Web Exclusive: India Label Summit
A fast growing label market in a strong domestic economy is pursuing avenues to ease participation in the global marketplace.
By John Penhallow
First the good news: The label industry in India is growing at 20 percent per year — admittedly from a very low base of around 500 million square meters of pressure sensitive labelstock in 2006. India’s gross domestic product last year grew by 9 percent (against 3 percent growth for the USA), and the government in New Delhi is pursuing a cautious but consistent program of reducing tariffs and removing barriers to foreign ownership.
The downside for US or European exporters of label presses, equipment and rollstock is first that tariffs still protect the local producer (for labelstock they are 10 percent) and second that local machinery producers, profiting from low wage levels, are offering label presses and other equipment at rock-bottom prices. Most Indian label converters will admit (grudgingly) that Western made presses and labelstock are superior in quality, but all too often they will not pay the extra to buy higher quality, imported equipment.
Nilpeter’s Dilip Shah spoke about the benefits of UV flexo to Indian converters.
Alone among major international labelstock manufacturers, Avery has its own coating plant in India (and is rumored to be planning a second one, in Mumbai). UPM Raflatac recently enlarged its slitting and distribution center, and is also said to be preparing to invest in a coating operation.
Recent surveys by Tarsus show label converters worldwide to be a surprisingly healthy lot: Two thirds of those surveyed reported pre-tax profits in excess of 10 percent of sales. Outside North America and Europe, label converters tend to be better artisans than businessmen, indicating a need for much more emphasis on appropriate training and education both for technicians and for managers.
Indian end users lay down the law
Avijit Das and Ravi Shankar are label and packaging buyers for GSK and Reckitt Benckiser, respectively. In a panel discussion they told delegates what Indian end users demand from their label suppliers. Unsurprisingly, this is pretty much what label buyers want in the United States and elsewhere: quality, consistency and price. But India being India, both speakers regretted that standards and specifications are not taken seriously enough. What none of the speakers at the summit mentioned — it would not have been diplomatic — was that the Chinese, all 1.2 billion of them, are starting to take international standards seriously indeed. Unless India’s businessmen and manufacturers change their ways, it will take more than the Himalayas to stop India’s rival to the North from elbowing them aside wherever there is the need for high quality and low wages.
As executive director of Pepsico India, Pradeep Sardana needs no lessons in thinking globally. He reminded delegates to the summit that FMCG manufacturers are interested in getting new products to market in the shortest possible time. Digital proofing, not used yet in India, would have to come, and failure to match international quality standards would put label converters out of business. He saw no prospects of RFID tags being used in the Indian market for the foreseeable future. “Let’s get bar codes introduced first,” he said.
Sardana warned of the dangers for India’s converters of modeling themselves too closely on the West. “Benchmarking is useful, but the benefits of low-wage costs and the obstacles of inadequate infrastructure mean that India is marking a different bench.”
When the retail revolution comes
India’s retail sector today is almost entirely traditional. Even in Delhi and other major cities, supermarkets are rare and street vendors and mom-and-pop stores dominate the retail scene. But change is on the way. Germany’s Metro Group (food retailing) and UK’s Marks & Spencer (clothing) both have feet in the door. Wal-Mart and Tesco are known to have plans to roll out hundreds of retail outlets throughout India. Political opposition to this retail revolution is still strong as small traders see their livelihood threatened, but most analysts agree that change in the Indian retail sector is now inevitable, and the only question is how fast.
Raj Srinivasan, general manager of Avery Dennison India, caught delegates’ attention with this shocker: “For the label business, India no longer exists.” He went on to argue that globalization and trade liberalization have already brought India out of protectionism and self-sufficiency and into the global economy. The invisible hand of the world market will increasingly determine label converters’ destinies, and what plays in Peoria will henceforth play in Bangalore and Bombay. The self-adhesive label business, said Srinivasan, is technologically mature, but that makes it even more essential for converters to innovate. Label end-users are everywhere saying, “Come to me with innovative solutions,” and in India as elsewhere converters must get the message across that what counts is not the cost of the label but the “total applied cost” for the end user.
In one respect, India is happy to take second place to China, and that is in counterfeiting major brands. India has a rigorous legal framework for protecting intellectual property, but getting a court injunction or judgment is a long and tortuous business and unscrupulous copiers exploit this to the full. Alex Stevenson, founder and CEO of Intercolor, explained to the audience how specialty inks can provide low-cost protection against counterfeiters. High luster pigments and special metallic finishes on labels tend to result in fake products standing out, while for more elaborate protection, thermochromic and photochromic inks not only distinguish the genuine from the fake, but also act as a powerful marketing tool. Most of these specialty inks, said Stevenson, are available on the Indian market.
Major US and European label press manufacturers were present at the summit in force, all anxious to get their slice of the action in this expanding label market. Paul Mattle, international marketing manager for the Swiss based Gallus Group, expounded the “Total Cost of Ownership” concept, which aims to quantify such parameters as maintenance costs, makeready times and press speeds into the investment decision.
Dilip Shah, who heads up Nilpeter’s operation in India, had sensible advice to the label converter wondering what print technology is best suited to their needs. He advised against buying too complex a press, suggesting UV flexo as possibly a good choice for the smaller Indian label converter, offering higher quality than water based flexo, and without the risk of ink drying on the plates and rollers. Offset gives the highest print quality, as well as the most economical prepress costs, but the offset label press represents a bigger investment. Like the previous speaker, Shah emphasized the need to look at all the relevant costs before deciding on the best press to install. Mike Russell of Mark Andy sang the praises of narrow web flexography, and he did it with gusto. While not neglecting pressure sensitives, he extolled the prospects for wraparounds, shrink sleeves, folding cartons, and pouches to meet the future needs of the Indian label and packaging industries.
There were several forum discussions during the two-day event. A panel of Indian label converters fielded questions from the floor about training and about wage levels. A lively discussion resulted in several concrete suggestions being aired. Another forum placed representatives of four equipment makers (Omet, GIDUE, Nilpeter, and Gallus) on the podium to answer questions on a range of technical and commercial subjects, including financial packages, outsourcing and the inevitable (and unanswerable) question, “Why do so many equipment suppliers always promise more than they deliver?”
In what amounted to a full and rewarding two-day event, delegates also heard presentations on prepress (Esko), tamper-evident foils (Kurz), UV curing (GEW), cold foiling (Nilpeter) and digital label printing; and they still found time for a networking cocktail evening as the sun set over the palm trees.