Sriraam Selvam: The industry’s response to the Covid pandemic

By 16 Oct 2020

I spoke to the owner of a commercial print firm. He warned at least 5,000 print businesses across India could go bust by March 2021. Only three things can save the commercial print industry: Affordable vaccine for the Covid-19 virus; a government vaccine to boost the balance sheets of small print firms; and a macro-economic vaccine

Selvam: The mantra for the next six months are customer focus, strong cost control, cash generation, and liquidity profile, and repurposing the packaging products

He was quite confident that none of the three vaccines were going to be available in the next six months. PrintWeek’s assessment of the Indian print industry based on ink, paper, and plate consumption data is: commercial print firms are operating at 55-66% of the pre-Covid-19 capacity. Many sectors that commercial print caters to are lost – as opposed to delay.

For example, one industry that’s facing a major dip is the travel industry with the United Nations World Tourism Organisation estimating a reduction of 58-78% globally.

At best, order levels will return to where they were prior to the crisis, however, it will not be possible for the industry to service all the debt, which will have built up due to the need to remain solvent. In all this, packaging is the Big Hope. The Indian packaging majors are notching up 90-95% of the pre-Covid capacity.

As a senior member of the packaging fraternity shared with me, “The underlying drivers of demand for mono carton packaging as well as flexible packaging remain strong.” Mainly, this was because of packaging solutions for resilient FMCG, food and the eCommerce industry. This is echoed by ink and paper manufacturers who say, “Supply chains remained robust from April”.

Industry insiders have praised “the exceptional work ethics during the lockdown, which allowed plants to remain operational.” Many businesses have provided record service and product quality levels for its customers (in India and overseas) during the period. Last year, the Indian packaging market was valued at USD 50.5 billion. By 2025, it is expected to notch up USD 204.81 billion by 2025. This means, registering a CAGR of 26.7% during the period of 2020-2025. Will we achieve these targets? Only time shall tell. Consider the corrugation industry.

Apart from Covid-related challenges, the corrugated box industry has been severely impacted by four price hikes in kraft paper in a short span of two months and a substantial rise in other input costs. The kraft paper mills have justified the hike by blaming the sharp increase of Rs 4,500-5,000 per tonne in waste paper prices in the last two months.

The point is the survival of the industry is at stake unless the box users (especially FMCG and white goods) absorb the rise in cost. Today, more than 10,000 small- and mid-sized corrugated box industry, which employs about six lakh people, has a capacity to produce six million tonnes of boxes per annum and logs turnover of about Rs 24,000 crores per annum.

Meanwhile, the liquor industry in India is set to face a 35-40% dip in sales this year due to the spread of the Covid-19 pandemic. Raahil Chopra, my colleague from Campaign India, spoke to Alexander Lambrecht at AB InBev. He said, “One strength we see in the Indian market is that people are moving to premiumisation. That’s what we are seeing in every market.

If you look at the growth of the alcohol industry, premium and above segments is where most of the growth is coming from. As people mature and get disposable income, they want a superior experience.” Which brings us to the now.

The mantra for the next six months are customer focus, strong cost control, cash generation, and liquidity profile, and repurposing the packaging products for new business such as eCommerce or rural markets.

Sriraam Selvam is the associate editor of PrintWeek and WhatPackaging? magazines



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