The Sensex has rallied well over the past month, even crossing its highest point rally of the past six months. The question on everyone’s mind was has the market recovered? Has the Indian packaging industry survived the global economic recession? While most would claim that the worst is over, many thoughts are still hovering on a note of cautious optimism. Compare this to eight months ago, with the doomsayers predicting a bleak outlook for the economy. But according to the luxury packaging service providers PSA spoke to in Mumbai, things are looking up.
Luxury packaging products: export oriented
According to Jinesh Mehta the young director at Mumbai based Utility PrintPack, “Our order books are up. In fact there are export orders for the next six months.” The few other packaging companies we spoke to also concurred. The luxury packaging sector derives their revenues largely from the export markets, mostly Europe, the Middle East and the US, which are highly luxury brand conscious. So any downturn in retail sales would have its repercussion here. Jinesh Mehta has categorised the luxury packaging segment as mass markets; middle mass markets and prestige market. It is the first two categories that are seeing revival with containers being booked well in advance. “Our main markets are Europe and Middle East. It’s only recently that we opened an office in US. We are optimistic that things will pick up by this year end.” The luxury market in general has been affected by 25 to 30% in this downturn, but India was not so badly affected due to its indigenous consumption factor.
Issues facing exports
However export markets though lucrative, carry inherent risks due to lacunae that still exist in supply chain management. “We may have liberalised our economy, but red tape still exists. It can be very frustrating at times, especially in the context of meeting delivery deadlines. Any delay makes us liable to pay for the perceived loss of business to our buyer,” says Jinesh. The key issue in exports in the current market scenario is security of payments, price pressure and infrastructure. According to Jinesh, today dealing in export without a letter of credit (LC) is a very big risk no matter how big the order and the brand owner. So the current situation demands focus on repeat customers. Due to the global crisis many foreign companies are collaborating with Indian companies and are looking towards India as a safe bet for partnership.
Utility, like a few other packaging printers such as Parksons and Kumar Printers have become part of global packaging alliances. Utility had sometime last year announced the launch of the ‘Global PresitgePack’ alliance for the global markets and also formed an alliance with Pragati Offset, Hyderabad.
Thus Utility has not only acquired many export orders, but it has some interesting plans for growth in the near future. “Utility Print Pack has always concentrated on niche segments and our core strategy is to do something unique. We do have Indian FMCG clients but luxury and innovation still remains at the centre of our strategy and Global Prestige Pack has helped us to open some big accounts.” Parksons Packaging has a strategic alliance with Cartondruck AG, Germany for paper and board converters. Kumar Printers, Gurgaon is the only Indian member of the Global Packaging Alliance.
Installations of ‘Dream Machines’
Utility PrintPack and Parksons Packaging pioneered luxury carton packaging production in the country using full UV presses. Although Utility has been doing this for a long time, some months ago it installed a new Heidelberg CD74 6-colour coater UV press for their Ahmedabad unit.
The trend of buying these dreamliner presses was started by Chennai based VMC printers with a full UV interdeck manroland installation. This was followed by many 6-colour plus coater full UV press installations including Parksons Packaging\’s KBA Rapida 105 at its Daman plant; Temple Packaging installed a Heidelberg CD74; TCPL installed the Mitsubishi UV 6-colour plus coater at its new Haridwar plant and subsequently a manroland at their Silvassa plant. In the past year the dreamliner installations hit double digits and would have reached a dozen if the exchange rates had not become so unfavourable and the banks had not increased their collateral and other requirements.
So has the demand for this type of printing and packaging kept up with the new installed capacity? Utility has been quite optimistic about its investment claiming that the demand justified its investments. In fact, as shown in the box, many packaging printers and converters have gone ahead and installed these dream machines based on global market demands. We see as many as 20 more installations in place by March 2010.
While the primary focus of luxury cartons is on exports, the domestic market is picking up with retail being the engine for growth, although it has a long way to go to benefit any of the luxury packaging players. Organised retail is not growing at expected levels. Also, the government has still not allowed FDI in organised retail, though this is expected to change with a strong government now in place, minus the left parties. Another surprising development has been the high sale of liquor leading to high excise revenue this year. This has led to high growth for this category of luxury packaging. According to Anil Namugade of Trigon Digital Solutions the market situation is not as bad as it is made out to be. “Maybe volumes are down, but sales are happening across retail segments. Brands are being launched. But the launches may be toned down.” (see box on page 24).
While the perfumes and cosmetics may use the UV presses to print on metallised board and plastics for their impact and translucent effects many of the perfume, shoe, fabric and expensive liquor brands use very fancy rigid boxes. Pragati in Hyderabad for instance uses their dreamliner Mitsubishi UV press to print liners with many spectral and tactile effects on coated and metallised stock which are then pasted on both sides of imported board. The box making is done on a unique fully automated facility with industrial capacity and sometimes magnetic closures add to the treasure box effect. While showing us some of these rigid luxury packs Pragati said that this segment requires constant development work and value addition but there is a regular market with significant quantities.
The luxury packaging market is at this juncture ‘product right sizing’. The big companies are now focusing on innovative ways of packaging including their gift packs and corporate gifts. Corporates on the one hand have reduced the product dosing of the gifts and on the other hand have enhanced the packaging aesthetics. So corporate gifts have now become travel sets — putting more emphasis on packaging. Designs and media too are undergoing some changes.
Carton board packs, for example, are beginning to move away from traditional square or rectangular boxes, with more customers now considering circular, oval, hexagonal or triangular shapes. EskoArtwork, a company based in Bangalore, have devised tools for development of a virtual product in 3D format, thereby giving the brand owners or packaging converters a feel of the product and the media. Said Shrihari Rao of Esko, “Today, customers demand different options in terms of the look and feel of the product. While making them is a time consuming affair, packaging companies have no alternative but to meet this demand. So we have devised advanced graphic art tools like Visualiser and ArtiosCAD. These tools gives one an actual design and feel of the final product, in 3D form.”
The other issues facing the packaging industry are margins and the availability of local raw materials, especially paper boards of a particular grade which are still imported. Eco-packaging, though a norm in international markets has yet to catch up in India. There is not much awareness over this issue. Utility on its part has installed a special system of recycling of press chemical waste.
There seems to be a definite paradigm shift in the image of an Indian packaging company. Earlier companies out of India had low prestige value. But, with global markets having either shrunk or almost vanished, global brands see opportunity in tying up here. These brands are now seen to be willing to work with Indian packaging companies. This paradigm shift has been most visible in the fact that Utility is the only Asian company to have been allowed exhibit space for the past three prestigious Luxe Pack luxury packaging exhibitions in Monaco. “It took a lot of persistence, but we finally proved to the organisers that we are worthy exhibitors,” says Jinesh Mehta of Utility PrintPack. The Indian luxury packaging has arrived on the global arena.
Trigon — targeting a niche segment in the packaging supply chain
Trigon was established by Anil Namugade and Milind Deshpande with the objective of bridging the gap between design creativity and printing technicalities. Trigon have the Kodak Approval Digital Color Imaging System and with their automatic cutting and creasing table provide the greatest possible confidence in predicting colour and appearance of the final printed piece, including both traditional flat sheets as well as finished 3-dimensional packages and prototypes.
According to Namugade, Trigon adds value to their customer relationships with the services of innovative technical support and ideas, and accurate contract digital proofing solutions that enhance their customers’ operations. He says that demands for home product care and luxury care products are shaping up quite rapidly which ultimately helps the retail packaging industry grow in at a much faster growth rate in the country.