Indian label converters to grow in 2011

Mike Fairley is an internationally known writer, publisher and consultant in the printing, packaging, security and label industries. During the past 30 years, he has written or contributed to 14 books on printing, packaging and label topics (including five encyclopaedias). An India watcher, Fairley discusses the prospects for the label industry.

Ramu Ramanathan (RR): You attended your first India Label Show in 1994. What has changed since then?
Mike Fairley (MF): In 1994, European label press manufacturers thought that they wouldn’t be able to sell many presses in this market. Now they are selling dozens or more in a year. It has changed that fast. And I think even in terms of material usage; the change is dramatic. There was very little imported material about 10 years ago. That has changed. The quality performance has gone up. Indian label printers are competing on a world basis and winning prizes in the world awards events. The investment has gone up significantly.

RR: Demographic and lifestyle changes are driving labeling in India but it is still a tiny base in terms of volume ...
MF: True. But we feel this base is going to grow substantially. We believe the self adhesive label industry in India is estimated to be growing in excess of 15% per annum. According to published data, 16 billion square metres of self adhesive labelstock is converted into labels in the world every year. As you saw during the presentation by Ilkka Ylipoti (vice president UPM), the total annual consumption of self adhesive labelstock in India is 750 million square metres. A tiny fraction of the world total. This translates into a per capita consumption in India of just 0.75 square metres. Compare this with three square metres in China, and 13-15 square metres in Europe and a little more in the US. So, the potential for self-adhesive growth in India is enormous over the next few years.

RR: Pressure sensitive labels along with wet glue dominates the India market?
MF: Yes. It’s around 250-300 million sq/mtrs for fine grade pressure sensitive labels. Overall you would probably have a similar quantity or higher of small grade sheets which cannot be machine applied labels. Pressure sensitive is perhaps rising to around 20% to 25% of the total label market in India, but wet glue is still the biggest. There are also a lot of sleeve labels in India, which is strictly deployed for the cosmetic and personal care market. Other technologies like in-mould labels are still a niche in India.

RR: I got some numbers from the Indian labelstock manufacturers. They say that semi gloss or chromo art paper and maplitho paper account for the biggest chunk of labelstocks sold in India. This accounts for nearly 70% of the total stock used; over 15% is filmic and 15% is others. Filmic should have been more but shrink sleeve labels have a huge chunk of the market share. According to some calculations: This would amount to 55,000 tons of paper consumed annually, both chromo and maplitho put together for self adhesive labels. Do you agree?
MF: Yes, this probably seems about right. You’ve to understand label usage from the print-buyer point of view; there are a number of value drivers to using label printing. Ensuring quality and compliance is very important. ISO 9000 is a growing buyer requirement. Taking cost out of the process is obviously desirable as well, and accelerated time-to-market enables products to enter the market more quickly. Converters have to change their service model according to the new requirements from the various players within the supply chain, and of course expand the scope of the business. The converter who delivers a label is pretty much a thing of the past.

RR: The market continues to invest in narrow web flexo technology, provided by imported presses and an increasing level of local, lower cost manufactured UV flexo machinery – which has become of interest to printers in India. Is this a trend prevalent in other countries like South Africa which got a boost after the recent soccer World Cup?
MF: South Africa is close to Europe in terms of consumption because of a significant wine industry. Also there are global consumer brands and products in the country. Once you get outside of South Africa however, the whole middle band of Africa, there is very little there. Maybe you have got another chunk around the top of North Africa. In the middle strip of Africa, there are some label companies but not a lot. In South Africa there is premium and a lot of wet glue. Again it would be the breweries with the labels and so on. Again, it’s mainly prime quality labelstock applications.

RR: I heard very bullish numbers from the machine manufacturers at Labelexpo. They talk of installing 100 machines in India in 2011. Would that be a fair estimate?
MF: Yes. We talked a lot about this. And I reckon this year it’s
probably going to be well over 100 machines; maybe nearer 120 or 130 machines. Let not just talk about the imported ones, it includes indigenous ones too. That’s quite a lot, a really big investment. Demographic and lifestyle changes are driving labeling in all sectors, and this is due to the growing middle class consumers in India. Also continuing innovation in the development of application and end use segments for labels is being driven by global brand owners and retailers’ investment in local operations. Major growth in packaged beverage, personal care, food sectors and retail and logistics is also providing a major boost for the label industry. Increasing availability of quality label materials – pressure sensitive label laminates, films, and specialist papers, ongoing development and upgrading of press technologies and printing skills, and demand for increased functionality in labels especially as anti-counterfeiting measure are label market drivers. All these factors will drive investment in the latest press technology.

RR: Indian label converters scaling up their size. Some of them are going multi-location, others are opting for in-house pre-press. Are they moving in the right direction?
MF: The bigger you get the more machines you get, the more plates you will need. The more plates you need and have to send them out to be made, the more you are likely to lose control. The bigger plants are often operating on two shifts, sometimes three. If you have problems at night, you can’t wait two days to replace a plate. So, the more sophisticated you get, the more pressurised you are by your global customers; it is likely that you would want to control everything in-house. This includes plate-making.

RR: Most label firms that I’ve visited in India say that tooling is an area of concern ...
MF: If you look back ten years or so, a majority of label presses in India were probably flatbed with flat dies. Today, most of the new presses coming in today are rotary presses with rotary dies. So you have to get the die-makers to start upgrading their systems, which today is probably mostly international companies. You will most likely see sophisticate rotary die manufacturing facilities in India before too long. I think some of the big global players are already mulling the idea, it just a question of when.

RR: How do you explain the dominance of wet- glue labels in India?
MF: Wet-glue labels are relatively low cost and can be applied at high speeds for long runs of bottled or canned products. Self-adhesive are more for premium quality brands. Undoubtedly, a lot of labels plants have been formed out of conventional printers. And so, they have opted for the offset process they know to begin with and can print sheet wet-glue labels. Some of the companies who have started with sheet offset, have stayed offset. One reason is, offset’s appeal is due to its quality component. But the more you start looking at the market and added-value options, and so on, then you start looking at combination of processes. Then converters opt for screen and/or offset and/or flexo, plus UV varnishing and probably in-line foiling. The latest narrow-web flexo equipment is available with options for hot or cold foiling, embossing, inkjet heads for personalisation, 2D bar coding, booklet insertion, hologram registration, flat-bed screen printing, sheeting, over-laminating, 100 percent web inspection, turret rewinding, or slitter rewinding, if required. Therefore it depends on your market.

RR: Today, is it unproductive to convert labels through the offset technology?
MF: Not on narrow web offset. In fact, some say it’s cheaper. It is very well suited for premium quality and very long runs, and as part of a combination process press. One of flexo’s main drivers in India is volume.

RR: Most printers follow a conventional cost methodology. How does one calculate ROI for label printing?
MF: I think I have to give you the trend in Europe. All of the sophisticated label printers have sophisticated management information (MIS) systems in place, which enables them to control everything. Everything that comes in, the work process right through to the production and delivery is all organized and controlled by MIS. And in many cases these systems give the user an estimate for every printing process you have in that plant – and give you a price comparison.

RR: Does this method calculate end of stock?
MF: End of stock is very popular for smaller and emerging label printers. Once you get in to brand owners and professional buyers, the one thing is stocking because brand images are so important. So there is a market of what I call the lower end label market. But once you get into what I call the professional buyers and the brands, end of stock isn’t such an option for label printers.

RR: When do we see standards for colours in flexo?
MF: It has been coming for some time. They have been working to develop standards for high density flexo for a few years now and the process is getting better and better. All the printing processes need standards. In fact, we’ve just helped to establish a project with the European label association for developing test standards for digital label printing as well, because there aren’t any standards for this process at the moment. Certainly, once brand owners want consistency in the performance, they also want standards. They want to put the standards and specifications in their buying specs. If there aren’t any they can’t put them in. And it’s one of the reasons many of them are really reluctant to use digital, because they can’t specify performance standard. We are developing test procedures for digital printing in Europe. We hope this will be global standards, eventually.

RR: Colour control is definitely a key element in the success of printing, not just CYMK, but also spot color matching ...
MF: There is a lot going on, particularly in pre-press. With the latest pre-press systems, you can fingerprint the press and put the data into the computer. Do  MIS and the pre-press. But you’re getting into the stage where you can also fingerprint the substrate and put that into the process as well. Hence, if one reel or job run is slightly creamer or bluer substrate than one of the jobs to another, you can compensate the pre-press to make it look the same. Pre-press is sophisticated, but it’s probably almost as expensive as buying a press! Pre-press has to be the main focus in order to have the fast turnarounds that digital printing requires for example. The press will do what it can—there’s a lot of technology in the market—but if the converter hasn’t got pre-press sorted, it can lead to a number of challenges. Pre-press has support fast job turnaround; unsuitable pre-press set-ups will jeopardise production and performance.

RR: India doesn’t have too many companies a with strong pre-press base.
MF: Once the global brands develop more in India, and the organised retail sector expands, then the more chance there is of getting sophisticated presses and prime quality labels. You’ve got to control pre-press and if you go digital, there is no option. It has to be done in-house. According to pre-press supplier EskoArtwork, ‘brand equity’ is definitely very important; for example, the accurate reproduction of spot colours.  They have showcased it during Labelexpo in Delhi.

RR: What are the trends in films?
MF: Again, it depends on the market. In Europe, the major move for films is in markets like personal care labels like toiletries, shampoos and cosmetics, as well as in many industrial applications. Anything you want to use in a bathroom is probably going to be on film. Anything that is on a squeezee bottle will be filmic. With this you can avoid wrinkled labels. Anything for which you want high performance and durability, like automotive and electronics, is going to be filmic. You use film for labelling things where paper isn’t good enough for labelling performance, which is let’s say for horticulture, garden, etc. Also in the agricultural sector for products like chemicals. So any place where paper is not good enough, film is handy. With filmic you can create labels which are suitable for use underwater! If you ship any chemicals by sea, the international standards make it mandatory for the labels to last for a minimum of three months even under sea water, and still be legible. This can’t be done with paper.

RR: What are the the game changing technologies, according to you?
MF: At the moment, UV flexo is the dominant technology, probably worldwide. In Europe it makes up 70% or more of all new press installations. It is nearly 75% in the USA. It’s probably lower than that at the moment in India. I think it will change and evolve. In my opinion, the major technologies are UV flexo, the growth of digital printing presses, which already make-up about 15% of new press sales. In about eight to ten years, digital may well start to overtake UV flexo in terms of installations, but not in terms of total installed base. Combination process presses continue to gain market share, as does offset – although from a lower starting base.

RR: In India, the cost of digital operations doesn’t add up.
MF: You have pharmaceutical plants with digital in India already. It’s difficult to do it any other way because its short-runs. Today, there 15 digital label press in India. I’m sure this will grow rapidly over the next five years.

RR: Indian firms use digital printing as a proofing device.
MF: You can do a lot more things with digital. You’re not just selling print. You’ve to make it a marketing, value-added capability.

RR: Do India label makers learn and understand the value of marketing opportunities with digital?
MF: They’re beginning to understand. Digital is about test marketing, short-run proofing, its versions, variations, its sequential coding and numbering, all of the things which you can’t do with conventional. The applications in India are still relatively limited. While the software, hardware, applications, and markets for digital label and package printing have developed rapidly over the past few years, many label, packaging, brand owner, and retail groups still have a perception of digital that is somewhat out-of-date in terms of quality, run lengths, solutions, and potential. All that has changed. Digital is now used for run lengths of 50,000 or more, a market opportunity which represents two-thirds of conventionally printed label jobs. Quality today is excellent. Indeed, many label producers quote jobs for both conventional and digital and let the customer decide. Many customers regularly choose digital. The breakeven or crossover point between digital and conventional has certainly extended considerably in recent years. Once the big retails enter India, that will trigger a demand.

RR: You’ve been in India for a fair bit of time. And you’ve visited a lot of label plants. Is there anything that struck you as definitive?
MF: They’ve got some very good factories now; they are investing in the latest new machines. One thing that strikes me every time I see work by Indian printers is how creative and innovative they are. When they buy a machine, they are quite happy to modify it to suit their needs and to do different things. You don’t get this in other parts of the world. It’s a part of the Indian culture.

RR: Indians sweat our machines more than anyone ...
MF: ... The other thing that amazes me is the amount of self-adhesive labels that are automatically applied to India; it’s relatively tiny. Almost all of UK and America consists of label applications that are automatic. Most of it in India is still hand application. But the automation will come once the big organised retail players come in with standardised brands and volume production. Then you will start to see a whole new industry in inspection and application technology. In five to ten years time the Indian label industry will be very different to what it is today.