SMI Coated Products, headquartered in Mumbai and led by managing director Ajay Mehta, is an Indian multinational labelstock manufacturer. The company started production at Daman in 1993 and moved to Ambernath in 2008. It increased its production with a new hotmelt coating machine in 2015, taking total capacity to 135 million sqm per annum. In March 2017, SMI made its first foray abroad, opening a slitting unit in Dubai. Ajay Mehta has been at the forefront of the Indian label industry, interacting with the industry about ways of growing printing businesses, increasing efficiencies and being profitable.
Labels & Labeling (L&L): Which label printing technologies do you foresee making entry into the Indian label industry over the next five years?
Ajay Mehta (AM): Digital is looking very promising in the Indian market and we expect a lot of movement in this direction. We believe larger print houses will adopt digital technology first. The worldwide trends show that digital is on a rise. According to predictions, 20 percent of all labels produced across the globe will be on a digital press by the year 2020. Every market is different but technology catches up faster than we think. Digital will not only take care of the existing small run jobs, but also over a period of time, open up new avenues of exciting opportunities for label converters.
Hybrid technology will bring out the creativity of label converters and innovative applications will be the flavor of the Indian industry. Mid segment printers will consolidate their position by adding more machines with technologies existing in their portfolio.
L&L: How do you perceive the development of hybrid label printing technologies in India?
AM: Hybrid label printing is a very exciting concept. As the industry moves ahead, every converter will try to create a niche for themselves. Digital and hybrid label printing technologies will be instrumental to help create niche applications for a variety of segments. There are many combinations possible and I am sure these will be used appropriately to create a lasting impact on the consumer.
L&L: What are the biggest challenges Indian label converters will face in the next five years?
AM: India’s consumption of labels started with a small base but the growth percentage year after year has been phenomenal. As is well-known, most of the label printing companies in India are family owned businesses. The challenge will be to grow with the changing times and to have a professional attitude while maintaining the personal touch. Every printer must also focus on a particular segment of business that their company is catering to, such as pharmaceutical, food, liquor, cosmetic, FMCG, to name a few. Each segment requires different treatment of labels in terms of printing and converting. It is, thus, very important that printers choose the type and configuration of machine suited to the segment they want to service. Otherwise it can lead to over specified press capable of catering to numerous segments. We need to have a clear focus of the segment we want to cater and utilize available resources judiciously. This is going to be very critical for successful and healthy growth of the industry.
L&L: In one of our discussions in 2014, you mentioned that most label converters in India may not be printing more than 100,000 sqm a month, whereas they should have been printing at least 130,000 to 140,000 sqm. What’s the current status?
AM: Printers have already realized the way forward. They have worked on utilizing the width of machines, lining up the jobs as per similar colors, reducing down time between jobs and using rolls of longer lengths.
L&L: How do you suggest printers become more efficient in light of reverse auctioning and increasing raw material prices?
AM: Fear of losing business has forced the selling price of labels to go further down while the cost of all other packaging material has been going up. This raises a doubt in the mind of buyers as to whether they are buying labels at the right price or not. This is one of the reasons to implement reverse auctions by buyers of labels.
Focused business strategy along with implementing lean management systems builds efficiency in the system. We have to move away from top line growth and look critically at the bottom line. This thought process among the label printers will take away the pressure of aggressively participating in reverse auctions. The industry is moving at a fast pace so investments are going to be essential. We have to innovate and look to provide label solutions for buyers of labels. This will help retain business at profitable rates.
L&L: What is the volume growth of pressure-sensitive labels in India?
AM: Current data based on a survey done by Label Manufacturers’ Association of India (LMAI) indicates the Indian label industry is growing at a healthy rate of 15 percent.
L&L: The ‘Make in India’ campaign, though, being talked about by the central government, has not yet made a significant impact on businesses. What is your take on it?
AM: This is a tough time around the world in terms of growth. In India, we have a legacy of bureaucracy and red tape. It takes time to break old habits and concepts. Along with the intention, we also need ground work. The government is working hard to build the requisite infrastructure needed for businesses. For far too long the Indian economy has been on the cusp of phenomenal growth. India is now the fastest-growing economy, resulting in higher growth of labels. Thecurrent government is making the right moves and right noise to take things ahead. We will surely see positive results in coming years.
L&L: Several printers spoke of business slowdown due to the demonetization announced in India in November 2016. How did the currency ban affect the Indian label industry? Do you see market conditions improving in 2017-18?
AM: There was definitely a business slowdown due to the demonetization announced by the government of India. Depending on the industry the label printer was catering to, some businesses were affected by up to 50 percent. Overall, the negative effect on the label industry was around 25 percent. The requirement has bounced back very close to normal terms now. We expect that people doing organized business will increase. Unorganized businesses are expected to reduce.
Also, monsoon season plays an important role in the economy of India and it is expected to be normal this year. The combined effect will ensure that the coming year will be good for the industry.
L&L: How is Goods and Service Tax (GST) expected to impact the label market in the short and long term?
AM: Change of tax structure will invariably mean adjustments in the ways of working. There are many seminars and training sessions going on in the country that are being utilized by most businesses. As people adjust to the new way of working, there could be a negative impact on the economy in the short run. However, GST will eventually result in higher tax collection resulting in increased spending on improving infrastructure by the government as well as subsequent increase in organized businesses. In the long run, it will be beneficial to the economy; thus benefitting the label market as well.
L&L: How do you view the entry of multinational printers in India?
AM: Entry of multinational printers is a reflection of the potential in the Indian label industry. Multinational printers will bring an organized and professional attitude in the industry. Personal relationships, however, will continue to stay important alongside better service and high quality. It will also become important to demonstrate systems which ensure consistent quality and service.
L&L: Printers are increasingly getting more involved with brands and end users to drive profitability. How does SMI facilitate that at both ends?
AM: We have always promoted this concept. When one interacts with brands and end users, one can provide solutions for their applications. Over a period of time one becomes recognized as a label solutions provider. This is a reflection of the confidence of the industry in itself. SMI has been promoting the use of self-adhesive material at end user customers as well as encouraging working jointly with printers.
We spread the technical aspects of labelstock material and provide labelstock solutions for end user applications. Economic benefits are not part of the discussions as we are not direct suppliers to end customers.
L&L: Can you tell us about your interests outside the label industry?
AM: I am passionate about traveling and seeing the world. It is fascinating to see how mankind has adapted to different climatic conditions, created different cultures, beliefs and lifestyles.
Read this opinion in L&L issue 3, 2017 and here