With little or no demand and operational constraints, the Indian label industry too is in serious trouble. The plants that are running with just 25 to 30% of their employees are at best, producing to 25% of their capacity. Thus even if a hypothetical 50% of the label converters have permission to open their factories after being shut on an average for four weeks, by the second week of May, they are on average, producing at 25% of their capacity. 25% of 50% means that 12.5% of label converting capacity has come on line.
It is quite likely that even if the lockdowns are lifted in the next two months and more factories permitted to open, neither production nor demand can reach even 85% of capacity for another six months. The suppliers and label converters that have managed to get permission to run their plants are only being allowed to run 30% of their plant.
With the country-wide lockdown continuing, the requirements of social distancing in transporting workers to the partially open plants and in operations while maintaining a high standard of hygiene are a challenge. In cases where employees are to be housed within the plant compounds, the requirements of space are prohibitive and also prohibitively expensive.
100 square feet per employee
One industry expert estimates that roughly 9 square meters or 100 square feet of built-up space are needed to accommodate each employee on the premises. For 15 employees, the developed area for housing needed would be anywhere from 1,500 to 2,000 square feet. Plants of this scale, even with two narrow web label presses running, are themselves quite often no bigger than 3,500 square feet. Bigger plants that could even contemplate housing for their employees would require 4,000 square feet of developed space for housing forty employees and for 80 employees, 8,000 square feet, and so on.
Automation and skilling
It seems that the Covid-19 virus is not going away anytime soon and that label plants (and for that matter, any manufacturing plant) will have to provide a hygienic work environment with social distancing. To some extent, automation could be an answer in the future.
For functions such as label inspection, one can anticipate a high influx of automated slitter-rewinder-inspection systems since it will be untenable to have eight employees inspecting labels when two machines with a single or even two operators can more efficiently perform the same function and also maintain social distancing in the same valuable space. Similarly, there may be some impetus for higher speed and more automated label presses. And even for digital label presses since they seem to require only a single operator. Two operators could handle both the running and the material handling of two or three digital presses.
Fear of infection from ‘outsiders’
There is a general fear not just among label industry employees of any ‘outsider’ sharing a workspace or a shift. Employees in factories in rural and semi-urban areas or those in industrial parks near smaller towns are wary of other employees coming to factories from ‘outside’ or from bigger nearby towns and cities. Because of the widespread fear of Covid-19 infection by even the most casual contact, and the current hotspots mainly being in urban clusters, they want ‘outsiders’ to be quarantined for 14 days before they are allowed to work in the same shift.
From our limited discussions with label printers during the Covid-19 lockdown, there are glaring disparities in their abilities to re-enter production by location and size and also by their role as suppliers to the essential industries generally deemed to be food and pharma. However, even taken as a whole, it seems that even if the lockdown is lifted within the next eight weeks, the new normal will compel the maintenance of worker health and social distancing norms for every single functioning plant.
The economics of the ‘new normal’
We have less than three fiscal quarters of the 1 April 2020 to end-March 2021 budgetary year to ramp up production to a theoretical average of 80 to 90% capacity. With some reasonable optimism, one can only estimate or hope that Q1 production will be 20% of capacity, Q2-45%, Q3-70%, and Q4-90%. In sum, label production for the year will reach 55% if you are an optimist. If you are not an optimist and consider yourself somewhere between being a pessimist and a realist, Indian label production this year will likely reach anywhere from 25% to 40% of capacity utilization.
The plants of the raw material suppliers and the label converters are slowly coming into partial production as permitted. They are doing their best to improve the hygienic and healthy environment for their employees and producing labels for the fast running of production and packing lines of essential supplies such as food and pharmaceuticals. This can be seen as a necessary humanitarian contribution by an industry that feels compelled to do what it can for the common good. Refreshingly, the industry leaders do not see this as charity but as nation-building and welfare. However, the good work costs money out of pocket, and unless the brand owners also step up, it does not make the already challenged Indian label industry viable.
This article is from the May 2000 issue of Packaging South Asia