Indian industry on the impact of Covid-19

With the supply of only essential goods and restricted movement, the lockdown has had a massive impact on the Indian label industry which has practically come to a stand-still. Only a handful of companies have been able to continue operations with 20 to 25 percent of their workers. While manufacturing companies have been allowed to run at 50 percent capacity, most label printing companies are running at as low as 15 to 20 percent. New guidelines, to ensure safety, requires workers to stay on factory premise in the state of Uttar Pradesh. However, for companies to organize accommodation has been a challenge which only some have been able to tackle well. State government have issued orders as they deemed fit for their respective states. Due to sealed borders, procurement of raw material such as ink, labelstock, plates, dies amongst other components has been challenging. Add to this, the expense of sanitizing factories twice a day, having workers undergo daily health check-ups with an infrared thermometer, providing masks and face shields. Migration of labor from urban landscapes to their respective villages further adds to woes during these difficult times.

Harveer Sahni, chairman, Weldon Celloplast, said: ‘This is a scary situation to be in. Majority of the label manufacturing companies are family owned MSME (micro, small and medium enterprises) started by first generation entrepreneurs where in some cases the second generation is coming in. Barring a handful, they are not established big groups with access to large funds. These companies operate on rotation of money model. Most do not have large parked funds that can support their total expenditure (fixed and recurring) for months without generation of revenues. Suppliers too have suffered and know the ground realities facing their customers. In such a scenario, the supplier credit will also shrink. We hope the government support in terms of finance, regulations and compliances help them tide over this difficult situation.’

In lieu of this, LMAI joined hands with 12 other associations to request government for support to revive graphic arts industry. A brief report can be read on our website. 

Pankaj Bhardwaj, vice president and general manager, Avery Dennison India, said: ‘We had challenges to get manpower to the factory, transportation and getting permissions. However, we are gradually trying to take care of issues.’ For detailed views from Avery Dennison India, watch the video interaction here. 

Ajay Mehta, managing director, SMI Coated Products, added: ‘It is difficult for anyone to work in current situations, getting permissions from authorities and from neighbors is a big challenge. Transportation has also been a challenge.’

Creative Graphics, a repro-house with factories in Baddi, Noida, Hyderabad and Mumbai has had to accommodate workers in his respective units. However, those who can work remotely are doing so. Creative Graphics supplies plates for printing milk packs, pharmaceutical and hygiene labels that are all included under essential category during the lockdown. Company’s proprietor Deepanshu Goel said: ‘We have taken permission from government in each state where we run the factory to allow our private vehicles to deliver plates to our clients. Our operating costs have gone up but we continue to serve our clients.’

Sharing his experience, Gourav Roy, managing director, Flexo Image Graphics, said: ‘We realised after several tries that we, as machine and consumable supplier, do not fall into the category where we can open our offices or travel to extend our services especially to our customers who need support. Therefore, we continue to work from home and are in constant touch with printers who are running our supplied equipment to offer support needed over phone or from remote mode.’

Nilpeter India couldn’t run production at the factory till May 10 because as the comapny's managing director, Alan Baretto told Labels & Labeling, machine manufacturers were not classified under essential category. Nilpeter India has further cut its press projections, made in March, by 25 percent for the global market. ‘We hope to manufacture and send four to five presses in India in the current fiscal,’ said Baretto.

Abhay Datta, director, UV Graphic Technologies, added: ‘The opening on May 3 has already been extended to May 17 and may get further extended which could be a cause of deep concern. Further delay in opening up businesses could cause irreversible damage to some label printers.

The world consumes over 60 billion sqm. of labelstock every year averaging 5 billion sqm a month. This excludes boarding passes and baggage tags which is estimated at over 6 billion passengers annually and equates to 35 million sqm of boarding cards and a similar quantity for baggage tags converted annually. With an average worldwide lockdown of over one month and an anticipated slowdown, these figures can take a dip of minimum 20 percent in gross annual production and around 30 percent loss in revenue,’ he explained.

Anuj Bhargava, founder at Kumar Labels, a Noida-based company that produces pressure sensitive labels for alco-bev industry, believes that the consumption of alcohol will go down by 15 to 20 percent post Covid for atleast a year. ‘A lot of alcohol that has been with distributors has been sold and consumed so when market re-opens, there will be demand but the supply lines could be severely affected. Companies may not have enough bottles and caps to be able to sell millions of cases. Lines to make bottles would have drained so to ignite them could take days,’ he said.

LMAI president, Kuldip Goel who also prints pressure-sensitive labels, said: ‘Printers’ short-term concerns are dealing with liquidity problems, maintain relationships with current customers, feeding labels for essential items so supply chain can be maintained and design a plan to re-open their respective factories. Quantum of demand, post-Covid, may change so we have to engage in long-term planning and evaluate automation. We must utilize this time for online training of our staff and prepare for post-Covid world.’ Watch the complete video interaction with LMAI president here.

Amit Ahuja, sales director, Multitec, said printers are trying to adapt to the new normal working environment and added: ‘I see many companies coming out with innovative ideas to keep up and/or start their production although they face huge challenges in terms of manpower, raw material, material movement and so on. It took a while for them to start, but some companies have now created SOPs for safe and smart working.’

Consumption and market trends
With printers, at large, facing irreversible consequences, it will affect the market trends as well. Until a vaccine is invented, tested and proven for effectiveness and its usage drives away the fears of infection leading to fatal consequences, buying and consumption pattern could witness a sea change.

Ahuja said, ‘This pandemic will fundamentally change our lives in the short and medium term.  In the short term, more families will try to buy things online, creating a huge demand for the e-commerce market where primary packaging will become simpler. There will be lesser trips to the malls and stores - so the way we perceive shelf appeal will fundamentally change. Consumption as a whole would not go down but could shift towards more of the essentials. In the long term, it could be the reverse. There could just be a case of a huge pent up demand which would eventually drive consumption through the roof.

Interesting case in point - the demand for cars shot up in China after the lockdown eased - a fact that defies all logic except for the rationale that more and more people want the safety of their vehicles rather than public transport. Another example is that spending on luxury merchandise also shot up due to the pent-up demand. Human beings tend to bounce back no matter how bad our situation has been.’

Mehta added: ‘New job opportunities would open up in the health and hygiene sectors. We expect some normalcy to come 4-6 months after the vaccine has been administered.’

Agreeing Sahni opined, ‘The pandemic is going to continue to have a severe impact this year so every move of the industry has to be calculated to limit any adverse impact. All long-term growth plans will have to be postponed and considered later when things change.’

Future investments
While the investments will be on hold for some time, could companies start evaluating their next step?

Sahni said: ‘So far the indications are definitely pointing towards nil or very little indulgence in fresh investments.’

Agreeing Mehta added, ‘New investments will be a challenge for some time but if anyone considers then it would and should be directed to automation. Companies will assess their damage and to their clients and suppliers before taking a call. The new normal of social distancing and reduced manpower to achieve social distancing in factories as well as in travel would force reduced capacity utilisation.’

Sharing his views, Mehta said: ‘Converters will think about more automation and one could argue that digital and hybrid presses will certainly get a boost in the shopping list of these companies. I am an "eternal optimist" and feel that as soon as things get back to normal, printers would be adding more capacity at a very fast pace.’

Validating, Bhargava, who prints pressure-sensitive labels for alco-bev industry, said: ‘We are very clear that we want to invest in faster and quality digital presses. Digital will grow but most likely people won’t have the capacity to invest. Our first priority will be to clear our debt before investing in any new equipment.’

T P Jain, managing director, Monotech Systems, said: ‘We believe this is a starting of digital transformation. We have identified operations that can be done from home and we will continue doing so post-covid. We need to evaluate automation in our factories wherever there is a compelling reason for it and look at machinery where we can eliminate manual labor. As far as label production is concerned, I believe digital printing will grow. There could be a serious labor shortage with low probability of migrant labor coming back anytime soon. So, digital will complement the existing technology well at this time. 

Growing consciousness towards safety and clean environment will lead to growth in label industry as the printers contribute in that direction. Organised retail will also get a boost thus, benefitting the industry. Therefore, there will be positive outcomes from the pandemic. Status-quo will not work. Whosoever will be able to re-position themselves will emerge a winner from this pandemic.' To watch detailed interaction with T P Jain, click here. 

Roy added: ‘I strongly believe printers who are committed, will continue to expand. I am sure decision would be more based on facts, figures and trends they will be able to see. Quality, production, automation, saving, return on investments and right partnership would be the key factors to arrive at a decision.’

Datta opined, ‘Label industry requires a manual workforce and cannot rely solely on automation as various processes and stages require human interventions. Therefore, there are limitations on how much can be automated. Moreover, automation comes at a substantially higher cost and requires a highly skilled workforce which could increase cost of production.’

While that could be true, most see a major change on how people will work hereon.

Work culture post-covid
Sahni said: ‘IT Developers will be called upon to create systems that can draw productivity in work-from home culture and reduce crowding in offices. This may also impact the requirement of additional real estate for companies that do not need complex infrastructure to operate their offices. Meetings are already being held through internet. Larger factories will see a lot of automation but again the MSMEs who are bigger job creators will have to be innovative in their work culture and avoid crowding. Security in industrial units was originally for managing attendance, visitor scrutiny, material checking both inward and outwards and theft, now it will also have to include medical scrutiny of all entering the premises.’

Mehta added: ‘Remotes control would be the essence. Sales teams would find it challenging as there would lots of virtual visits and discussions with clients. Daily reporting would be by new formats of reports. Welcome to the world of virtual reality.’

Baretto said: ‘We are facilitating work from home for our staff by providing required equipment to them. We have found that our online meetings have been very productive with good participation during this lockdown. Therefore, staff that can work remotely will continue to do so post lockdown too.'

Ahuja said; ‘Manufacturing companies will try and move their offices to a virtual environment but factories still need people to turn the levers and work the machines. Reels still have to be loaded and ink has still to be put in manually. Workmen on machines are very hard to replace but certain functions like accounting/finance, HR and the sorts could be moved to the remote working environment.’

For printers, Bhargava, said: ‘In-store competition and fighting for shelf space will now be on computer screen. However, repeat sales are going to happen based on quality of the product and packaging. Quality of label may not make much of a difference. The fights are going to be brutal and will depend on marketing budgets.’

‘Mankind has faced lots of challenges and we have always prevailed over them. Every major challenge has brought out the spirits in all and raised the level every time. Each new impossible looking challenge has always created new avenues and a brighter future for all. The past 100 years has seen so many huge challenges, each looked unscalable - whether it was the Spanish flu, First World War, Second World War, SARS, MERS, Ebola, HIV, 9/11, 26/11, and so many terror attacks across India as well as across the globe. At the same time the kind of progress we have made in the past 100 years is simply brilliant. The future will always be brighter and better, that is the nature of mankind,’ concluded Mehta on a positive note.