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