Frequent increase in paper prices
have been adversely impacting the printing and packaging industry in recent
times. The print industry has been at the receiving end not just because of the
price rise but also due to shortages of paper and that too at a time when
demand is rising. The printers have suffered because of long lockdowns due to Covid-19
pandemic; they had hardly heaved a sigh of relief as the situation started to
improve when prices began their upward movement followed by shortages or
unavailability of critical inputs, adding to their operational problems. The
self-adhesive label printing and converting industry is an extension of the
sheetfed or unsupported web printing industry. Unfortunately, the impact of the
present situation on label printers is more severe, given the complex nature of
their major raw materials, the self-adhesive or pressure sensitive adhesive
labelstock. Unlike the single layer substrate that paper or board is, the
labelstock is a laminate with many inputs. The face materials vary from various
kinds of paper substrates, films, foils, etc., then there is a range of pressure
sensitive adhesives like emulsion and hotmelts in variants like permanent,
removable, for low and high temperature applications that are formulated with
various polymers, plasticizers, emulsifiers, and other chemicals. Lastly the
release base papers and silicone formulations. All these inputs are facing
price increases. Realizing the impact and seriousness of the situation, LMAI (The
Label Manufacturers Association of India) initiated by the current President
Rajesh Nema, organized a webinar titled "Knowledge - Accelerating Growth"
on 30th October 2021. The panelists included Saurabh Agarwal-Avery
Dennison, Ajay Mehta- SMI Coated Products, Prashanth Raveendran- Seljegat
Printers and Manish Desai- Mudrika labels. The webinar was moderated by Jaideep
Singh Secretary LMAI and coordinated by Anurag Mohan Management committee
member.
 |
| Ajay Mehta |
Ajay Mehta spoke on the gravity
of the situation due to rise in prices with price increases being announced by
paper mills frequently despite not getting their full requirements of
materials. Forward contracts are made with paper mills but those are for
quantities required and mills in general, charge prices prevailing at the time
of dispatch. However still, the increasing international freight rates, reduced
availability of raw stocks with mills and the upswing in demand impacts
adversely. While the mills give a date whereafter new enhanced prices will be applicable,
but the adhesive suppliers do not even give time for price increase and
announce the new price with immediate effect. Paper mills supplying release
base papers are either facing shortages of pulp so have lesser materials to
offer or they to recover the losses incurred during lockdowns are directing
their materials to markets where the get higher value for their products. He
cautioned that by modest estimates, the label industry will stand to lose over
Rupees 250 Crores annually and there is no way this loss can be absorbed, they
have no alternative but to pass on the price increase to the printers. They do
get resistance from some quarters but there is no way to compromise on this if
one has to survive and keep the company in sound health.
 |
| Manish Desai |
Manish Desai of Mudrika Labels mentioned
that print buyers strongly resist the price increases by expressing that there
are other printers ready to supply at lower rates, however according to him
they must be persistent as there is no other option. The possibility to
downscale the product specification by lowering substrate grammages and adhesive
coat weights to keep the prices stagnant is not the right step and will lead to
inferior quality and rejections at the customer’s quality control. Moreover, since
many print buyers are now mentioning the standard brand labelstock usage in labels
supplied to them, printers do
not have
the option to consider alternate suppliers. He suggested to the labelstock
manufacturers that since they interact with print buyers to get their materials
approved, they should in turn also impress upon to approve price increases in
tune with raw material price escalations. It would also be prudent for labelstock
manufacturers to make forward contracts with raw material suppliers such that
they in turn can give some breathing time for printers to settle down with new
prices. Price rise is an ongoing process in growing economies and eventually
the industry settles down with it in 3-4 months, unfortunately now it is at a
challenging time and too frequent. He further added that amongst their customers,
with privately owned companies it is easy to get price approvals as one can
deal directly with senior management and justify the need for higher prices.
Contrary to this, it takes 3 to 6 months to get approval from multinational
companies as they have multiple layers of management and the price approval is
a long-drawn process and by the time the approval comes, the prices may already
have increased some more.
 |
| Saurabh Agarwal |
Saurabh Agarwal of Avery Dennison
mentioned “'The significant increase in demand post the improvement in pandemic
impact, especially in the large economies of the world, while the supply
environment continuing to remain constrained has been the single biggest reason
for the serious inflationary pressures. The rising oil and energy prices and
the prevailing ocean freight crisis intensifies the impact and is now impacting
almost every region. At Avery Dennison, all our efforts are geared to continue
serving our customers in the best possible way during these volatile times,
while at the same time keeping them informed of the prevailing situation.”
Prashanth Raveendran of Seljegat
Printers was more focused stating that they have reached a level of success by
continuously investing in the finest equipment to manufacture labels to
international standards and creating innovative products. He said, not getting
the appropriate and remunerative price for their products will hamper their
growth and not justify their huge investments. He stressed that if some print
buyers do not understand the situation and do not agree to give the right
prices, unfortunately and sadly we will have to forego such orders. After all,
we have to service our financial commitments.
 |
| Priyank Vasa |
To get a wider view on the topic
the author interacted with some more industry constituents. Priyank Vasa of Ahmedabad
based Unick Fix-a-Form says, “The recent price hikes and inflation in raw
materials has got us wondering how long we can sustain a healthy margin while
continuing to offer the best rates and quality to our
customers. Production efficiency has been impacted in the past two years because
of the pandemic. Looking at the current situation, it is tough to offset increasing
cost of raw materials with an improved efficiency. Labels have become a
commodity, unlike older days where one could reap the benefits of developing a
product for years altogether. Product diversification could be the key
which could offer a good balance between profitability and volume. Current
market conditions do not offer many niche segments where business could
thrive. Sustainability of the margins will take the driving seat vs the
volumes. Expansion models must be feather light as nature of our industry needs
repetitive investments that come with an interest burden.”
 |
| Mahendra Shah |
Mahendra Shah of Renault Paper
Palghar, a part of Manohar Packaging group says, “
We call
ourselves manufacturers of labels but technically, we are just converters
without any consumer brand-value which can be encashed at a later part of our entrepreneurial
tenure. Our current or past investments do not last long, due to fast changing
technology. If you do not capitalize your investment in the first one thousand
days, your time and energy is wasted in just recouping the investments done. Really,
is this why we became entrepreneurs? Competition was always there and will remain
in future, the only difference is the mindset. Now with fast evolving
technologies we need to achieve the return on our investment at a faster pace. As first-generation
entrepreneurs, we took harsh calls and succeeded, with this huge price impact
on our inputs now, we all need a fearless attitude to go for price increases
from our customers before it is too late. We may lose some customers but
with clear thoughts I am sure we can all make our business profitable and sustainable.”
 |
| Anuj Bhargava |
Anuj
Bhargava of Kumar labels asserts that the price increase must be passed on and
it is an imperative for survival. Another point he mentioned is that the
industry is not realizing that people
are a necessity in a company to work efficiently and the cost of people has
dramatically increased post covid. So that cost combined with the enhanced raw
material costs is a “Killer.” If label printers do not pass on the impact of
the combined cost increase, then definitely it is a formula for suicide.
The PSA
or self-adhesive labels industry is already at crossroads whereby evolution is
leading to a lot of demand growth going off to different evolving technologies
like shrink sleeves, inmold labels, wraparound labels and direct on product digital
printing. Expansion in capacities coupled with commercial and other offset
printers, facing pressure from the online communication, also investing in
label manufacturing is bringing about intense competition and pressure on profit
margins. Label manufacturing also has another challenge which is becoming a
matter of concern and that is the waste management. Adhesive coated waste
matrix and the release liner that form more than 50% of the laminate is either
going to landfills or being incinerated. Facing pollution controls and attending
to environmental concerns the printers must now invest in measures that support
sustainable and environmentally safe production processes. At such a time when
input prices are going up putting margins under pressure, their woes keep on
escalating, prompting them to get together as an industry and ponder over workable
solutions to counter the concerns that are arising. The positive side is that
in a large country India with a huge young population, the growth is evident
and there will be enough for all label manufacturing technologies.
Written
by Harveer Sahni Chairman Weldon Celloplast Limited New Delhi November 2021
Printweek India's edited
version of this article is also available at; https://www.printweek.in/Features/label-printers%E2%80%99-woes,-price-increases-and-shortage-of-inputs-55396
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