People are moving from villages to cities to experience the
modern-day city life as they see on TV and internet.
The scenario has transformed over the years. As a result of ongoing urbanisation, the urban population in India has now grown from 19.4% in 1968 to 33.5% in 2017. The shift has a direct impact on the consumption of household goods, as daily needs in city dwelling are obviously different and more than that in villages. More so due to the impact of a growing rate of literacy level which is the percentage of people aged 15 and above who can read and write having increased to over 72% percent from 40.76% in 1981. People in the working age group 15-64 years has escalated to 66.2%, from a level of 55.4% in the last 50 years. In 2017 the median age of the country, which is half of the people to be younger than this age and other half older, was estimated to be 27.9 years. In a country of 1.32 billion people a growing need for household goods or consumer goods also referred to as FMCG or “fast moving consumer goods” means there is an ever-growing huge demand for labels and packaging that are a part of the consumables they buy.
The scenario has transformed over the years. As a result of ongoing urbanisation, the urban population in India has now grown from 19.4% in 1968 to 33.5% in 2017. The shift has a direct impact on the consumption of household goods, as daily needs in city dwelling are obviously different and more than that in villages. More so due to the impact of a growing rate of literacy level which is the percentage of people aged 15 and above who can read and write having increased to over 72% percent from 40.76% in 1981. People in the working age group 15-64 years has escalated to 66.2%, from a level of 55.4% in the last 50 years. In 2017 the median age of the country, which is half of the people to be younger than this age and other half older, was estimated to be 27.9 years. In a country of 1.32 billion people a growing need for household goods or consumer goods also referred to as FMCG or “fast moving consumer goods” means there is an ever-growing huge demand for labels and packaging that are a part of the consumables they buy.
According to a report in The
Economic Times dated May 01, 2018, consumer products market grew
13.5% in the Financial year 2018, with eight of 10 leading companies posting double-digit value growth, FMCG being the 4th largest segment of the economy. Online sales of consumer goods is also seeing an enormous rise as number of online users is poised to cross 850 million by 2025. According to a report by marketing research firm “eMarketerOnline” retail sales in India are expected to grow by 31% this year to touch $32.70 billion, led by e-commerce players Flipkart, Amazon India and Paytm Mall. Retail market is estimated to reach US$ 1.1 trillion by 2020, up from US$ 672 billion in 2016 further expected to boost revenues of FMCG companies to 104 billion US Dollars. The data herein mentioned indicates a definite, constant and escalating demand for labels and packaging.
13.5% in the Financial year 2018, with eight of 10 leading companies posting double-digit value growth, FMCG being the 4th largest segment of the economy. Online sales of consumer goods is also seeing an enormous rise as number of online users is poised to cross 850 million by 2025. According to a report by marketing research firm “eMarketerOnline” retail sales in India are expected to grow by 31% this year to touch $32.70 billion, led by e-commerce players Flipkart, Amazon India and Paytm Mall. Retail market is estimated to reach US$ 1.1 trillion by 2020, up from US$ 672 billion in 2016 further expected to boost revenues of FMCG companies to 104 billion US Dollars. The data herein mentioned indicates a definite, constant and escalating demand for labels and packaging.
Indian Label industry has been
witnessing challenging time since demonetisation of currency and later due to
implementation of GST. While these measures may be beneficial for the industry
at large, yet they slowed down the trade impacting margins and revenues. With
capacity growth already committed by existing label companies who had already placed
orders for new equipment and by those entering the segment in this period, slow
down impacted adversely the positive sentiment in label industry. The Label
printing and converting equipment was being upgraded globally by machine
manufacturers to achieve efficiency in production, reducing wastages, producing
to economies of scale and was becoming more expensive. An industry that was
used to a quicker ROI (Return on Investment) and better margins found the
situation challenging, decided to be cautious and held-back investing
decisions. While the economic parameters of growth as mentioned in the earlier
part of this article were on the move all the time, a pause or back stepping for
two years created a gap that has resulted in now a positive situation whereby
new investments to increase capacity are being made. However still, label
printers are apprehensive that this sudden indulgence may result in over
capacity, promote unhealthy competition resulting in lower margins and make
servicing of loans a little difficult. Despite this the positive sentiment in
the label industry is evident as those who have excelled are committed to
expand and maintain their position.
Change is the only permanent in a
growing scenario, also stagnation leads to deterioration so one has to keep
improving, innovating and expanding to remain in reckoning in a vibrant colourful
industry. The label industry, much to the discomfort of the existing peers of
the industry is seeing a lot of investment from the sheetfed offset printers.
The sheet offset industry is used to big time investments in equipment and
voluminous sales justifying their lower margins with massive turnovers. They
were content with ever growing toplines, yet when the bottom lines needed
strengthening labels appears to be a solution. While this would not add much to
the top line but would surely contribute positively to their bottom lines. In a
conspicuous effort to make their balance sheets look more presentable, it seems
the offset printing industry is becoming indulgent in labels. It is for this
reason we see label exhibition stalwarts Tarsus targeting the offset printers
for their upcoming Labelexpo India. This is much to the discomfort of existing
label industry constituents as it would add to the intense competition bringing
pressure on already depleting margins in terms of percentage.
The label demand in India
continues to grow and investments in label printing and converting equipment is
on the rise. Though not much authentic data is available, yet the author based
on experience and time spent in the industry has attempted to reach a
reasonable size of the market. There are about 1000 label manufacturing
companies in India. These include very small and big plain label, barcode label
and product label manufacturers both in roll and sheet, spread all over India.
The number of machines that each of these companies possess varies from just
one machine to multiple machines, in many cases the machines installed are in
double digits. On a very modest estimation if I assume an average of just two
machines per label company, the total comes to 2500 label converting machines. The
number of rotary machines announced in media in the recent past as installed in
India over the years till now by leading label suppliers like Mark Andy,
Gallus, Nilpeter, Omet, Bobst, Edale, MPS, Weigang, Orthotec, etc. coupled with those supplied by
local manufacturers like Multitec 200 machines, RK label 150 rotary plus 600
flatbeds, Jandu 135, Alliance, Webtech and others, is well over 1500. Now if we
add the used machines, the intermittent and other flatbed/rotary options, the
figure is definitely over 2500. Working backwards for converting capabilities
with realistic downtime, the per capita consumption of labelstocks is well
beyond 1 square meter.
Calculating quantities of label
stock manufactured from the number of coaters installed with Labelstock
manufacturers we have, according to the author’s personal estimation, Avery Dennison
is leading the pack and SMI following, together they account for over 40% of
the production in India with almost 48 Crore or 480 million square meters per
year. According to Jandu Engineers, who have been the main coater laminator
supplier to the unorganised sector, they have till date installed 150 adhesive
coating lines in the country. While Jandu asserts that his coaters run at 100
meters per minute but for a realistic estimation their speed with down time has
been considered at 50 meters per minute. Added to this is the production coming
from numerous Hotmelt coaters installed and together with the stock lots used,
the total again justifies the 1 square meter per capita usage. Another
evaluation done with base consumption that most in the industry had agreed at 0.25
square meter in the year 2003. Applying a year on year growth rate of just 10%,
this year we cross the 1 square meter per capita usage. The estimation is the
author’s personal estimation only, many of the industry peers may not agree
with the author’s estimation yet it appears that we have come a long way in the
last 20 years. The self-adhesive label production and consumption in India all
including roll, sheet, stock lots etc. this year seems to have reached a
whopping 1.30 billion square meters!!!
Written by Harveer Sahni Chairman
Weldon Celloplast Limited New Delhi India September 2018
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