Sakata to up game at Bhiwadi and Panoli

How would you react to what’s happening to the print related capital goods manufacturers in Europe?

Many companies survived the 2008 global meltdown. Some of the machine manufacturers have focussed on the developing markets while some of them diversified into consumable business. You have a big story in Heidelberg. They strengthened the marketing of Saphira plates and inks and other press chemicals etc; and could survive. The present downturn is more serious and is expected to last for some more time. And if it continues in the present form particularly in the USA and the European markets, we may see a few more companies, as Manroland, go into insolvency administration, as it is known in Europe.

How do you see the market unfolding in this scenario?

If you compare India with the world, a GDP of 7.3% is not actually bad. It’s very good. The growth stories still continues, today. There is growth coming into packaging and if this FDI proposal gets cleared, and the government does not succumb to the opposition pressure, then packaging may blossom and flourish further. See how a re-cycled newspaper is being used as packaging material at a kirana shop in villages and smaller towns. There is no traceability despite this being such a big health hazard. There is no date of manufacturing, no date of expiry. For example, oil. One does not know where the product is coming from, when it was packed and what’s is shelf life or what fat is being used. Oil  becomes rancid and there’s so much adulteration happening, with many fatalities having been  reported in the past. Food product’s integrity is sacrificed because of lack of packaging. It’s a big issue. If nothing else, organised retail will ensure that things are packaged properly and there’s accountability.

A word about ink quality standard?

INCQC, the quality standard of Wan-Ifra specifies only lab and delta-E on the colour gamut. As long as there is a consistency of the colour, and lab values for each colour, it passes quality standards of ink. There is no negative list of any heavy metal or negative list of hydrocarbons which cannot be used. It’s a bad situation unless it is remedied.

Why do you insist on legislation? Why can’t the ink manufacturers take the responsibility?

It is very easy to legislate if there’s a willingness from the government. The newspaper business, I am talking about, is so distorted in pricing. Take for example, the circulation figures.  Circulation revenue does not meet even the marketing cost for the company. Each copy of the newspaper costs more than what we are paying for. Where in the world do you sell a newspaper for Rs 3. In Japan, a newspaper is 200 Yen; in Singapore or European or the US market it is $1.8-2. The newspaper companies are very cost-conscious, which puts pressure on the inputs. Nobody wants to pay an extra paise for paper or consumables like ink. The entire profitability is coming through the advertisement revenue. So the ink companies are under such acute pressure that nobody wants to discuss environment because it involves cost.

Talking about environment, a lot is being spoken about going green across the spectrum? What does it mean to you? What different module can Sakata offer?

See, Sakata has already taken out from our system all the negative list compounds like no heavy metals like chromium, lead or dyes are present in our product portfolio. Even if our customers ask for it, we refuse. Plus our products on the offset category are all REACH compliant. Our products also meet a number of Japanese standards and European standards. So from an environment point of view, Sakata is doing its bit. Besides, we also educate our customers on what needs to be done on the environment side. Sakata also brought in products like Belle color inks which are Toluene and MEK free inks for flexible packaging.

Do customers respond well?

Yes. A number of printers are now driving products like toluene-free or MEK (Methyl Ethyl Ketone)-free products although toluene and MEK is still acceptable in India. It is unfortunate that these substances are still being used in the Indian market. It is also very unfortunate that in India, vinyl types of inks are still being used. There are serious issues of re-cycling products printed with these inks. There is a serious issue of incineration at normal temperatures.

Let’s us talk about Sakata Inx. How was Sakata Inx established in India?

I was working for Ranbaxy group as vice president, technical (being a chemical engineer). One of my portfolio was identification of new businesses and the company identified packaging as one for investment. As part of my portfolio, I went about finding partners. I went to Japan and identified Sakata and got it on board as a technology transfer arrangement. This was in 1993. We started seed marketing for customers like PPL and India Foils. A year and a half later, the Indian company went slow owing to its main business facing losses. In 1995, Sakata on my request, agreed to invest into this  venture, thus becoming a joint venture (JV) with a 30:70 minority stake. The Indian company ran into more financial troubles, impeding the JV’s progress. In 1996, I resigned from the Indian company. When Sakata came to know of my quitting, I was offered the opportunity of heading India operation as president-director on behalf of Sakata, Japan, after it decided to buy rest of the stake, to make it a 100% Indian subsidiary. I accepted and started operation from my house, a three-bedroom flat in New Friends’ Colony. I asked my family, who then were living with me, to move to Gujarat for a while. I converted one room into my bed room, one into an office and bought some second hand furniture. So I would get out of the bedroom formally dressed, and enter the other room, which was my office. My servant did the same. During non-office hours he would be my domestic help, and during the day my office messenger. When the word went around that Sakata was setting up an India operation, I started getting calls from friends, asking me if they could join. In 1997, we set up an office in Nehru Place and started construction of the plant in Bhiwadi, Rajasthan. In 1998, Bhiwadi plant became operational and the rest – as they say – is history. Today, we have 500 people working in the two plants (the second one has been commissioned in 2009 in Panoli Gujarat) and a Sakata Inx India headquarters in Gurgaon, where we are doing Rs 320-crore business this year.

How has the growth pattern been for Sakata?

When we started operation in November, 1998, Sakata’s Bhiwadi plant had 5000 MT capacity for gravure inks. We grew by about 20% each year and every year we invested in Bhiwadi. For example, we started with equity of Rs 16-crore. Today it is Rs 60-crore. So we have been enhancing our capacity and in 2005, we acquired more land in the same complex and put up the offset ink operation in Bhiwadi. This incremental expansion at Bhiwadi still continues, in spite of our new project at Panoli in Gujarat. Our capacity is being raised from 5,000 tonnes to 9,000 tonnes for offset inks at Bhiwadi, which will be ready next year in March.

Can you tell us about the Panoli project in Gujarat?

We started the Panoli project in 2009 and have invested close to Rs 50 crore in setting up the factory. The gravure capacity is running at full capacity.now. The other news is,  the offset ink project will shortly start.  

Over a period of time the printing industry has seen fundamental shifts  in its business. Though offset still rules, digital is gaining in ascendency; commercial is on the decline while packaging is looking up; same with the book segment. How do you see the print industry going forward?

Maximum growth is taking place in the coldset area, the publishing and newspaper segments. That’s where we are also focussing. As for catering to the offset packaging needs, we have enough capacity to meet the needs at Bhiwadi. I believe that segment is not growing as much as flexible packaging. Flexible packaging is growing at about 12 to 15% year on year. While we are focussing on coldset, we are also enhancing our capacity to meet the flexible ink requirement, both at Bhiwadi and Panoli.

We come across printers who were the “old world print masters”, who mull over the future of print - and the technological strides in print (formulations, chemistry, soya-based, solvent-free inks). What do you say to them?

The future will see a lot of consolidation. This will be in production efficiencies, automation as labour is becoming expensive. Availability of skilled labour is not keeping pace with the growth of the industry. The biggies will become bigger. There will be lot of mergers and acquisitions. Smaller players will find it tough. Environment consciousness is increasing day by day and green issues are stepping out of seminars and conferences to the real workplace and practice.

Is Sakata looking to acquire any company?

Are there any company to acquire? I don’t think there are any ink companies available. There’s no point in acquiring a smaller ink company. There’s no value in that. That time has gone. Unless  a company is of a substantial size, or has some technological advantage in some of its products, marketing niche or network of dealers. Companies get acquired if you have some strategic strength in terms of technology or some patents or brands. We are not seeing any value of that type available. Yes, in 2005 we were looking at certain companies when we were to invest in our offset business. However, we are open to this idea and will look at an opportunity if it arises.

What happened to your plans of manufacturing soya-based inks for newspaper, offset and heatset applications?

We are making soya-seal inks for our offset products including inks for newspapers. It’s successful and accepted in the market place. All our inks products are marked with soya-seal. The soya seal-marked products are the ones which conform to the specification of Soya Bean Manufacturers Association. Soya-seal is like the ISI mark, one has to be a member of the association and obtain a license to use it on the ink products you sell. The symbol  is called the soya-seal. To be given such a licence your products have to comply to key requirements. First of all the ink should be aromatic-free or the use of aromatic carbon in the formulation should be less than 1%; total volatile compound should be less than 1%; and minimum of 20% of soya oil should be used in the product. Just because you use 5% soya-oil in your formulation, it does not become soya-seal ink. There is a difference.

But there are ink-makers who use soya-oil in their inks too, what’s so great about Sakata?

As I have already told you, it’s the soya-seal on our products that’s the differentiator. Our inks comply with the specifications of the American Soya bean oil manufacturers association for the usage of Soya Seal. Our inks have less than 1% VOC and hence are odour-free. Plus they do not smell as they have aromatic compounds less than 1%.

Also there this low-migration inks?

Yes, Inx International, a subsidiary of Sakata, has launched this ink recently.

And edible ink?

The colorants, which are used to produce food, the kesar used in the rassagulla, they are, what I call edible inks. They are not used for printing.

What about the ill-informed views on food-grade ink?

This is a very important topic. There is nothing like food-grade ink. As per different legislations in Europe or elsewhere, ink should not come in direct contact with food content in a package. The packaging company has to ensure that a barrier in the form of laminate should be structured such that the ink cannot migrate to the food content. The other important thing is that the ink used in the packaging does not have any negative list compounds.

Printers are trying to explore new ways of positioning their production in the market place. Are there any special demands they make from ink manufacturers?

Yes, we receive such demands almost daily, particularly from the print packagers. Whenever, the packagers are using a new substrate, a new type of packaging material a new design, or even when they have installed a new high-speed machine, we receive requests for help in producing the type of ink required for the new set-up. We have a R&D centre at Bhiwadi, which carries out these tests for new ink products.  Even otherwise, we keep doing innovations to provide new inks, especially as the market is growing. For example, until last year nobody was asking for toluene-free or MEK-free inks. This year we are selling good quantity of such inks, probably the first ink-maker to do so in this part of the continent.

In terms of percentage, how has the VOC-free or toluene-free usage been?

It’s difficult to tell you the exact percentage of usage demand, but I must tell you that it’s catching on. It is very heartening that more and more printers are opting for this type of inks. Of course, some of this must be to meet our customers’ export demand, but there are some who are adopting these inks for environment reasons.

Have you encountered a challenge while developing a particular ink for a demand?

Yes, there are issues of some properties of the pigments. The customer wants very specific shades, or for example, a particular property of light-fastness in this shade, which does not match with the existing raw material. Then we have to research with all possible pigments of the world to develop this particular shade. At times, the pigment to prepare that type of product itself is very expensive, which we offer to the customer, who then take a decision, depending on their commercial viability.

Talking about China and you have been travelling to China a few times. What’s Sakata doing in China?

Yes, I have been there a few times. Sakata has two plants in China, one only for liquid inks and the other for offset inks. This is a big market and needs of that market is very different from than that in India. Indian customers are much more demanding on consistency and higher quality standards.

In terms of raw material, do you face any shortage? Do you source anything from China?

Not much from China. A lot of material comes from Japan and Europe and local. We do not depend upon China. There are other ink-makers who depend on China. That’s not how we operate. We do not have a sourcing office in China.

Ink comes into focus, when there is a hike in prices. Pricing remains a concern, especially where printers (and ink-makers) offers a four-colour set for Rs 625? Your view.

I think, the ink companies are to be blamed for this. There are three reasons. One is the installed capacity in the country is much higher than the current demand. Secondly, there are certain historical reasons. In the past maybe some companies have charged more and given less value to the customer. Then they have gradually lowered the price to one-third levels from what they had been selling. This has given rise to the perception that ink-makers are making a lot of profits, and any rise in ink prices would mean more profit for the ink-makers. And third, ink companies in the past have not done enough to earn respect from their customers, in terms of bringing value to their business, in terms of good technology or bringing some new knowledge-base to the customer, which helps in reducing cost or increasing efficiency. For customers, ink has been a commodity. If one company did not provide, he will buy it from another. But the situation is changing as prices have bottomed out and customers have started seeing the value that a good ink company can bring to their businesses. And market has started looking to partner with the ink-makers for the mutual benefit.

How?

Having dropped the prices so much, the margin for profit has become very thin. The price point at which the inks are being sold, there’s no way they can survive with any further drop in price. You can’t sell at a loss and therefore, business or no business, a rise in ink price was to happen and is happening. Now, even if a printer say, if  ‘x’ ink-maker is not supplying ink, I’ll go buy it from ‘y’, the price will be the same. That’s why I am saying that the situation is changing, at least for the ink-makers. And the customer is also accepting the rise in cost of ink as a genuine one.

What’s happening on the UV front?

No, we do not make UV ink in India. We only produce UV coatings. That said, I must say that we have the product ready, but we do not find enough market to sustain UV ink manufacturing. The market for UV inks is very small. We feel each market has its own requirements and stages of growth and the challenge is to come up with solutions as the technology advances. Inks cannot be stand alone. The  business of printing and packaging is integrated with the machines, customer requirements and ultimately you and me.

What’s on the horizon for inks in digital technology?

Sakata will eventually come into digital, but currently we find that the total size of the market is, like UV inks, not enough to actually start large-scale production of digital inks. At a demand rate of 3,000 tonnes for digital ink, we feel investments at this level  can wait for some more time.

In terms of printing inks, something that comes out very strongly is the enormous sense of ownership in the print plants (with ink kitchens, and special recipes). Are you excited by these projects?

Yes. We are. It’s probably one of the very few companies which give ink kitchen to its customers. What’s an ink kitchen? It’s nothing but return ink management where your used inks are mixed, matched and used for subsequent print jobs. It is a big help – press-ready, dilute ink management, estimation of ink, proofing and cost saving. I think this was our creation and our idea. We already have five ink kitchens operating in our customers’ premises and more of our customers are demanding one from us.

What sort of business cycle should we expect for 2012? And growth rates for your company in India?

It will be in line with what we have been doing in the past, around 20% growth. We are hoping to touch Rs 320-crore in March 2012, that’s around 20% up from the previous year.

What’s the “next big thing” from Sakata?

As of now, we are promoting toluene- and MEK-free ink and challenge is in terms of new technology. Raw material shortages and their increasing prices are the challenges confronting our technical team on everyday basis.

Outlook for the Indian printing industry in the next five years?

I have a very high opinion about the Indian printers and their technical competence and their knowledge, it’s of a very high level. They may be running short on infrastructure or raw materials, but as far as knowledge is concerned they are second to none, globally. They know what is happening in the world. Having said that, as a nation we are integrated with the global economic situation and it’s not that nothing will happen to us if the global economic situation worsens. The uncertainties in Europe and US continues, effects of which is already showing in our economy. The ripples will affect us too. But the silver-lining is that our domestic growth story continues to grow.

This Feature appeared in 30 December 2011 issue of PrintWeek India magazine