ROUND ONE: Bullish and back with a bang

Ramu Ramanathan (RR): Firstly, congratulations to KOPA. The Bengaluru print and packaging industry seems to be back with a bang. This will be the theme of our discussion today. The buoyancy in the industry.

We conducted a little survey, and spoke to a lot of converters, book printers and digital print players. We asked them a simple question: during the last 36 months, a lot of print firm CEOs and converters had challenges. In this sense what sort of help did they need from manufacturers and their technology partner? We asked them what were the things on their wish list. I will try to share their concerns with the seven esteemed members of our panel. 
RR: I would like to start with Vinay Kaushal. How do we see business in this industry - usual or unusual? What are the high points or challenges and any learnings that we picked up over the last two and a half years?

Vinay Kaushal (VK): I started my career here, in Bengaluru, 37 years ago. Business; usual or unusual is a difficult question to answer. The Covid span was difficult. Especially, how to keep the team intact, and how to support customers who were equally stressed that time. In the last one year, the business is ramping up and we have had important installations in New Delhi, where the machine is eight-colour along with inline control systems. That was the high point of the year after Covid. Now, the business is unusual and let us see how it unfolds.

RR: What are your views on business as usual or unusual, KS Murthy? The flexible packaging industry has seen growth.
KS Murthy (KM): The flexible packaging has seen tremendous growth. Particularly, the food sector has grown around 25 to 30%. Unfortunately, we did not see that type of growth in the packaging segment of mono cartons. Toyo’s main focus during the Covid months was flexible packaging. Having said that, we have a huge capacity of manufacturing sheetfed offset inks, of almost 1,200 tonnes per month. 

RR: Murthy, are you running at full capacity?
KM: At this moment, we are back to running a capacity of about 70%. Our focus is towards the coatings. Sustainability has become a big challenge and it is the future of all our packaging segments. So Toyo is focusing more on developing the coatings and enhancing our capacity in terms of the coating business.

RR: Rakesh Sachar, lots have been transpiring in the paper segment. The numbers of ITC are staggering: 16 product families, 30 grades, 50 sub-grades and 1,000 specifications. What is the sustained inflation, supply and demand dynamics and how is it going forward?
Rakesh Sachar (RS): Yes, lots of action in paper and paperboard segments. And our product portfolio is bigger than what you have mentioned.

RR: I stand corrected. What is the sustained inflation, supply and demand dynamics and how is it going forward?
RS: The demand supply dynamics have been up and down during this year with a strong H1, weak H2, both of which were very stressful, even though the YoY has been average. We will see this kind of volatility in the business going ahead as well. At the macro level, India's growth story remains good, as we can infer from the various expert reports on projected GDP numbers. On the demand side for packaging grades, experts are projecting a growth of around 5% and on the pessimistic side to 8% on the optimistic side. So while we may be having challenges currently due to inventory corrections, sentiments, inflation led contraction in demand for certain segments, we will see the macro level demand to remain strong as we go ahead.

RR: Any new announcements?
RS: No virgin paperboard capacity is getting commissioned in the next two years. And then the fragmented structure of the domestic market makes large imports difficult. So again at the macro-level no major supply side surprise. Looking at this demand-supply scenario in the domestic market, at ITC PSPD we are looking to expand our capacity for virgin paper-boards. We are targeting around a million MT of virgin paperboards in the next 3-4 years. This is going to be a major investment. This is a testimony to our belief in the India growth story.

RR: What is the volatility that you were talking about?
RS: We have seen a lot of volatility on demand-supply side over the last three years due to the pandemic, its after-effects. Also the war in Russia, inflation, wild swings in commodity prices, shipping crisis etc etc. We are hoping for a more stable business environment going ahead but we see challenges on the raw material side. We expect much-more volatility which could impact manufacturing costs of paper mills. The largest input raw material for virgin wood-based paper and paperboard mills like us is fibre which is sourced from the local wood and imported fibre. The dynamics of imported fibre are at a global level and there are macro-indicators for both. There is a positive and a negative side. 

RR: So a period of wait and watch?
RS: Yes. However the domestic wood scenario is stressed and we are looking at a major crisis for the next two years. All paper mills which depend on wood-based fibre are likely to face major supply and cost challenges. They will need to innovate their own solutions. As far as ITC PSPD is concerned as a manufacturer, we would also like to see a stable scenario. 

RR: Venugopal Menon, what is the sense you are getting from the converters and what is your sense of the sentiment in the market, especially for packaging?
Venugopal Menon (VM): The last few years, in the lieu of Covid, it was challenging in some parts of the industry and beneficial for others. The packaging including, flexible, corrugated, cartons and the label industry, did well. The corrugated segment grew because of the rise in eCommerce; labels grew because of pharma; and cartons got a boost because of food and pharma. Since the second half of 2022, we have seen a slump in the market in terms of consumption and demand. Now, the second half of 2023, it should come back to normalcy. We will see demand coming back and consumption growing.

RR: What about packaging consumption?
VM: With the population dividend, disposable income packaging is bound to grow. Sometimes it is cyclical due to consumer patterns where the consumer wants to spend and how much. In the coming years, we will see major investments in industries like footwear, electronics/mobile, toys etc.

RR: An out of syllabus question for you Amit Khurana. Can you give us an overview of what has been happening in the Indian newspaper segment?
Amit Khurana (AK): The Covid period has completely altered the way the industry is moving forward as the new normal is very different. The consumer behaviour has changed and the way we consume our content has also changed. Talking about the newspaper industry, which was a dominant industry around a hundred years ago; has seen growth year-by-year. I think despite all the technological disruptions such as media, social media and the digital era, the newspaper industry in India has been very robust.

RR: And now, post-Covid?
AK: But post-Covid, it is seeing a downward trend and the industry has gone down by about 20%. Markets are shifting from metro cities to the tier-two tier-three towns. Regional language newspapers are back to their 100% circulation and India still manufactures six crore copies, daily. As far as the technology is concerned, post-Covid, the demand patterns are shifting and customers are asking about sustainability. That has been one of the key focus areas for TechNova, to give more sustainable products. 

RR: Since TechNova has a solution for each and every industry vertical, please share your overall assessment?
AK: Demand in the publication segment is very good, the newspaper segment has dipped, and the commercial print segment has been struggling. Having said that, our numbers indicate a good amount of growth from tier-two and tier-three towns. On the packaging ground, there is a growth of 15 to 20%. Also, the book publication segment in India is seeing a huge growth because of the China plus one policy. A lot of publishers; including large and global ones, have started shifting their orders to India.

RR: Appadurai A, when we met at the Photo Fair a few weeks ago, you shared some insights plus data points about how India is the world's largest professional photo printing market for HP Indigo. The other thing you said, echoes with what Amit touched upon just. Installations in centres like Ranaghat, Bhatinda and Dehradun. So the question to you is, where does digital photo print and digital print stand today in this larger share, and where do you see it going forward?
Appadurai A (AA): First thing first, HP Indigo is a testimony of the fact that during the Covid period, the print and packaging industry supported the vaccine manufacturers. When industry pundits were talking about a slump in the industry, HP experienced a triple-digit growth. Digital printers were growing and Indigo customers were growing at 300%, thereby beating the market completely.

RR: How so? 
AA: Well, when a problem like Covid appears, customers become smart and nimble-footed. Mind you, the focus was not merely on photo print. Bengaluru saw two packaging installations by HP Indigo, which are doing pretty well.

RR: What do you attribute this to?
AA: In India, approximately 1.4 crore weddings transpire in a year and that is where the photo printing industry plays a prominent role. So, roughly about two plus crores of wedding photo albums are manufactured in India every year.

RR: Extraordinary.
AA: Absolutely. And this is the market which will continue to work, grow and seek higher quality. The Covid pandemic forced people to limit their size of guests for the wedding, and this caused a rise in the making of photo printed albums. 

RR: My next question is for Arnab Maiti. I have come across some numbers which say that Esko has a touch point with 92% of global brands. As Esko is interfacing with brands, packaging technologies and product development, is there a new grammar that has emerged during the last two to three years in terms of turnaround time, automation, pre-press, remote proofing, and virtual proofing? How has the ecosystem modified itself?
Arnab Maiti (AM): What Covid has done is a permanent and irreversible change. A lot of focus is coming back to the planet; that has become the forefront of all considerations. A recent study on consumer behaviours points out that the consumer wants experience first. And so, people are back with a vengeance to consume as Durai pointed out just now. If you look at the items in the market, you see products which never existed before. 

RR: Any bottlenecks?
AM: Oh yes. For the supply chain, it creates a huge bottleneck as one needs to introduce more product varieties / SKUs into the market with a shorter time-to-market, and all the other print equipment that you have got, becomes a bottleneck. That is when the trust quotient increased in the software and automation. 

ROUND TWO: Capex and Opex mantras
RR: An interesting input from BS Jolly from Edelmann Packaging which is an Ecovadis certified factory located in Baddi. He says, If you analyse the total cost of ownership (that is, the initial Capex and Opex over the life cycle of machinery), the Capex is not more than 20-25% of the total cost. But the buying decisions are made on the basis of Capex because Opex is hidden from customer perception. Machinery manufacturers can help in reducing the Opex by offering subscription-based models of Opex and OEE improvements. Venugopal Menon, would you like to go first?
VM: Well, Mr BS Jolly is right on one aspect that TCO is not only Opex but also what the machine is performing and producing the OEE . Fixed cost is done once and it can be amortised over a period of time but Opex is recurring. But if customer can improve their equipment OEE , then net productivity of the machine improves and thus higher the productivity in a given time, lower can be the cost per unit of production and for that machine maintenance is very important and Opex cannot be considered in a Silo or just an expense it has to be in tandem with machine output visa vi machine maintenance cost. With the Bobst ‘Connect’ platform now customers can monitor their equipment OEE and then address where they can improve .    

RR: How do you achieve this? Your thoughts Vinay Kaushal?
VK: Coming to the first point of the question, the ‘pay per print’ model; with the market dynamics in the Indian industry, I don’t think this model is a possibility at present. As in the initial comments I emphasised on the word ‘smart’ which stands for - Study more; Make systems which work; Apply those systems; Review and reward who are following the system; and target (SMART). Being systematic is the most important thing today for our printing presses especially after Covid and the efficiency of the machine is more important than all other costs. Capex is a one-time expense but Opex is an ongoing expense. 

RR: Venugopal, can machine manufacturers in the print and packaging industry start offering ‘pay as you print’ payment models for Capex financing? 
VM: The vision of our group believes in shaping the future of acting, which is based on connectivity, digitalisation, automation and sustainability. Connectivity is one thing where our vision is to collect all the machines, where we can collect the data and the owner can monitor the machine's performance, and then take action based on that. I appeal that on the Opex side, it is important to consider the efficiency and the productivity of the machine.

RR: Each segment has different market dynamics, maybe what is correct for the digital print segment is not doable for the sheetfed segment. Your view, Durai?
AA: A very good question. Firstly, 20% is the Capex monetisation in the overall equation and secondly, the subscription model is an ultimate way to further the market. Digital printing was born with a subscription model in place. Out of the 300 pieces that we have in India, about 60% of them are in the subscription model. There is the Opex, that somebody pays to lease, and they pay the maintenance to us, and anything that happens in the machine is a  bother to the manufacturer. I think this is the model and this is how every industry has grown around.

VK: This is not meant for all the segments. Each segment has different market dynamics, and what fits for digital might not fit for the sheetfed segment.
RR: But what does a CEO do about Capex, since it drains cash flow? And what kind of capital plan should one follow?

AM: When you talk about a particular size of business for whom the capital expenditure is a showstopper, the pay per click or pay per use can be a useful model. In the long run, pay per use always works out to be more expensive. The point is whether you are achieving your business objectives for the year using the right financial model. At Esko, we are heavily adopting this subscription model.

ROUND THREE: Trend-spotting
RR: Are there any shifts in India from pre-owned to brand new centres? Also, are there any new strategies that the industry is coming up with such as collective buying or cooperative purchase?
VK: You asked about the collective decision; a new trend is being seen recently. Five of the customers from one particular industrial area in Delhi who are each other’s competitors, sat down and negotiated with us. Finally, they purchased five machines together. Even though they were competitors, at the end of the day, they realised this would benefit them. And yes, there is a shift from major cities to smaller cities. People are realising that in order to survive, they need to improve their technology. They work on productivity and quality analysis and this can only happen with a new machine, then the benefits which are coming shortly.

RR: There are few models such as ink kitchens to provide captive knowledge. Is it possible to replicate that model, extrapolate that and do it at a larger scale?
KM: Colour is science. Colour contains values. With the help of science, we are able to get closer to the requirements of the customer. India is going to be the future export-oriented market for Toyo to the western countries. It is not just ink kitchen that needs to be considered, but also colour management. The training has to be done in terms of ink matching and colour management as well.

RR: ITC has undertaken many things in terms of elimination of losses, value creation for customers, focus on defects, overproduction, etc. But the tool that ITC used was digitalisation. Is it doable and can be replicated with smaller organisations?
RS: We are definitely larger and more complex in scale of operations as compared to the SME and MSME units, but in terms of manufacturing systems and processes the basics do not change. So yes, the systems and processes adopted by us to improve our manufacturing efficiency can be adopted by SMEs as well, with some modifications and customisations.

In terms of product differentiation, I would want more product differentiation as a sales manager but there is a limit to which you can do product differentiation beyond which it becomes a cost component. I believe the winner has to be accelerated through the manufacturing processes.

RR: The next question is for you, Appadurai. How to entice the next generation, and how do you get them to sort of join in the industry, especially the senior?
AA: I have observed that most of the printers sitting in the audience commute in luxurious cars. None of them use a basic car model. My analogy is that if we try to convert this investment into buying automated machines and advanced equipment, that is when the print industry will grow. Also, it will entice the next generation to join this industry. The next generation seeks automation, latest technologies, printing equipment and machineries in a print hub.  Today, 27% of HP Indigo’s existing installed base is run by the second generation. This is four times higher than the conventional industry today.