equipment they possess has capabilities to shuffle between self adhesive labels, shrink sleeves, lamitubes and folding cartons. They have access to diverse printing and converting capabilities on their expensive equipments.
The Indian label industry is now extremely diverse in its spread across the nation. I have attempted to estimate the number of presses installed in the preceding year. It is my personal estimation after interaction with industry peers and machine suppliers. I have also relied on press reports. Samir Patkar, MD of Gallus India stated at Labelexpo Europe2013 that Gallus had sold nine presses in 2013 and hoped to close the year with 10-11 press installations. Manish Kapoor, sales manager at Nilpeter India confirmed sale of six Nilpeters. There are other sales made by Mark Andy, Omet, Gidue, etc.
According to Gaurav Roy, whose company FIG sells the Mark Andy presses, they have sold eight presses in the last year. Says Gaurav, “We have over 150 Mark Andy installations in India. The trend is changing now; with printers opting to buy the high-end performance series, the number of installations per year maybe coming down but the value of equipment has risen."
In my personal opinion, about 30 label presses from the established western suppliers have been installed in India in the last twelve months. Ahmedabad based Manish Hansoti selling Chinese Zonten presses has confirmed the sale of five flexo presses and 13 diecutting machines. Though the diecutting machines cannot be termed as label printing presses, they contribute to the usage of labelstock and eventually growth of label industry, so I will include them in the grand total of label converting equipments.
Installations made by the Amit Sheth led Label Planet and their Asian principals are almost 14 Weigang flexo presses and 25 rotary diecutting machines. As for the Indian press supplier,s Jandu has sold 12 presses. Ahmedabad based R K Label Machines says they have sold a total of 22 label presses, which is a mix of flexo rotary and flatbed. According to Amit Ahuja of Multitec, they have sold a total of 16 presses out of which four have been exported. There are other Indian machine suppliers, but their contribution is miniscule. I estimate the total number label presses and die cutting presses that would convert labelstocks into labels is in excess of 140 that would include other local presses and the used presses coming in. Out of this grand total more than 50 machines are plain diecutting presses, but as I mentioned earlier, since they play an important part in the total usage of labelstock in India they have to be considered in estimation. Moreover, it is the basic entry point at the micro level for people entering the label industry.
The Indian label industry would have ended the year on a very positive note and registered higher investments and growth rate but for the exchange rates having played the spoil sport. Before Labelexpo Europe last year, all looked very good but when the rupee fell by almost 15% making equipment costlier, label printers put purchases on hold and also many of them put off their trip to Brussels. Another factor that has been responsible for slower growth is the political instability of the central government facing the nuances of coalition politics. Also FDI going on hold in anticipation of stability after the general elections this year impacted the economy adversely. However, the Indian label industry is still moving ahead with caution to achieve growth and cater to a market that still has a lot of potential.
Harveer Sahni is Managing Director for Weldon Celloplast Limited, a manufacturer of pressure sensitive materials in New Delhi, India. Harveer blogs about the label industry here.