SMI Labels and Packaging Materials

Wednesday, July 1, 2020

Life in Labels-Yesterday, Today and Tomorrow!


A resilient label industry that was reeling under the adverse impact of lockdown due to Covid-19 is now clawing its way back to normalcy despite facing a highly stressful financial situation that has left them staring at a massive gap in cashflow and loss of production. Customer demand is low as regards retail, with malls still not opening to full strength and consumers restricted to their homes, buying only essential items of use. A sudden spurt in requirement of sanitizers and pharma products has given a fillip to the label requirement but one is left wondering how long this will stay and with increasing number of printers offering similar products, the price of labels for this segment will also soon become intensely competitive and non-remunerative with no value addition needed as a necessity. The silver lining is that the industry at large is confident to bounce back to the pre-Covid levels, but this may take a few months to a year or more. Underlying threat of the virus not dying down continues to haunt the industry and it is time to look back evaluate the present and foresee or plan for a consistent future.
The previous pandemic termed as the deadliest in the history of mankind and called “Spanish Flu” lasted a little over two years from 1918 to 1920. It impacted almost 500 million (50 Crore) people across the world, which was around a third of the world’s population. It killed more than 20 million (2 Crore) people around the world, the worst impact appears to have been in India that time when almost 12-13 million (1.2 Crore to 1.3 Crore) people, almost 5% of the population that time, lost their lives to the flu. With no vaccine or antibiotics those days, general preventions such as isolation, quarantine, good personal hygiene, use of disinfectants, and limitations of public gatherings were applied to control the spread.
Label industry in India had been registering a consistent double-digit growth for past many years. It still managed to keep growing while the country went through, demonetization, implementing of GST and economic slowdown. In recent years we have seen printers expand and enhance their capabilities to empower themselves with diverse printing and converting technologies to create innovations so as to remain in the profitable league of business owners. We saw in recent years the number of label printers grow in all segments indicating the robust growth of demand with which growth of labels is directly linked to. It has been an interesting phase when we have seen the likes of Seljegat in South India expand to a 40,000 square feet  factory, Any graphics in North from humble beginnings to building a 250,000 square foot green factory, Sai Packaging with their factories in Faridabad and Bengaluru, Sai Comcode also going multi locations and then our home grown printers Mudrika Labels and Zircon starting initially as only label printers crossing the Rupees 100 crore sales barriers. This was also the time when we saw multinationals move into the country either directly or by mergers and takeovers, these include the likes of Skanem, Signode, Huhtamaki, Brady’s, Printcare, etc.
Populations around the world have grown many fold since the previous pandemic and medical sciences are much advanced yet it is 4 months since Covid-19 has hit the world and there is no sign of it coming to an end, the numbers just go on escalating. However due to the availability of advance medical facilities which too are falling short in view of growing number of affected people, the recovery rate is relatively good. Yet people are suffering and dying in numbers all around, businesses are in a dilemma of lost production due to lockdown, worker migration, reduced demand and total closure for travel and hospitality segment. It will be a long time before the economic recovery takes shape and return to pre-covid levels. I asked several questions to label printers of varying size across India and reproduce some of their relevant responses as below.
1.       How has the lockdown impacted you?
a.       Raveendran Seljegat, Sivakasi South India: We were closed for a week but then because we supply to important pharmaceutical companies, we got permission to initially run with 30 people out of 150 and 10 days later we were allowed to work with 50. Subsequently we got permission to work with 100% but as per Government directive we gave retirement to workers over 50 years with full settlement without any deductions. Now we are working with 140 persons in 2 shifts for social distancing.
b.       G K Deshpande, Geekay Printing and Packaging Bangalore: Our team was shattered, as many workers went home out of fear, we had to manage with few. Our digital printing facility helped us in meeting requirements of customers from pharma and food segment.
c.       Manish Desai Mudrika Labels Mumbai: Due to reduced work force we must work with flexible timings and holidays. We have lost 2 months of production and sales; payment terms have become unviable hampering finances.
d.       Himanshu Kapur J K Fine Prints Mumbai: Monetary wise the impact is huge but will be short lived. I see another 3-4 months of pain, hopefully after that we should be back to pre covid levels.
e.       Mahendra Shah, Manohar Packaging Palghar: The impact is there but it is a boon to manage in getting a more responsible output with 50% work force 
f.        Dilip Modi, Integrated Innovators Ahmedabad: Business down by 25%
g.       Manish Hansoti S Kumar Multi Products Ahmedabad: The impact was there but not as severe since we came under the category of essential supplies. We had to operate with just 25% strength. The bonus was managing life with less and enjoying quality time with family.
h.       Rajendra Gandhi Maharshi Labels Ahmedabad: We had to shut down factory without prior notice, some machines need daily maintenance without which they begin to go faulty. Today, even after 3 months, we are still not at full capacity. Overheads are increasing, sales are not.
i.         Rajesh Nema Pragati Global Indore: Looking at the positive side, “It has brought me closer to my extended family.”
j.         Hari Shankar Modi ModiFlex India Kolkata: Two months of no productions!
k.       Priyata Raghavan Sai Packaging Faridabad: We have lost turnover for 2 months, have absenteeism and many losses piled up. Payment and Inventory cycles have gone off track. We are now fighting to stabilise vis-a-vis earlier when we were fighting for growth. Many major customers have declared Force Majeure leaving convertors like us, in a difficult situation.
l.         Rajeev Chhatwal Kwality Offset New Delhi: Sudden lockdown announced came as a surprise. All production was stopped resulting in nil sales for nearly 2 months. Orders got cancelled, inventories have piled up and severe liquidity problems are being faced.
m.     Anuj Bhargava, Kumar Labels Noida: Negative: Lost one full month’s sale, Positive: Learned to work efficiently with least resources
n.       Luv Shriram, Shriram Veritech Solutions Pvt Limited Noida: Reduced sales resulted in impact on profitability / longer cash cycle and customers are delaying payments
o.       Shakti Jain, Great Eastern IDTech Pvt. Ltd. Gurgaon: Significant decline in business revenue, liquidity (cash flow) crunch, logistics (delivery) issues persist. 
p.       Kapil Chaudhary ZENBI International (P) Limited: Not much impact on business, we got many new orders for sanitizers and FMCG Sector.
q.       Vinay Verma Label India: Our bar code business suffered, and we were not supplying to food or pharma, so had to wait. Fortunately, the sanitizer label demand has helped us back to work in a limited way.
r.        Mukesh Goel, Gopsons Noida: Few of our core sectors are down and expected to resume up to 80% pre-covid levels only by Q1 FY21-22. During lockdown phase, we were operating at minimal strength. We trained our employees to run multiple machines, larger benefits of which we are realising now. With multitasking, we have created a reserve pool of employees to meet any unforeseen situation or another lockdown if it happens.
s.        Ajay Mehta, SMI Coated Products Mumbai: The lockdown has impacted everyone in the world, we are no exception. It is unbelievable that we have mostly been at home for the past 100 days. Personally, it has been a great opportunity to spend time with family, especially my grandson whom we have seen grow from 5 months to 8.5 months. On the business front it has been a challenging and satisfying time to keep all motivated within and outside SMI!
t.     Nirav Shah Letragraphix Ahmedabad: Lockdown has impacted the overall mind-set of people. We were also impacted in the beginning. However, on 4th day of lockdown-1 we received all necessary approvals to start the work with minimum possible capacity. Our staff members also quickly accepted the change because of which we could come back to operations in short time. The adverse situation has taught many lessons. Instead of waiting for post Covid scenario, I wish people accept situation and work towards betterment. 
Almost all the respondents have lost sales, have been impacted adversely for cash flows or profitability and are now working with reduced workforce. They are learning to live and formulate processes to use the adversity as an opportunity to cutdown manpower while retaining same productivity.
2.       To what percentage have you resumed operations?
Surprisingly amongst the 20 respondents only four companies have resumed 100% production. The rest also have resumed but their levels vary between 50% to 80% the industry average can be estimated at 65-70%.
3.        How are you implementing safety and social distancing norms?
Most of the respondents have adopted the standard operating procedures however some have gone the extra mile by implementing more than the SOPs. Raveendran of Seljegat says the factory is sanitized 4 times in a day and toilets twice a day. Workers are required to wash hands with a mixture of Neem and turmeric ground together besides with provided soap and sanitizers before entering and leaving premises. Plus, on state govt. recommendation every employee including owners are required to drink an ayurvedic drink consisting of Ginger, Pepper and other ingredients once a week. SMI has made extensively elaborate arrangements for sanitizing the premises, untouched door operations and spraying repeated as also restricting visitors to a bare necessity. Kumar labels has also made somewhat similar arrangements both these companies have made videos of their endeavors and these are available on youtube. Many companies have staggered the production in to two shifts with same number of workers to achieve social distancing.  This does seem to offer an advantage of getting more production from a reduced workforce. Machines have been relocated wherever possible. Label India, Delhi was operating their unit on 2 floors, they added another 2 floors to attain social distancing. Collective Coffee and lunch breaks are a thing of past. Machines are kept running and workers are given time one by one for coffee, tea or meals to maintain the distancing. Obviously, this is advantageous as down time decreases.
4.       Are your employees back in full strength? If not, what percentage have re-joined?
The answer to this indicates the extent of problems of worker migration, as none of the companies have 100% workers rejoining. 50% to 80% workers have rejoined and as for office staff most companies are asking them to work from home.
5.       When do you think you will reach full production?
Most printers except one or two, all have expressed that it will take some time to come to full production. This may vary from 2 months to 4 months. The infrastructure and capacity to produce is intact with the printers but there are so many other factors that impact the return to full normalcy. Since retail is greatly impacted and lockdown has been imposed across the country, demand is down and will take time to pick up to pre-Covid levels. Added to this, the financial crunch due to the no operations in the lockdown period has hit all the value chain from suppliers to printers to print buyers impacting their cash flows. Increased capacity with reduced demand and a pile up of payables like instalments taxation and other statutory dues may further add to the woes of label printers, it thus appears that return to normalcy will be gradual.
6.       Will you work as you were before or will adopt more workflow automation and reduced workers?
The only positive side emerging from this pandemic is that printers are finding possibility of working with reduced number of workers. The realization has made all respond positively towards the imperative need for automation both in production and workflow management as some of the most expensive inputs are labour, real estate and wastages. Automation will help in reducing these.
7.       Do you think industry at large will implement better housekeeping?
Most people feel that it is a necessity in view of the spreading infection. Enlightened and progressive industrialists feel it was a need of the hour. They all agree that it will be implemented. In words of Priyata Raghavan, “Yes a cultural change is expected to bring this in.”
8.       Do you foresee expansion in this financial year?
There are printers like Mudrika, Prakash Labels and others whose new equipment ordered earlier have been installed or is in way, other than that there appears to be an emphatic no for new investments in capital equipment this financial year. However still, printers like SelJegat, Kumar Label and Mudrika feel that if they must implement workflow automation, investments in allied equipment is an imperative, they will invest wherever and whenever needed. SMI has already made substantial expansion last year. Vivek Kapoor says, “yes we will be replacing equipment with latest technology rather than expanding”. All the same, the underlying sentiment cannot be ignored that if the market dynamics demand expansion, “then why not?”
9.       Will you travel for any industry exhibitions this year?
19 out of 20 respondents said NO to this, evidently the scare of catching this deadly infection, is a big deterrent.
10.   What is your vision on the industry working in the post covid time?
All across, the general feeling is that the industry needs to change and go into introspection. Housekeeping, sanitization, automation, organized workflow and lean manufacturing will not just be words spoken at conferences but will find a new meaning for implementation even in the MSME units. Rajiv Chhatwal of Kwality says, “Post covid industry should mature more. they will invest wisely, look at reducing overheads and improve profit margins, business models will surely change.” Manish Hansoti of S Kumar says we need to learn to save and park funds for a rainy day to face such calamities. Priyata Raghavan and Shakti Jain feel that post covid also it will be digital engagement with customers and suppliers. Personal contact will be limited.  Anuj Bhargava says it will henceforth be “Digital-Digital-Digital!”. There are others, those who feel the changes are temporary. Ajay Mehta of SMI sums it, “here will be some shift in consumer pattern, economic downturns are inevitable due to lockdowns as well as due to huge loss of jobs in different segments. Having said that, lot of new opportunities are opening up. We are confident that our industry will come through very well in comparison. We see possibilities of growth of the market in coming 12 months’ time.”
11.   Will the changes coming about be permanent?
The industry in unison feels there is nothing wrong in adapting these changes that will make workplaces safe. Just one or two respondents feel that some Indians by nature would like to get back to where they started but by and large as Ajay Mehta says, “Only change is permanent.” Constantly the industry needs to bring about more changes to become more efficient leaner, productive, sustainable and safe. The changes will be permanent for all those who understand the right way forward

Written by Harveer Sahni Chairman Weldon Celloplast Limited New Delhi, India 1st July 2020

Printing magazine are permitted to reproduce the above article by giving due credit to author including the blog address http://harveersahni.blogspot.com