Driving profitability in labels!

 Driving profitability in labels, with embellishments, digital printing & hybrid printing

Self-adhesive or pressure sensitive labels industry in India has grown steadily right from the time of its initial entry into India to be indigenously produced in the mid-1960s when a screen printer manually created the first label. Thereafter, label manufacturing has evolved and completely transformed  technically over the years. Initially, small and slow very narrow web letter presses, 4 or 5inch wide, from the eastern part of the world were used to print with blocks and die-cut labels with flatbed dies in roll form. These presses eventually started going wider in printing width with growth in demand. The need for increased production in 1980s brought in the adoption of rotary flexographic printing presses. However, since the flexo plate technology was just evolving, usage of letterpress block printing was still growing. It was in the new millennium that developments brought in prepress and plate making technologies, made it possible for printers to decrease their dependence on letterpress printing technology and invest in flexo presses that eventually became modular and print widths going wider with increased speeds. Toward the middle of the first decade of the new millennium, the pop and Mom retail stores, known as Kirana stores catering to consumers, started being replaced by the entry of organized retail outlets and with it, came the increase in demand for labels and packaging. When it was realized the customer’s point of purchase decision to lift the product off the shelf is the driver for sales, brands felt the imperative need for attractive labels and packaging. Different print technologies started being employed and presses with advanced capabilities started being developed and offered. While all this transformation was happening, the label industry in India was all along registering a robust double-digit growth. It was largely accepted fact that even though labels are a very small part of the large packaging industry, it was more profitable. Due to this, the number of label printers kept growing, investments also came in from established offset printing companies. With cheaper label presses coming from China and availability of good affordable machines in India, the label printing capacities have grown exponentially. This increase in capacities, the pandemic, the strikes in Finnish paper mills, the Ukraine war, the re-emergence of Covid in China,  etc. brought the margins in the labels industry under intense  pressure. Raw material prices have since escalated, freight rates, salaries and overheads have increase while competition does not leave room for increase in selling prices. In such a difficult scenario, label converters are looking at options to drive in profitability.

Opinion and comments of label printers across India was sought on how to drive-in better margins in the label production in the given circumstances. Three questions were posed to all, their response is somewhat similar, yet some do have apprehensions about the steps that are suggested whether they will actually drive in margins? However still, a direction on the way forward appears to be an imperative. The  printers in the diverse geographical zones who contributed their views are as follows;

North:

Anuj Bhargava, Kumar Labels NOIDA hereinafter referred to as (AB)

Rajeev Chhatwal, Kwality Offset New Delhi (RC)

West:

Mahendra Shah, Renault Paper, Palghar (MS)

Himanshu Kapur, J K Fine Prints Mumbai (HK)

Priyank Vasa, Unick fix-a-form, Ahmedabad (PV)

East:

Manoj Kochhar, Holoflex Kolkata (MK)

South:

Raveendran Selvarajan, Seljegat Sivakasi (RS)

Lakshminarayanan Parthasarthy, Signode India Ltd. (Wintek) Bangalore (LP)

Question: Do you agree that Embellishments, Digital printing & Hybrid printing or converting are important steps to get better prices for labels?

AB: Yes, value added labels do add to margins. However still, the main buyers are few. Startups or premium products cannot add volumes where multiple players offer value additions. 

RC: Embellishments certainly will get you a better price if you have a technical edge over your competition. Just a  different printing process does not get you more price from customers. One needs to decide which process to use to get better return based on machine capabilities .

Hybrid is still not suited for the Indian Market. However good converting and finishing is important for short runs on digital to reduce wastage.

MS: Yes, I agree. With increase of just-in-time orders, shorter runs and demand for innovations,  it is economical and faster to produce with Digital printing. Embellishments complemented with other capabilities, aid improvement in value addition.

HK: More technical the labels are, better is the margin. Unfortunately, large companies expect more for less. The basics of costing has been lost by most label converters. Embellishments also add to costs, but to recover those costs is difficult.

PV: We aim for the best process fit for a job, be it digital, flexo, hybrid or offset. That is the only way to master production cost. Digital embellishment always gives an edge and keeps business secure but does not always guarantee increased profitability, it comes with its own limitations. 

MK: I agree that Embellishments, Digital printing & Hybrid printing or converting are important steps to get better prices for labels. Value addition invariably leads to a better realization. Brand protection elements such as hologram, security inks, security designing also add value.

RS: Not only embellishments, but also innovations along with having capabilities for attending to needs of customers are important. If food and pharma customer needs labels with water-based inks, we need to have those capabilities. If they need booklet labels it becomes an imperative to be able to create them. Every printing process has its own specialty so when you are able to create labels with Hybrid and digital technologies, then of course selling prices are better.

LP: QR codes and AR (Augmented Reality) in labels, connecting consumer to the brand – is what we see as way forward for profitability . Embellishment leads to aesthetics, shelf appeal, increased sale and brand value for better profits to the buyers and converters.

Question: Have you taken any steps in this direction to increase your capabilities?

AB: We are always focused to value added labels. We have capabilities do embellishments like 3-D effects, embossing, textured foiling, screen printing and many other such processes that enhance the aesthetics of product.

RC: We have already invested in converting equipment with finishing and embellishing capabilities like foiling, Screen printing, Lamination etc. Our range of labels includes- Foil stamped/embossed labels, labels with tactile effects, Laminated, 3-D embossed, Variable data and Holographic labels etc.

MS: Since long, our customer profile is such that embellishments and employment of multiple print technologies is an imperative, for this reason we invested in hybrid presses many years back. Currently to achieve just in time capabilities we are investing in digital printing which will also give us additional production time on our main printing presses.

HK: We have always invested to be a capable company, right from inception so have the capacity to do all types of embellishments.

PV: Yes, we have added digital capabilities. Having multiple printing technologies at our disposal, enables us to pick and choose processes that are best suited for a particular job depending on the complexity of decoration required. 

MK: We are constantly trying to scale up our capabilities of adding diverse authentication features and other embellishments such as foiling, registered hologram stamping, variable data printing and finding new materials that are unique.

RS: At Seljegat we always endeavour to stay invested and capable with the latest developments. We have already installed machines with multiple capabilities, and we prefer all inline. We can do embellishments, special varnishes, multilayer labels, digital for variable or personalized labels, embossing, etc. We are always ready to cater to the changing needs of customers, nowadays pharma and food companies are demanding labels to be done with water-based inks or low migration inks, we have immediately empowered ourself suitably to serve them. In today’s time if we cannot deliver that extra, then we get lost in the crowd of intense competition.

LP: We are already having all capabilities and exploring AR in labels as next step towards Brand connect and Brand promotion. 

Question: What in your opinion are factors that can drive in better margins? Please mention steps at given prices of inputs.

AB: Label companies should invest in making labelstocks for captive use, negotiate hard while buying machines and for buying raw materials.

RC: As competition gets aggressive, systems need to be designed to reduce wastages, increase productivity and buy raw material at competitive prices. Making our internal systems strong is the only way out to drive-in better margins.

MS: We started the process of optimizing production costs, long time back. We collected data of all ongoing jobs for past 3 years and calibrated all processes as per the following;

a) We dwell on actual time needed for the job and check if the processes are complying with targeted numbers.

b) If not complying what's the core reason and if for some reasons not meeting norms,  can solutions be found?

c) Evaluating, if no solution is possible, is the job generating profit for the company? 

d) If not , either get the price increase or discard such jobs to save time for more sustainable jobs.

HK: Rather than controlling the input prices on which we have no control, we should focus on getting better prices from clients. We need to factor-in the basics like label waste that is completely non-recyclable and cannot be salvaged. Label machines are capital intensive we must add the impact of cost of investment in the total price of end product.

PV: To improve profitability;

Freight cost management is an imperative, it can save lot of money.

Process improvements and wastage control is necessary. One should start with small steps like exact web sizes, proper sheet layout, special sizes for volume jobs, ink management and keeping a track of low moving stocks.

Refrain from unhealthy competition.

Learn from your mistakes as a team. Take all complaints seriously. Try implementing simple solutions. 

Update monthly  performance chart of individual operators,  give them incentives for faster turnaround and increased capacity utilization. Take corrective steps to reduce downtime due breakdowns. 

·      MK: Key to improve margins is to provide customised solutions by understanding what the customer needs. We try to incorporate various levels of authentication, embellishments and decoration to tailor solutions that best meet their needs. If a customer cannot afford to pay for the hologram, we focus on enhancing the printed authentication features keeping costs under control, and yet get a price that enhances our profitability while the customer appreciates the value we deliver.

RS:  For driving in better margins, the instant reaction is to buy cheaper but if we have to think of steps at given raw material prices then one has to research internally and implement changes. As a first step we have opted for equipment and steps for faster changeover time between jobs to increase productivity. We have invested in a system for make ready to be completed before one job ends. The changeover time for us has reduced from one and half hour to just thirty minutes. For job set up we were using fresh labelstock but now we use rejected, old and leftover unusable stocks. Next, we are now switching over to LED UV as its operational and lamp replacement cost is lower. New equipment has been ordered and will be installed soon. We plan to install an automatic butt slicer for non-stop production. Reducing wastages is also on our radar and we constantly work on it.

LP: The following steps are necessary to drive in profits;

Watertight operations, control on wastages and minimising set-up waste.

Reducing overhead costs, improving efficiency and OEE (Overall equipment effectiveness).

Propose embellishments to customer making the label more premium to claim better realisation.

Summation:

Price increase is an ongoing process, the impact of inflation is felt every year along with that of other unavoidable circumstances. So, manufacturers need to gradually increase selling prices to maintain a healthy bottom line. Unfortunately, that is an ideal scenario but in actual the selling prices are driven by market dynamics and competition. In the present situation, for the label industry, it is time to look internally and evaluate. Based on the views of the printing fraternity it is largely agreed that embellishments, security features and innovative concepts on labels that enhance the shelf appeal and lead to better sales volumes for brands, can help get better prices. The simpler the label is, more is the competition. As indigenously produced label presses have come within the reach of middle level printers, the competition in that segment has become intense. Moreover, with organized retail and ecommerce becoming the predominant selling systems, need for more decorative labels, IT enabled labels and personalized variably printed labels  with security features has escalated. Not long-ago setup of label jobs took an hour or more with 2 or 3 persons on each press and at least 100 meters of material being used before final saleable production commenced. With increased automation, advanced automatic registration controls, higher speeds, etc. now a single operator can setup a job in just a few meters in about 15-30 minutes, with increased productivity, less wastages and quick changeovers between jobs by keeping the next jobs ready. Using exact size materials and not generating offcuts is also a necessity. These are changes that add to margins and reduced operational expenses.

Food and pharma safety and health concerns are matters of importance for discerning customers, this, along with statutory rules for toxic or unsafe materials used in converting labels, are to be avoided. There is an increased demand for non-migration and water-based inks because UV inks are considered somewhat hazardous for direct food contact and skin contact applications. Printers need to have such capabilities to supply as demanded by print buyers. Most companies feel that to reduce costs there is need for internal production systems and the workflow to be strengthened or monitored continuously to reduce downtimes at each stage, opt for more automation to reduce manpower and use energy efficient machines, equipment or systems.

Finally, time has come when EPR (Extended producer responsibility) compliance has become mandatory. Sustainability and circular economy are becoming a social responsibility for earth to be a safer planet. Large FMCG companies and brands have already started opting for or expressing preference to buy from certified green companies. It will not be out of place that producing in compliance, may as well add to cost but it may also qualify for better pricing for this good social cause.

 

Written by Harveer Sahni Chairman, Weldon Celloplast Limited, New Delhi February 2023