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Silence! The post-Drupa quiet is in session - The Noel D'Cunha Sunday Column

27 August 2016

Indian printers flocked to Drupa. Many vendors announced marquee orders at the show.

But is the boost and revival for real?

One printer in Mysore said print has become a seasonal business. Another in Hyderabad said, you need more and more expensive machines to sustain the current customers.

In this Sunday Column, six print CEOs, who have invested in and around Drupa 2016 make sense of the big numbers.

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Manjunath BK, director, Global Printing & Packaging

Why do you think people are getting new machines?
Printers have realised that by investing in old machines they can never get the edge over their competitors and cannot produce world class packaging products.

Most of the successful printers cater to the export market and have to meet the expectations of overseas clients. Hence, they do not consider used machines, especially when it comes to the printing machine.

However, they do not mind (and I think that’s the right decision of course) buying used machines for post-press activity. The condition of the printing machine is most important when one has to produce a beautiful label or a carton, unlike a sparingly used finishing equipment, which can still produce a flawless product.

How will label printers sustain ops, if rates keep plummeting?
Simple answer –"Follow the Smart guys (leaders)".

Rates keep plummeting due to unhealthy competition among printers who do not calculate the actual cost of production. Some people forget that they need to keep safe margins to support them while re-investment in modern technology and for further growth of the company.

Despite the competition, smart printers would find a way to cut the cost of production by using alternative, less expensive but equally good substrates, inks, coatings and other raw materials and by using faster methods of production. Smart printers would not simply drop the prices without first doing their math and value engineering. That's how label printers can sustain.

Are we entering a phase where Europe was positioned, a few years ago? This phase saw many print companies going bankrupt or saw their profitability diminish ...
Printing and packaging industry depends on and thrives on larger industries like food, pharma, FMCG, cosmetics, lube etc. So, as long as these industries are doing well in India, label printers would not have the risk similar to that of Europe.

However, if you are referring to commercial printing companies, yes, a similar situation can be expected. This is why some stalwarts in print industry have smartly diverted from commercial to packaging printing at the right time.

Niral Patel, director, Art-O-Print, Ahmedabad

Why do you think people are getting new machines?
The commercial print market has been hit the hardest, as Internet, tablets, smartphones have become more popular than the physical printed copies.

The commercial printers are trying to move in the field of packaging, which may be one of the reasons printers are purchasing new machines.

The second reason is that FMCG market is growing fast in India, forcing printers to divert from their core business.

The third reason is that those with good money and don't find better investment opportunities, like builders, real estate agents, are investing in printing line. I don't know how come they find this line lucrative compared to their original business.

How will printers sustain ops, if rates keep plummeting?
The next ten years will be interesting. When new players enter the print industry, packaging particularly, do not know how to cost their products. They build their cost on what the print company next door charges, sometimes playing at the hands of the buyers, and dropping the cost drastically.

As a result, if a printer has to sustain in such a competitive environment, he will have to provide innovative and unique product to the market. High-end digital presses showcased at the Drupa provide one the opportunity to customise each product and create a new line in the market.

Further, costing is an important part of the print business. There are many aspects to be taken into account, including the running cost of the presses. When the cost of a print job is decided on the basis of the cost of paper, how will the print company survive? If such practices continue, I think most of the printer will fold up in the next four to six years.

Analyse your cost and stick to that cost, no need to cut others price, then and then a print company can survive.

Are we entering a phase where Europe was positioned, a few years ago? This phase saw many print companies going bankrupt or saw their profitability diminish ...
Defiantly when printers don't understand their own field in terms of cost, they will end up soon. You will see bankrupt printers soon.

We wish people understand and create a new standard in the market and survive for life long.

hp-event-israelAt the HP event in Israel: Biren Amin of Art O Print, accompanied by his son, Rushil and nephew, Niral

Hemant Bhotica, director, Shree Arun Packaging

Why do you think people are getting new machines?
This is a vicious circle. Big players get brand new machines, as otherwise, they will end up paying income tax. They also get loans either from venture capital companies or ECB’s at a very minimal cost of interest. Also, they need to cater to the top clients of the packaging industry and have to give the best possible quality. Also, they are setting up localised units near the place of the requirement of the customers and hence new plants are set up and new machines acquired.

When they do this smaller players have to buy even if they don’t want to compete with them in the market, even if their existing capacity is under-utilised. To keep up with the quality, capital expenditure has to be made or else you will perish.

How will printers sustain ops, if rates keep plummeting?
Well, plummeting rates are like time-bombs. In the case of some printers it has exploded and in the case of many its ticking, and will explode one day if the rates are not taken care of. Those who are sustaining are doing it with a lot of difficulty, and managing their finances. They too are not getting a just return on the capital employed by them.

Are we entering a phase where Europe was positioned, a few years ago? This phase saw many print companies going bankrupt or saw their profitability diminish?
Well, the printers in Europe had the problem of the economic slowdown and not because their rates were bad.

India as on date is out of the economic slowdown, though not completely and will not suffer the same fate due to similar reasons.

The reasons will be different. Print companies will go bankrupt because of the unviable rates what they are getting from the buyers due to cut-throat competition among themselves and the buyers taking advantage of the same.

It is high time that we the print community realise, that we require to unite and not let our buyers teach us our costing. We should work with our heads held high and not think of ourselves as small-time businessmen who can be cowed down by our buyers.

We are in an industry which is highly capital intensive and we should ensure that we get the right return capital.

Narendra Paruchuri, chairman, Pragati Offset

Why do you think people are getting new machines?
On the commercial print side - people are buying new presses to replace a couple of old ones. The production rate in these new machines is amazing and the quality is good.

Today space, power, people, and maintenance, cost a good percentage of earning. So changing to a new machine makes sense, especially if you are a tax-payer.

In the packaging side, I think that growth has been there and newer machines are coming in. Also, replacement of the older machines is important and necessary.

How will printers sustain ops, if rates keep plummeting?
They cannot. If you keep on cutting rates, the business will not be sustainable.

Are we entering a phase where Europe was positioned, a few years ago? This phase saw many print companies going bankrupt or saw their profitability diminish...
At 10 kilos per capita consumption of paper, I am not worried what happened in Europe. I think India will do well in the second half of Modi's rule. GST, Make in India, and in general, a positive economy poised to grow at 7.5/8% will make Indian printers happy.

p-narendra-and-hemant-paruchuri-examining-the-sbl-hot-foil-stamped-sheet
P Narendra and Hemant Paruchuri examining the SBL hot foil stamped sheet

Prithviraj Desai, director, Mail Order Solutions (MOS)

Why do you think people are getting new machines?
Currently, I feel that there are three types of purchases taking place in the industry. First, people are upgrading their existing systems in order to increase capacity to match their incoming workload. Second, people who are replacing equipment which has become outdated and cannot be sustained going forward. Third, people are investing in entry-level digital machines to brace for the future and wrap their heads around the evolving marketplace. I think companies in the first position are most comfortable.

How will printers sustain ops, if rates keep plummeting?
This is THE question. However, we must realise that this kind of situation does come up in all industries. We all must learn to accept that the printing industry is maturing, and the customer is becoming more demanding. The customer is definitely in the driver’s seat because he has a huge pool of alternatives, resulting from the high capacity in the printing industry. We must find our specialty, our area of expertise, and then focus on becoming the best within our specialty.

A typical commercial printer could find himself in a difficult spot in such a situation. Expand your horizons to bring in additional services to clients, resulting from working closely with your clients to see which direction they’re heading in. Having a strong differentiating quality is most important in this time, and quality, timeliness, and value adds are not only expected but have become the norm.

Are we entering a phase where Europe was positioned, a few years ago? This phase saw many print companies going bankrupt or saw their profitability diminish...
I am not exactly sure about how it was in Europe a few years ago. But I do see the Indian print industry maturing and heading towards a lot of consolidation, which will result in lower margins, companies shutting down, or merging with larger companies. This is a time where having your unique specialty is of utmost importance – unique being the key word there. That, and offering services to clients that could have huge switching costs for them. Technology is progressing at great speeds so we as printers do have the tools to be unique to our customers. It depends on how well we can cement our relationship with our clients.

Vishal Mehta, director, Shine Image (part of SRK Creative)

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Why do you think people are getting new machines?
I think there are two aspects involved – one is holding on to machines we should let go, machines that actually costs us, and the second is invest in a machine that will be more efficient and productive. I think many have started to realise the benefits of the latter. For example, if the market demands a bigger sized machine, it can be fulfilled only by a new machine. It also helps save on labour, lesser rejection and quick turnaround times.

How will printers sustain ops, if rates keep plummeting?
This is an ill that is turning into a crisis for the print industry. High input costs leave printers with shrinking margins. While charging less for print jobs is an equation that works for the customers, but in the long-run will this make print business unsustainable. The smartest printer will push quality, produce innovative products, manage cost and become profitable. It’s difficult, but the only way out.

Are we entering a phase where Europe was positioned, a few years ago? This phase saw many print companies going bankrupt or saw their profitability diminish ...
As of today, I don't think we are entering a phase where Europe was position a few years ago. Our economy may have hit the bottom and the recovery may be slow, but there’s restructuring. Agreed that printers may not be full with jobs 15 days before the festival season, like they used to, few years ago, they do come but on the verge of the festive season now. It’s a cascading effect – companies are restructuring, and we expect consumption to recover. Be prepared in terms of communication, quality, service, and maintain good relationship with the clients.

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