The Indian label industry has
been quite resilient to market oscillations over the years. It has constantly
been registering a positive CAGR (Compounded Annual Growth Rate) and attracting
investment over the last two decades. Even in the time of economic slowdown or
the great global recession of 2007-2009 the Indian label industry was still
growing, though at a lesser rate. The investment in new label presses and equipment
that were technically more advanced offering automatic registration control, faster
job change overs, short web path and reduced wastages was never stopped, it may
have paused for a couple of months but would bounce back. This has been
primarily due to the growing demand of consumer products sale emanating from an
increasing number of literate young people with gainful employment and higher
disposable incomes in their hands. A large population, predominantly rural and which
is second in numbers only to China has a middle class that is getting urbanized
being exposed to changing lifestyles courtesy the TV channels or networks and mobile
telephony is adopting the modern day global living and shopping standards. From
buying essential needs from neighborhood stores in lose condition they have
been shifting buying packaged commodities and consumer goods from organized retail
outlets and fancy malls offering an amount of safety mentioning manufacture and
expiry dates with price and product safety information. This culture has continuously
provided fillip to the growing demand of consumer goods and subsequently to
demand of good labels and packaging. Unfortunately, the present situation
created by the spreading Covid19 virus has put everyone in a state of worry, high
alert and caution.
The virus has caused colossal
loss of lives around the world besides infecting millions who are fighting to
recover from the effects of this life-threatening pandemic. Originating in
Wuhan China the first lesson learnt to contain this virus also came from there,
to curtail the spread one must resort to complete lockdown of the city. Once
the fatal consequence of this fast spreading virus was witnessed in countries
like Italy, Spain, Iran and many others, the Modi government in India took a
timely decision to put the entire country in a state of lockdown initially for
three weeks. This may have slowed down the spread to a great extent but since
the danger loomed over the large population, the lock down was extended for
another 3 weeks. The initial days of lockdown was like a vacation but when the
reality of its impact on life at all levels of humanity became evident it has surfaced
as a nightmare. On the 3rd of May 2020 when the extension of
lockdown ends, we are left wondering if the lockdown will be lifted completely
or partially and when life will return to normal. With Malls, airlines,
transport, bus services, restaurants, markets, industry and business at large
all closed, life has come to a standstill. The imagining of job losses, no
revenues coming in, salaries and expenses payable for businesses and receivables
for the salaried, not coming makes one sit up and wonder how will life move
ahead like this?
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| Paruchuri family, owners of Pragati Pack Hyderabad |
The impact: Most label companies
are family owned and run on the rotation of funds model with extraordinarily
little funds parked anywhere for such contingencies. Now with no payments
coming in due to lockdown and customers having a valid reason that they are
closed in a similar situation the result is evident. It has a cascading effect
on the industry. The workforce consists of temporary, casual, permanent
helpers, skilled and management staff. Most of lower and middle level workforce
are migrants who have travelled long distances from their villages and live in
rented accommodation on what they get each month getting their rations on
credit from neighborhood stores. In the current scenario and no permanent
solution in sight they are left with no option but to return to the safety of their
homes in villages where they have roof on their heads and meagre agricultural incomes
to feed them but without the fear of getting infected. Since Government
directive says salaries and wages must be paid in full during lockdown label
printers are in a dilemma, how to pay when no revenues are coming in.
Production is stopped, receivables are not coming in, both fixed and recurring expenses
are accumulating, bank instalment and interest adding on, maintenance is needed
to restart, security personnel have to be in place, minimum electricity charges
have to be paid, imports are attracting customs duty and incurring demurrages, all
together the situation seems to be grim.
Consumer spending for the
present is going to change completely and buying will be restricted to bare
essentials. Visits to malls and markets or such public places will be restricted
to avoid getting infected. Travel by air, rail or state roadways is virtually stopped
and will be immensely hit, this will also similarly impact restaurants,
cinemas, shows and events. Biggest sales of garments originate from shops in
malls and dedicated markets, these are likely to be impacted adversely. Label
is one item that finds usage in all business segments, may it be product
labels, Garment labels, Barcode labels, Baggage tags, Automotive labels, Lubricant
labels, Computer labels, etc. The garment labels that account for almost one
third of the total usage of labels is likely to see a big decrease in demand.
Baggage tags is another area that will hugely impacted until air travels picks
up to pre-Covid 19 levels or more. With all these indicators pointing towards a
shrinking demand, printers are a worried lot and for this reason they have put
on hold expansion plans for the time being and at least for the current
financial year we do not expect any major expansion decisions coming in. Those
deals made earlier may have to be honoured and installations may happen.
However still the printers would like to put on hold these deals so as to wait
and watch. Since the entire supply chain is affected the resources also become
limited, supplier credit may reduce on the other hand customers demand for more
flexible terms will arise. The industry will be looking at government support
to keep afloat.
With most travel plans shelved print
shows postponed or cancelled; it is evident that this downturn will have its
full impact during the current financial year which for Indian companies is up
to the 31st of March 2021. Hopefully by then a vaccine has been
development and life may start returning to pre-covid state. Until then investment
will remain extremely low or on hold and customer visits will also be limited,
alternate business strategies will have to evolve and ways of doing business
will change for good. One thing is sure that eCommerce will emerge a winner in
this fight against the pandemic. People will try and order things online and
receive at their doorsteps, sanitize them and use. The system may become a habit
for all time and a large part of the buying will happen that way. Labels and
packaging for ecommerce may also undergo change as the imperative need to tempt
the buyer to pick up the product off the shelf at point of sale is not there,
so embellishment that increase the price of labels and packaging can be cut for
ecommerce.
The brighter side: The Pandemic
is not going to last forever. The one that came over a hundred years ago was at
a time when science was not that advanced, to day when the technical
capabilities and research is extremely advanced it will not be long before a
vaccine is invented and the world is freed of this menace. All the earlier epidemics
also came and went away so we must look at things positively and wait for better
days to return soon. This pandemic has brought the global opinion against China
as it is believed that this was created by them, one must wait and see if there
is any proof of such a thought process. Meanwhile global multinational companies
have started to consider moving their international manufacturing hubs. India
does look to be a preferred destination being a democratic, English speaking
country with one of the largest educated and technical workforces. The Indian
government needs to create conditions to make the full use of this opportunity
by simplifying the entry procedures and ease of operations without unreasonable
red tapism. This will attract foreign direct investment and also expand the
economy and facilitate return to continued growth.
The way forward: Our label
printers need to positively use this lockdown time to make strategies to revive
their business, list their strength and plan to put them to effective use to
grow their businesses and make it future ready. Create an entity that is resistant
to external contingencies. The business must be reinvented to be system driven
rather than human driven, integrated workflow automation and distant operation
possibilities need to be evolved. All segments of customer service from
development, planning prepress, production planning, printing, logistics, servicing
and up to point of sales support need to be brought to a unified electronic platform
to make it an extremely satisfying experience for the customer reducing the human
involvement to minimum once an order has been initiated. In coming time
dependence on online business is going to be the future. Selling via ecommerce
model, creating labels from computer to either digital print or initiating the
other processes will have to become the operational way in future. Printers
need to keep reviewing their planning, updating themselves with latest
techniques and processes. They need to create free time to make human contact with
important customers when the situation warrants that also through online
meetings until things are back to normal
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| Hugs from a friend! Vinesh Bhimani Kimoha Dubai with author |
So that we realise and feel that
we are human beings and not machines or computers; Once we are back to normal
do go over to your customer for a natural desire of meeting personally and giving
a warm handshake plus a big hug!!!
Written by Harveer Sahni
Chairman Weldon Celloplast Limited New Delhi India April 2020
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