COVID-19 calls for innovation in packaging

FMCG sector impacted by uneven cash flow and migration

Avery Dennison
Pankaj Bhardwaj, vice president, and general manager of Avery Dennison India

Avery Dennison India claims it has become a better team while working-from-home. “We started working from home before the official COVID-19 lockdown, and the Janata Curfew were announced, keeping in mind our employees’ safety. However, our factories continued to operate as usual. Post the lockdown announcement, it took us 48 hours to get the permissions and restart our factories at all four locations,” says Pankaj Bhardwaj, vice president, and general manager of Avery Dennison India.

Initially, Avery Dennison started the factories with just 20% of the workforce and limited capacity. It now operates at an average of two-thirds capacity. The management foresaw the likely challenges as early as January when China was battling the virus that was spreading globally. A business continuity plan triggered in January ensured the uninterrupted supply of raw materials. “The biggest challenge during this lockdown has to be production and transportation, with lead times higher than normal. However, we were able to get logistics support from our partners and ensure the supply of raw materials,” Bhardwaj explains.

Label converters supplying essential goods manufacturers were able to start and somewhat scale-up early. The company’s pharma customers were quickest. Other areas such as FMCG, agro-chemicals, and eCommerce, where Avery Dennison has a significant presence, took time but started relatively soon. “Three weeks into the lockdown started, not more than 25% of our customers were functioning. This number rose to 60% by mid-May,” he says.

V-shaped recovery a possibility

The consumption pattern rocked back and forth in the past weeks. The global chief executive officer of a large FMCG company, says, “In a country like Italy, which was one of the worst-hit by the virus, it took the essential products companies to get permissions to operate in the lockdown within hours. Whereas, in India, it’s taking them 4-5 days.” Most consumer product companies are still working in the range of 40% – 50% of capacity, directly impacting label demand, and converters’ cash flows. Labor migration has also hurt.

“However, new ways of working are evolving. While coming to terms with new working methods, labor shortage and cash flow challenges, it will take the label industry a couple of months to completely stabilize. The brighter side of the story is that a large part of our portfolio is consumer-centric. Hence, even though demand is hit in the short run, it hasn’t evaporated. We may expect a V-shaped recovery soon,” says Bhardwaj.

The lockdown 4.0 story

India is headed towards the fourth phase of the lockdown, while in the third phase, many industries and factories were allowed to begin production. “The government is now ensuring business continuity. We can expect more relaxation in the new phase. These relaxations would reflect significantly in the orange and green zones and maybe to a greater degree in the red zone as well,” he predicts.

Covid-19 calls for new packaging trends

The Covid-19 virus outbreak has changed the way people look at and use consumer products. “Less contact packaging is going to be a new trend. We expect new formats are going to emerge for the least contact packaging. There is also a latent demand for a new type of packaging that can help mitigate viruses and bacteria. It may be an antimicrobial solution or something that prevents bacterial build-up on the packaging surface. However, it is going to take a long time for such innovations to become commercially viable. Nevertheless, we can expect interesting developments,” says Bhardwaj.

Opportunity for India to attract investment

“India has a clear and distinct advantage of being a large consumer market. Specifically, in the field of packaging, there is interest from global companies to explore the Indian landscape. We have seen global companies scaling up operations in India in the last five years. The current situation may act as a trigger and spring some investments in the country,” Bhardwaj concludes.

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