Joint Ventures, Mergers and Acquisitions, etc.
seem to be the topic of discussion when different members of the self adhesive
label industry meet these days. These takeovers and alliances happen or become
predominant in different situations and circumstances. In a particular scenario
when times are bad, demand is down and business owners find that operating
margins are low, demanding a need to restructure, look for an exit route or
join partners who can bring in value to the operations. In another scenario
when the going is very good, the growth is consistently in double digits and
larger players are eyeing the market, at this time business owners either get a
good price and call it quits or partner with the larger players with global
presence to achieve a situation of monopolistic leadership. In India the
situation is slightly different, the basic concept of double digit growth is
relevant yet the industry is in a rather nascent stage as compared to
international markets. Single owner companies, who are rather small as compared
to large international label printing entities, are at the forefront of this
industry offering a readymade platform to those who wish to enter the Indian
markets. Big international label printing and packaging products manufacturing companies
who realise that the large Indian literate population is turning out to be one
of the biggest consumer product segment in the world, are considering
investments in ventures here, to access these markets. To get a slice of this
lucrative market they are on the prowl looking for ventures they can acquire or
partner with, for an immediate entry into Indian label printing industry. It
happens to be the quickest route as they take over or partner with existing
successful label companies, already servicing large fmcg and multinational
users.
International players have been
in India for long. Johnson & Johnson are linked to history of label in
India. They started to produce labels way back in 1978. Then there is CGPPI at
Goa and Birla 3M in Bangalore but these were planned ventures set-up long years
ago. The Joint Ventures, mergers and acquisitions in the current scenario all started
when Kusum and Kartar Dunglay of Goodwork Company Delhi met Marc Reynders at a
show in New Delhi. They eventually started their joint venture Reydunn at
Manesar, Gurgaon in 2005. Unfortunately the partners later fell apart and both
went their own ways. Reynders now run their wholly owned label unit at Chopanki
in Rajasthan and Reydunn is a part of the Goodwork group operating from
Naraina, New Delhi. In 2006 Brady Corporation headquartered in Milwaukee USA
employing 6500people and sales of 1.34
Billion US dollars setup a wholly owned company Brady Company India Pvt. Ltd.
in Bangalore to produce labels for safety, security, identification, die-cut
profiles, and specialty products. A little later my friend Mikael Dahl of
Nordvalls Sweden joined hands with Venu Ayyar of Laxmi Compugraphics to enter
into a JV. Nodvalls is an over 100 year old company with a turnover of over 19
Million Euros and over 105 employees. This venture too did not take off. I
quote Mikael in an email received on 12th October 2012, “Unfortunately we had
to terminate the cooperation with Laxmi, press is for sale”. In the meanwhile
Nordvalls has bought over one of their national competitors to grow further and become the No.1 label
company in Sweden. Just a year later in 2007, Printcare Srilanka, a 27 Million
Dollar Company started their unit Printcare India Pvt. Ltd. at Coimbatore. The
unit as I understand is doing well. Until this time, given the track record and
business model of such JV endeavors, the growing and enterprising label
printers were not worried. 
It was only on the 21st of March 2011, that a press
release from CCL Label Worldwide ruffled many feathers and set the ball rolling
towards the current trend of JV’s and acquisitions. CCL label headquartered in
Canada, employing 5800 employees at 61 locations around the world, acquired 50%
stake in Dubai based Label Co. Pacman. In the same press release a line read;
“The partners have also agreed in principle to a prospective future Greenfield
investment by Pacman- CCL in India.” If the world’s largest label company was
planning to invest in India, it was time for Indians to take stock. They had to
consider partnering with other international partners to face the challenges
coming from such large entities. Though CCL has yet to announce their entry
into India in label production, yet leading Indian label manufacturers have
opened their doors by either selling out or partnering with larger players.
Early this year in February 2012
the industry was surprised by the news that Bangalore based Wintek Flexoprints
had been acquired by Hyderabad based ITW Signode, ITW India Ltd. a subsidiary
of multi-billion dollar fortune 200 global industrial products company ITW,
with headquarters in Illinois USA.
A few weeks later one of the Europe’s
largest label producing company Skanem with headquarters in Slavanger, Norway, acquired
51% stake in India’s largest label company, Mumbai based Interlabels with sales
of over 19Million Euros and 220 employees. The new entity is renamed as Skanem
Interlabels. This has definitely triggered a trend in the label industry. Just
six months later, we have the news that Bangalore based SGRE labels, has been
fully acquired by Mumbai based Positive Packaging Industries Ltd. the
flagship company of Enpee Group, an international conglomerate with over 50
years of business experience. Positive Packaging is a pioneer in flexible
packaging with state-of-the-art facilities located strategically in India,
Nigeria and the U.A.E. They offer packaging solutions to customers in various
countries through a robust international sales and service network, catering
to diverse sectors including FMCG, Agro products and Pet food. The acquired business is now named as Positive
Labels. This trend seems to be on the increase, more and more Indian printers
are looking for partners. Some admit it others like to keep everything secret. However there are quite a handful of them who would like to have international
partners to expand their businesses with global presence. Meanwhile constituents of
the label industry are talking in hushed tones about another deal that has
taken place but since the stake holders do not confirm publically, it remains
gossip that goes on.
The industry is undergoing a fast
transformation from being small, single owner, mostly first generation
entrepreneur owned enterprises with one or two label presses to larger companies
with diverse product offerings like labels, flexible packaging and cartons.
These companies have made huge capital investments and are in the forefront of
the label industry. The single owner family managed companies who have made
rapid strides by investing in multiple label presses to expand and grow to meet
the current demands of their end users include companies like Update Prints,
Regal Creative, Syndicate labels, Anygraphics and Zircon in North India,
Classic Images in East India, Webtech, Ajanta, Mudrika, Mahrishi,
Letragraphics, Renault paper, Unique, etc. in western India and Seljegat in
South India. Two of the others who expanded in South India have been already acquired.
Larger professionally managed companies who have presence in offset printing,
flexible packaging or carton manufacturing, who have invested in label printing
include Uflex, PPL-Huhtamaki, Positive Packaging, Shree Rama Multitech, ITW,
Pragati offset group, ITC, etc.
Definite segmentation has taken
place in the Indian label printing industry. At the lowest end is the biggest
labelstock consuming segment of the industry. These include companies who
produce plain labels, barcode labels, gun labels, computer labels, EDP/VIP
labels, etc. In the middle are the printers who cater to the unorganized sector
and smaller manufacturers of consumer goods mainly in the MSME (Micro Small
& Medium enterprises) sector. The top end that drives in the highest
revenues caters to the larger companies, FMCG sector, multinationals,
pharmaceutical companies, organized retail, etc. They are the ones producing
the highly decorative and complicated labels on their state of art equipments.
It is this top end of the label companies where all the JV’s or acquisitions
are taking place. With FDI(Foreign Direct Investment) in multibrand retail permitted in India, growth
rates in label consumption will rise.
With volumes expected to increase and
come from the need of packaged goods that will be retailed to a young and large
population, the sentiment in the industry will remain “Positive in labels”.
Written by Harveer Sahni, Managing Director, Weldon
Celloplast Limited, New Delhi-110008 October, 2012
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