SMI Labels and Packaging Materials

Wednesday, January 25, 2012

Indian label industry goes cold, blows hot!

Bottle with self adhesive filmic label

Till the end of the nineteen-nineties, none of the handful of Indian labelstock manufacturers, offered or was able to consistently supply, filmic self adhesive label materials. After 1997, Avery Dennison started to produce or distribute filmic labelstocks in India on an ongoing basis. Till then, most of the high-end label printers supplying to leading FMCG brand product companies like Unilever and P &G were solely dependent on imported materials. Once the availability of these filmic stocks became easy, the market was expected to grow at a faster pace.

Shrink Sleeves

Bottle with Shrink Sleeve

With the start of the new millennium, the consumer product market started to grow with the advent of organized retail catching on in Indian markets. Consumer goods became more sensitive to shelf appeal and this led to growth in demand for self adhesive or pressure sensitive filmic labels. Getting the consumer’s attention became imperative as consumers themselves chose the product from the retail shelves rather than the shopkeeper convincing them to buy a particular product. At the same time shrink sleeves (invented by Fujifilm way back in 1960) started to also gain a foothold in the Indian FMCG product market. Sleeves provided the advantage of 360 degrees graphics and advertising space on the product itself and began to carve out a distinct and high growth market segment. Although pressure sensitive film labels lost their opportunity of gaining big volumes from the expanded market in specific segments, the usage of self adhesive or PS film labels grew and prevailed.

Despite the entry of shrink sleeves, the PS filmic label segment continued to grow at a steady pace of 10 to 15% a year. My own assessment was that at that time of 2000-2003, the overall self adhesive label demand had started to grow at a much faster rate. In the year 2003, in my presentation for the Cham Pressure Sensitive Symposium at St. Moritz in Switzerland, I had assessed that the pressure sensitive adhesive label segment was growing in excess of 25% while the filmic label segment was registering an even more rapid growth. Eventually the shrink sleeve segment carved out a definite market segment for itself and the PS film label segment settled down with a steady growth rate of around over 20%.

Prominent FMCG branded food and cosmetics products, where volumes were large, preferred to use shrink sleeves as they not only provided opportunities for 360 degrees graphics but also were cost effective. This was because the large runs for these product segments could justify the conversion on high speed wide web gravure printing presses. On the other hand labels for products that needed shorter runs continued to use PS filmic labels, as shrink sleeves were not viable for short runs on the wide web machines due to the cost of cylinders and other prepress requirements. In some cases where customers do demand shrink sleeves for shorter runs, the narrow web flexo label printers pitch-in to produce them. Instead of eating into each other’s market share, shrink sleeves and PS film labels have finally settled down as two distinct product segments.

Organised retail.

According to Bhavin Kothari of Interlabels in Mumbai, both products have separate identities and as far as the PS filmic labels segment is concerned, the market is steadily growing at over 20% a year. On a personal note I rate the growth of PS filmic labels at a higher figure of almost 30%. Rajesh Chadha of Update Prints New Delhi says 80% of all the labels they produce are filmic and the segment has steadily grown over the last 10 to 12 years. Gururaj Ballarwad of Wintek Bangalore states that 65% of his company’s produce of labels is film-based and that the growth seems to have accelerated further in recent years with organized retail spreading more widely across the country and consumers demanding better labels and aesthetics. Gururaj adds that PS film labels with highly decorative features give a more elegant and rich look to cosmetics and toiletries and users have started to recognize this. Raveendran of Seljegat, Sivakasi and K K Bajaj of Regal Creative New Delhi also agree that film labels are preferred by FMCG brands these days especially where production runs are smaller.

With the availability of more advanced grades of film label stocks where the gauges have become thinner and squeezability is also built-in, and with thinner release liners being offered, the product is getting upgraded. Even the press and tooling manufacturers have come forward to offer possibilities to convert these new materials. These materials, while they aim to produce better quality labels, will also help reduce the adverse impact on the environment by waste generated in converting labels. A clear 25 micron film facestock on clear 25 micron film release liner will definitely have more labels per roll. The plastic waste generated has better recyclability and will reduce the tonnage going to landfills. With faster growth becoming evident in the film label segment the label industry can sense the heat from thinner film labelstock that uses film liner.

Winter chill

In the beginning of 2011, the Indian label industry was in a buoyant mood. Printers were nearly unanimous in their opinion that the self adhesive label industry was growing and doing well. Every industry that is registering growth needs to increase their capital investments in new machines to upgrade to the latest technologies and to enhance capacities. In the words of Amar Chhajed of Webtech Labels Mumbai, “If we plan to grow 40% in a year, we have to make capital investments in new equipment and enhance capacity to produce 40% more!” As we came nearer to the middle of 2011, the news of a second slowdown in Europe made the industry go cold. There appeared to be a little lull in the industry even though everyone was convinced that the label in India will sustain growth year after year. The industry seemed to have pressed the ‘Pause’ button.

Since the Labelexpo Europe at Brussels was fast approaching, printers wanted to divulge their expansion plans and decide on equipment only after watching the latest on display at the premium show. I have in my overview of the Labelexpo, mentioned that it was busy time at Brussels for the Indian printers as they had big investment decisions to make. We expected investment announcements to start in weeks following the show but the currency situation played the spoilsport. The Indian Rupee value depreciated against the US$ and the Euro. The cost of equipment escalated by over 10% and another chill ensued! Simultaneously as the year ended, the price of labelstock and other raw material inputs also shot up putting additional pressure on margins that were already becoming thinner due to intense competition. End users had both options and offers from existing label suppliers as well as new entrants – they refused to accept price increases. The label industry felt the pinch along with the winter chill.

Hot again!

The 2012 new year brought the news of a slight upward movement of the Indian Rupee and hopes that it would continue to firm up. The demand for self adhesive labels has started to show healthy growth in the last few weeks. Label printers seem to be smiling again and seem to be preparing to loosen their purse strings for many of the investments that have been on hold. The confidence level is building up and after having faced the cold, the Indian label industry is almost blowing hot!

Written by Harveer Sahni, Managing Director, Weldon Celloplast Limited, New Delhi-110008 16th January 2012.

Sunday, January 1, 2012

“Gentleman of the Label Industry”

Ananth K Rao
In the early nineties at the first Screen Print Exhibition in Nehru Centre in Mumbai I was standing at my booth in the show when I saw a tall handsome man walking with long steps briskly toward me with another industry friend on his side. As they reached my stand they impulsively stopped and I was introduced to this man Ananth K Rao owner of Stay-on Papers, Hyderabad. I was really amazed by the friendly vibes this man emitted and am happy to say that he became my best friend in the industry that moment onwards. It was later that I realized he was the industry’s best friend. Ananth is a labelstock producer in Hyderbad who ventured out in the field, when the industry was still at a nascent stage and maturing to find acceptability of self adhesive labels amongst the industrial consumers of labels. It was a time when the self adhesive label was still a sticker and was in the process of being accepted as regular label. Wet glue labels were the order of the day. The kind of friendship Ananth Rao extended was exemplary. I remember a very interesting incident. I went to Hyderabad and it was my first visit there to explore the possibility of supplying to him release papers, which he later started to produce himself. From my landing in the town till I departed, he took me around and was the perfect host. He also took me to screen print dealers who were his customers requesting them to buy from me. At one shop where the customer did place the order, I asked for advance payment. While customer refused, Ananth pitched in and offered to pay on his behalf. I was embarrassed and let the order pass. That evening I was invited to Ananth’s house for drinks and later dinner at a famous restaurant. Before we left his home, he went in and brought a packet which he later handed over to me saying that was the advance money and I should send that dealer’s order. I was stunned! How could this man do this without there not being anything in this deal for him? I was overwhelmed by the extent of his magnanimity. It is a matter of record when most labelstock customers of mine started opting out to produce silicone release papers themselves, Ananth forced me to start producing labelstocks and in other terms be a direct competitor to himself! He is an amazing person. Over the years I realized that anyone in the label industry, whether he is a supplier, a customer, a machine supplier, media person or a competitor… Ananth is the natural host for them in Hyderabad. He goes on to offer unconditional help and support. It is for this and many other reasons that I call him, “Gentleman of the Label Industry”.

Born into an agriculturist family with large landholdings, Ananth Rao went to Lawrence School, Lovedale for his basic education until ISCE (Indian School Leaving Certificate) followed by Pre-University course at Loyala College Chennai. He then completed his B.Com. from Badurka College Hyderabad, affiliated to Osmania University, before proceeding to United States to pursue further education in management studies. After completing MBA from University of Florida, USA in 1979, he did a two year stint with Southland, owners of Seven-Eleven Stores before returning home in 1983. Self adhesive labels had caught his fancy and he decided to venture into the field. He initially started trading in Labelstocks procured from another pioneer in the field, Kilaru Prasad of Prasad Accumeter Pvt. Ltd., also based in Hyderabad. Prasad, who also had moved to India from USA where he had worked for Accumeter, makers of hotmelt coating equipments, had taken the agency from Accumeter to sell their products in India. He had also installed an 8 inch wide demo hotmelt coating machine in Hyderabad. While trading in Labelstocks, gave Ananth the opportunity to study the market and help him establish, it also helped Prasad to showcase the equipment to prospective customers while he was producing material. In fact they were both complementary to each other. Prasad was successful in selling two more 8inch coaters one to Ananth’s Stayon Papers and another to Klaas Equipment who later sold it to Interlabels. Thereafter Prasad went full time into producing and selling self adhesive labelstocks.

The initial years into production, Ananth faced many problems. Though technically he had support from Prasad, yet raw materials were difficult to source due to import restrictions and licensing. Release base paper to this date is imported and even Hotmelt adhesive is imported. He found his cost of production higher than his competitors because he was coating 8 Inches width while other units coming up those days were coating 20 inches. His wastages were higher and volumes were low. In 1991 Ananth found his first success when he got orders to supply labelstocks for state excise labels on liquor in the states of Andhra Pradesh, Karnataka and Tamilnadu. As volumes started to swell, it was time for him to move on and expand. In 1994 he decided to integrate backward by investing in a silicone coater and start producing release papers himself, which were outsourced till that point of time. A year later he started to produce Hotmelt pressure sensitive adhesive however presently he outsources most of his requirements of adhesives. In 1998 he felt it was imperative to invest in another wider coater to produce cost effectively. He bought his second hotmelt coater, this time a 20 inch wide equipment. In 2000 to cater to diverse needs of the label market he installed an emulsion adhesive coater. His total coating business now employs a workforce of 40 and operates from premises spread over 50000 square feet. The equipment that they have include two 1.5 meter coaters, 2 one meter adhesive coaters for labelstocks and tapes, three hotmelt adhesive coaters of widths 1 meter, 500mm and the old 200mm coater modified to coat 250mm (10 inch) which is still working alongwith a range of finishing equipments.

Ananth now wishes to consolidate his position by investing in modifications on existing machines so as increase coating speeds to achieve economies of scale and to make efforts to reach full capacity utilization. He hopes that in 5 years his company will be double the size of present operations. He loves the industry because it brings him in contact with people from very diverse fields due to labels being used on every product. However he feels bad that the industry is too price sensitive with long credit terms, leaving business exposed to increased risk.

Ananth’s wife Sree, is his perfect companion and a homemaker. Both love to socialize and are extremely active in the Hyderabad social circuit. His daughter Sagari is happily married to Arjun, a software engineer based in USA while son Rahul is actively involved in the affairs of Stayon Papers. Ananth does not plan to diversify in other fields and feels on this matter, his son Rahul is free to take a call. His other business interests are in real estate, he also owns a hotel in Hyderabad. He is on the governing body of Hyderabad Race Club and he has been the President of the famous Secunderbad Club. Most evenings Ananth is seen at the club with his eminent friends from the city and industry friends visiting Hyderabad. He loves to make friends, be with friends and look after his friends. No wonder I call him “Gentleman of the Label Industry”

Written by Harveer Sahni, Managing Director, Weldon Celloplast Limited, New Delhi-110008 December, 2011.