Borkar Packaging: Carton packaging czars from Goa

Noel D Cunha (ND): Tell us about the last two years at Borkar Packaging
Nikhil Borkar (NB): During the past two years, we acquired few companies such as the corrugated box manufacturer, Suraksha Packers, and mono carton manufacturer, Universal Cartons. When we added these capacities, we aimed to achieve high growth.
Amol Borkar (AB): Our target was to grow at around 25%. But, we managed a double-digit growth. It was lower than our expectations.

ND: Why was the drop in growth?
AB: I can attribute it to the overall market growth. It was slow. But, we clocked a turnover of Rs 533 crore for FY 2018/19.

ND: What’s your target for FY 2019/20?
AB: We have added a unit in East this financial year. This additional capacity will get quickly utilised, resulting in good growth numbers. With the revival of the FMCG sector, we are anticipating 90% utilisation by 2020. After a few sluggish quarters, there is an uptrend now.

ND: What is the current economic scenario of the packaging industry? Where does Borkar Packaging fit into it?
NB: When you talk about economy and packaging demand in particular, yes, there is a slump, but Borkar Packaging as an entity has added capacities in a previously non-existent market.We have set up a state-of-the-art unit in Kolkata to cater to the Eastern market, and with the Suraksha acquisition, we have ventured into the corrugation vertical.

This entry into a new market/segment is helping us compensate for the overall slump. Also, we don’t think that this scenario is going to continue for more than six months.

The seven-colour Roland 700 press with an inline foiler

ND: How do packaging companies handle such a slump?
NB: One has to look at cost and capacity optimisation. A long-term investment is a must if and only there is a market for it with a stable ROI.
Further, we have usually noted that as demand dips, the FMCG sectors concentrate on a smaller pack size. It often results in an increase in turnover for packaging companies. We aim to deliver volumes at a cost-effective price.

ND: Is there any impact on the bottom line when you talk of smaller SKUs?
AB: Smaller SKUs increase volumes. So as such, there is no impact on bottomline. Handling costs of such volumes is essential.

ND: That is a unique way of looking at it. How do you balance the machinery requirement within your existing setup?
NB: Yes. Our uniqueness lies in providing smaller packs in volumes to run on customer’s high-speed lines. We have balanced our capacities, especially in post-press converting area to handle such quantities. We have added an auto blanking machine in Goa and Baddi plant enabling us to reduce handling time and cost.

ND: How much of additional machinery was required to fulfil this model of yours?
NB: A little extra capacity in post-press is reasonable, provided it is not at the cost of efficiency.  As a company, we have always been cautious while adding printing or converting machines. It has to be systematic investment.

We have added the machinery keeping in mind that even in weak economic conditions, these lines should be running at 60% to 70% of its capacities. Our growth strategy includes good margins, and being lean and agile.

One requires faster machines with quick changeover times. With sluggish demand, few of the weaker players in the unorganised sector find it difficult to sustain, eventually moving these volumes to the organised sector. 

The focus internally has always been to maximise output from machines that we have. I believe, that even during the phase of a sluggish economy, efficiency must not be compromised.

ND: At what level do you get involved with your customers? How much do they matter when it comes to investing in new machinery for packaging?
AB: We add capacities only after engaging with our customers into our official growth plan. Our investment in machinery is dependent on the capacity fulfilment by the customers. We don’t invest in machinery first and then go searching for customers.

ND: So you constantly engage with the brand managers?
AB: Yes. There are many innovations/value additions that can be done in a product and this is where we consult with brand managers. Supply chain manager engagement happens for finalisation of location and logistics management.

The Bobst ExpertFold folderglue with Accubraille module

ND: Can you tell us more about this involvement with the brand managers?
AB: Plant visits and innovation day participations are platforms for engagement with brand managers. We look at the packaging trends in the market and present our ideas accordingly.  This instant visual and hands-on experience usually lights up a session of brainstorming.  Some of these ideas eventually get implemented in the final packs.

ND: Please give us an example of a particular product or brand that you have worked with…
NB: All our ideas about gift packs have worked fantastically well with our customers. There are pharmaceutical companies which required anti-counterfeiting measures, and we have served them by providing hologram foil stamping. Some of our innovations turned out to be brand-enhancing and game-changing for our customers.     

ND: What about the cost-effectiveness of the product for such innovations?
AB: To give you a specific example, a few years ago we successfully replaced of a rigid tube canister pack with a premium-looking paperboard canister for a major liquor brand. These packs are better looking and cost-effective. We applied innovation to the whole mechanism right from designing the pack to printing and converting.

We have recently worked on replacing PE coating with food-grade varnish, which will be sustainable and cost-effective.

ND: You had spoken about the other side of customer engagement – supply chain management. Why this?
AB: To provide a ‘just-in-time’ inventory solution. It is where supply chain management comes into play. We have many customers in Kolkata and other Eastern parts of  India. We used to serve them either from Goa or from North. We set up the Kolkata plant after a detailed discussion with our customers and their supply chain management personnel. This engagement eliminated our dependence on an external market study to enter that market and the risk of putting up capacities. 

Borkar’s Goa plant in Nessai, Margao, converts 30,000-tonnes of paperboard per annum

ND: Consumer trends are something a lot of packaging companies are keeping a tab on. It is mainly through innovation that these consumer trends are being adhered to. Where does the innovation lie when it comes to consumer trends – printing or converting, or both?
NB: When it comes to innovation in printing and converting, there are two different sides to it. The print side novelty mainly serves the purpose of value addition. Whereas in converting, the innovation involves engineering a completely new pack. For example, the washing powder packs are quite different from what it looked maybe five or six years ago.

The idea was there, but it never seemed implementable. Now with the retail segment moving from a local shop to a big shelf display, all of a sudden, this idea of packing washing powder in cartons has become more viable.

The idea behind this is that one could sell six kilograms of washing powder in a single purchase. Plus, the consumer would stay engaged with that brand for an extended period.

ND: How does this engagement with the household consumer take place over a long period of time?
NB: The monthly need of the customer is about one kilogram of washing powder. By making him buy six kilograms at a time, the consumer has just one brand in his view. 

You will ask why carton and not a plastic bag? A six-kilogram washing powder packaged in a plastic bag has functional constraints. It cannot stand tall on the shelf, which can make it visually unattractive. 

A paperboard packaging makes the pack more appealing and adds functionality like letting the consumer use the packaging to store the washing powder.

Companies such as Surf and Ariel have increased their volumes through this new way of packaging. It’s a great success story for them. For low-end brands that haven’t adopted such kind  of packaging, it is challenging fro them to create a long-term engagement with the household consumer.

ND: At the same time there is a trend of soaps and shampoos being packed in small packs and sachets for consumption in the rural area…
NB: Yes, that trend is going to continue. Wherever there is a reduced wallet-size consumption of small packs will happen in huge volumes. It’s mainly in urban areas that this long-term engagement is possible, thus locking the consumer to a particular brand.

ND: What are some other packaging trends that are currently gaining popularity?
NB: One is a move towards sustainable packs that are recyclable. ‘Avoid plastics’ is the new mantra and is gaining momentum. The point is: make the pack completely recyclable. For example, innovations are happening right now for an ice-cream pack which is devoid of PE coating. It’s in the testing phase. It is a matter of time before it becomes commercially implementable. 

ND: There is also this trend of moving away from metallised polyester or metallised polyethylene terephthalate (MetPET)…
NB: Yes. And it is a reversal of the trend five years ago when everything was moving towards MetPET. At the same time, the brands want their packs to look similar with paperboard as with MetPET. As a result, everything is now moving towards gravure and cold foil. Even foil stamping is back in fashion.

ND: With gravure there is this argument of using solvent inks…
NB: There are substitutes to solvent-based inks in gravure like toluene-free inks. In the end, this pack is recyclable as against the one with plastic. One has to use single recyclable material.

ND: Hindustan Unilever declared the pace of sales growth to a seven quarter low of 7%. Is it because of the moderation in rural segment’s consumption pattern? What is your take on it?    
NB: In terms of economy, that segment is largely dependent on the forces of nature. If there is enough rainfall or if there are no floods than that segment has a prosperous outlook. We are bullish on both the near- and long-term future.

ND: There is a blood bath in the market when it comes to pricing. Some brand owners tend to be notorious by squeezing one company against the other when it comes to pricing…
AB: We always focus on the quality and the service. We never compromise on the material used or its quality. We have seen the benefit of our stand, and in most cases, we have retained the customer. Quality always wins.
NB: At Borkar Packaging, we don’t mind if we lose out on a customer because of our pricing. It’s the question of our sustainability when it comes to pricing. A non-sustainable pricing model will lead to a few short-term gains, but in the long-term, it will be detrimental. Quality and timely delivery do bring back lost clientele.

ND:That strategy seems to have worked for Borkar Packaging...
NB: There is more to it. We always tell our marketing team to have a line-up of new clientele in the pipeline to mitigate the risk of loss of clients on account of pricing. By doing this, we always have a steady stream of customers to cater to. We do not get bogged down by the potential decrease in turnover because of the temporary loss of clients. We aim to be viable even after losing a few clients than build excess capacities and worry about underutilisation. Financially adding capabilities too quickly results in pressure to book them at unviable pricing. We always avoid such scenarios.

The pre-press unit at Borkar’s Goa plant

ND: It is this very reason that certain companies who take part in reverse auctioning eventually end up complaining about it…
AB: One should participate in such auctions with a lot of responsibility. Lack of accountability leads to companies getting blacklisted as they fail to deliver. 
Our point is: if you are providing quality and timely delivery, the customer won’t mind paying 2-3% more.

ND: Is there a strategy that you adhere to while engaging in request for quotations (RFQs)?
AB: Before we opt for any RFQ, we do an internal study about the products and the minimum/maximum quantity. Plus, we only choose the RFQ route for those clients who fit our service criteria.

ND: Your packaging entity is spread over a wide scale. Yet one sees that you haven’t opted for a digital press for your packaging needs…
AB: Cost is a critical factor while deciding on a digital press. We investigated everything and found that offset is still cheaper than digital. However, there are a few advantages of having a digital press, like every sheet, can have a different carton on it. Running smaller lengths, customisation of products for mobile app customers like Flipkart and Amazon, are applications which can be produced using a digital press. But, we are a volumes player, and digital is not a viable option for us.
NB: There are two parts to packaging. One is printing and second is converting. There’s a considerable price difference when you compare digital with offset for long runs. With digital you practically eliminate the printing part of it. The finishing will still need conventional equipment. We are not averse to digital technology. We simply think that it’s not viable in the market space that we operate in. 

So, for the moment, we will wait and watch the digital space closely.

ND: Please tell us about how you maintain the consistency of your machines and manage waste…
NB: We have built our enterprise resource planning (ERP) system connected to most of our machines. It helps us to be completely aware of the efficiency of our devices and the downtime, if any. The maintenance of the equipment and the registering capabilities are all mapped to standards. To offer the quality that we do, we have to ensure that the machines are well-calibrated. We carry out fingerprinting of our printing and finishing machinery every three months.

ND: What is the process involved in fingerprinting of the machinery?
AB: Along with our production, design and maintenance team we involve pre-press and press consultants to help us in this.

ND: Do you engage your ink supplier for the innovations that you want to carry out on a pack?
NB: We actively engage with our ink suppliers for the solutions as well as the problems that we anticipate in the market. In this way, most of the new ink products that arrive in the market get tested on our packs. We are happy to do that because we get to learn a lot in the process. It keeps us a step ahead of the market. We were ready with food-grade inks well before the market demanded it.

AB: The other advantage is that we are not solely dependent on the brand manager to know the packaging trend in the market. Our ink supplier tells us about the ongoing trends. We are working on sustainability with all our suppliers, and the ink manufacturers are part of this supply chain.

Amol Borkar: “Paperboard packaging makes the pack more appealing and adds functionality”

ND: Does this engagement also get extend to paperboard suppliers?
AB: We are a multiple-location company, and we engage with different paperboard suppliers like ITC Paperboards and Specialty Paper Division, Century Paper Mills, and Emami Paper Mills etc. ITC is one of our key suppliers, and it is an industry trendsetter.
NB: To give you an idea, we have created a metallised board instead of metallised polyester, as an alternative to MetPET. I cannot reveal the product because of the non-disclosure clause, but we have done extensive trials with multiple brands. At present, the only impediment is its cost. It shows our preparedness when it comes to trying new things for new trends.

ND: What is the strategy when it comes to your paperboard requirement? 
AB: We have to keep stocks as board type, and GSM are different for each product. The mills also have their schedules for the particular board type or GSM.
NB: Plus our industry is different than how an FMCG company works where packs are ordered on demand. We cannot do that. We have to keep an inventory anticipating the need for particular products. Also, the suppliers are far off in our case – sometimes more than 1,000km away.
AB: Apart from the raw material inventory we have also set-up finished goods inventory for our customers.

ND: How necessary is it for a packaging company to be multi-locational?
NB: It has become necessary to go multi-locational to optimise transport cost,  enhance speed and reach to the market.
AB: Our customers share their expansion plan with us then we do our analysis to zero down on next location based upon this information. Long-term economic viability is key while setting up any green-field plant.

ND: Has there been any region that you decided against although you had an option of setting up a plant over there?
NB: We avoided the Northeast region. Consumption in the Northeast market is not at par with the present manufacturing activities in that market. Servicing nearby areas like North West, West and South from there are not economically viable due to the distance involved. Though there are tax benefits associated with the region, when we did a long-term evaluation based on the number of client and competitors, it did not add up well for us.
AB: The local consumption is a significant deciding factor for not entering that region. In the Northeast region, the nearest 
market, apart from the local market, is 2,000kms away.

ND: You had mentioned earlier about the acquisitions. One of them was a corrugation plant Suraksha Packers and the other was a carton manufacturer called Universal Cartons. What made you opt for the acquisition?
NB: One reason to take over Universal Cartons was that the Borkar Packaging had a plan of scaling up operations in the North. Universal Carton fitted the bill perfectly. Moreover Universal Cartons had an excise benefit upto 2020.  This acquisition helped us to grab a sizeable market share in very short span of time.
AB: The acquisition of Suraksha Packers happened because we were looking at entering the corrugation space. In the case of Surakasha Packers, we found that the work culture and business ethics were similar to ours. 
Since we had common clientele, we could engage with the same customers for our multiple products.
NB: Acquisition is an easier way of scaling up if executed methodically. The green-field projects have a longer gestation period.

Borkar family tree

ND: You never had a thought of venturing into flexible packaging?
NB: Our core strength is paper and paperboard packaging, plus our technical knowhow is below par as far as flexible is concerned, so we avoided venturing in it. The flexible packaging segment is also cash-flow sensitive and fluctuation in raw material prices are frequent.

ND: Borkar Packaging has been one of the top three companies along with Parksons Packaging and TCPL. Any competition stress?
NB: The competition here is healthy because all of us have similar kind of investments and operate at a healthy price point. None of us look for temporary market gain. There is a long-term sustainability which is why we all enjoy a healthy growth.

ND: Borkar has set up a chain of twelve supermarkets in Goa. What was the thought process behind this?
AB: It is the oldest of all our businesses. We have added six new stores in one year plus we manage a franchise for Pantaloons Goa.  As a business entity, we are in retail under the name of Borkar Superstores, in the real estate business under the name of Borkars Developers and in packaging under brand Borkar Packaging. We intend to grow in all these verticals.

ND: Lastly, Borkar Packaging is a huge success story. What are the attributes that continue this saga of success?
NB: Our focus has been to deliver quality and timely delivery at a reasonable price. We intend to be ahead of the market and have significant R&D infrastructure. We engineer the look and the functionality of the pack.

Our offering spans from labels, leaflets, cartons and corrugated outers. All this has contributed to our success.

AB: If our client has any requirement concerning paper and paperboard, we can serve them. In short, we are one-stop packaging solution.