Packaging majors seek alliances; as Indian label firms prosper

An analysis of the new agreements and alliances in the Indian label print industry in 2012.

30 Oct 2012 | By Ramu Ramanathan

The dominating headline at Labelexpo India is the business of tie-ups and acquisitions – and the big ticket deals. All this has been happening without much hullballoo. This is a bit strange when you consider the stature of the packaging majors who are part of the new deals, Uflex Ltd, ITW, Paper Products and Huthamaki, Positive Packaging, Skanem Group and more recently, MeadWestVaco Corporation.

The acquisitions are part of a series of moves in the Indian label industry, which seems to be undergoing a transformation. Most organisations are seeking to consolidate; others are finding suitable Indian partners. As per a report from Technopak, “Today very few global retailers can afford to stay out India” with a total retail spending of $700 billion a year in the next five years. In this sense, most label print firms will seek to fulfill this requirement by buying specialisation in the Indian market.

Indian label firms are good at making things. But the organised label market is still a tiny proportion (some say 15%) of the whole. To cater to the new-age consumer, India will need a manufacturing base. It may have labour force that is cheap, but productivity is a bottleneck. As a leading brand manager (and jury member) told me during the PrintWeek India Awards, “Indian label firms will have to be technology focussed. They have to learn to build a brand and ensure labels are not perceived as commodity manufacturing.”

 The recent patterns in the label industry are part of this great leap forward.
MeadWestVaco acquires Ruby Macons
The most recent agreements is about MeadWestVaco, a global leader in packaging and packaging solutions. The group has entered into “a definitive agreement” to acquire Ruby Macons Ltd, a leading player in corrugated packaging materials, based in Vapi and Morbi, Gujarat. The main aim is: the acquisition of Ruby Macons which will ensure greater traction for MWV in the global packaging industry and strengthens the company’s presence in India.
 According to John Luke, Jr, the chairman and chief executive officer, MWV, “MWV plans to bring innovative solutions like those it developed in similar markets like Brazil, delivering solutions in areas including fresh produce, industrial products and consumer goods.”
 Ruby Macons produces 1.50 lakh tonnes annually in corrugated packaging materials space in India. The revenue of the firm is, $80 million (Rs 416 crore) and thanks to the acquisition, an expansion is underway. This is for a company with double digit operating margins and strong return on capital.
 MWV headquartered in Pune has been eyeing the packaging business in India.

Positive Packaging buys SGRE Labels
Meanwhile, as reported in the previous issue of PrintWeek India, Positive Packaging, a part of Enpee Group has acquired Bengaluru-based SGRE Labels.
 The Bengaluru-based label printing firm is equipped with both conventional narrow web flexo and a digital press from HP Indigo. According to market pundits, this acquisition will aid Positive Packaging to provide overall solutions to its clients from packaging to labelling.
 A decade ago, in April 2002, Positive Packaging announced the acquisition of Indian flexible packaging manufacturer-ICM Packaging; and in July 2009, Vista Film & Packaging, a manufacturer of CPP films and associate of PPIL, was amalgamated into PPIL.
 Positive Packaging is part of the Enpee group of companies, promoted by N P Kirpalani, a non-resident Indian based in Nigeria. The company was set up in 1994, and manufactures flexible packaging material. PPIL manufactures multi-layer laminated, printed, and metallised films using bi-axially-oriented poly-propylene, polyester film, and aluminium foil. It also manufactures rotogravure-printing cylinders and laser-engraved printing cylinders, metallised films and cast poly-propylene (CPP) films.

 PPIL has an annual manufacturing capacity of 31,800 tonnes of laminates, 55,000 units of rotogravure-printing cylinders, 9000 tonnes of metallised film, 5400 tonnes of CPP, and 12,000 units of base shells.

 The company has flexible-packaging plants in Khopoli (near Mumbai), electronically/laser engraved cylinder-manufacturing plants in Taloja and Bengaluru, a metallising plant in Taloja, a CPP plant in Ambernath, and base shell manufacturing facility at Bengaluru.
ITW and Wintek
The big news at the start of 2012 was when Illinois Tool Works (ITW) Signode India, an industrial packaging solution provider, acquired the complete operation of Bengaluru-based Wintek Flexo Prints to complete its packaging portfolio.

 “It’s an 100% acquisition and Wintek Flexo Prints  will now operate as a unit of ITW Signode India,” said Gururaj Ballarwad of Wintek Flexo Prints during that time. Ballarwad feels that hybrid technology consisting of gravure, offset, flexo and screen printing will be the game changing technology for label printing in India.

 “ITW was looking to venture into labels and cartons in India and Wintek had future growth in mind which led to this consolidation. It will be the blueprint of growth for Indian label industry in the coming years,” add Ballarwad. 

 One of the largest users of Gallus narrow-web presses in India, Wintek is already under process of the technology adoption to get integrated with ITW’s other manufacturing facilities at Rudraram (Andhra Pradesh), Surangi (union territory of Dadra & Nagar Haveli), Pune (Maharashtra) and Rudrapur (Uttarakhand).

 ITW will invest in new equipment at Wintek to scale up its folding carton division, operated on a smaller scale than its labelling division till now.
 Illinois Tool Works, was founded nearly 100 years ago, has over 60,000 employees, thousands of patents, and operates as a decentralised and diverse collection of manufacturing and industrial businesses.  
Label firms prosper
Meanwhile there is talk of another packaging major entering into an alliance with a prominent western India label firm. It’s still in the realm of speculation. But beneath this patchwork of new deals is a pattern. Once, is access to rich-country markets. This includes trade and therefore growth. But is also includes a host of other things like better technologies, more machines, and proper framework for investment rules.

 A couple of label press manufacturers we spoke to a year ago, had stated the label segment had got paralysed. This should ensure a genuine recovery and ensure the focus is back on manufacturing and international services. Anuj Bhargav of Kumar Labels is quite bullish about the change.

 With a staff of 100 employees and a 2200 sq/ft printing unit, Bhargava claims Kumar Labels has been witnessing a growth rate of 30% per annum. He also doesn’t hide his expansion plans and shares and talks openly about his partnerships with Dubai and Indore-based label printing presses. “In the coming three years, we will commission more machines, focus on innovation, and will go for partnerships for our organic and inorganic growths. We can’t do everything on our own,” he says.

 “Yes, MNCs are coming in to India but they will not succeed until or unless they understand our culture because here businesses are developed more on the basis of relations you share with your customers. For instance, when Dominos entered the country, they were giants. Yet they encountered troubled waters, till they Indianised their taste,” he says.

A similar sentiment is echoed by Priyata Raghavan, director, Sai Security. “Currently, we are doing around 100 tons of labels each month. The ratio of net production of wet glue to PS labels stands at 75:25. We are trying to decrease our wet glue label production to 40% of the total production, and instead focus on increasing the PS label production up to 60%,” she says.

 She seems unperturbed by possibility of multinational players making inroads to the Indian industry. Multinationals acquiring Indian companies will continue and in fact, grow in the future. However, their presence will not make any difference for us. Consolidation will happen in a big way, and I see consolidation as positive. It is also an opportunity for Sai Security, as well as, the industry,” she claims.

 “I feel a foreign partner makes an Indian partner more productive. This is good, and has nothing negative in it. India is being a very different market, these international bigwigs need Indian partners as it is not easy for them to succeed independently,” she says.  
Skanem acquires Interlabels
The other big news for 2012 was when Skanem Group acquired 51% stake in Interlabels Industries, a Vasai-based printing and packaging company.

 The Skanem Group is a supplier of self adhesive labels in Europe and Asia. Currently, it has 13 production sites in eight countries with over 1000 employees in Norway, Sweden, Denmark, United Kingdom, Germany, Poland, Russia and Thailand. The partnership with Interlabels would ensure it can take part in a growing market in South Asia. At the time of the agreement being formalised, the owner and CEO of Skanem, Ole Rugland said: “India is a market with a great potential and rapid consumption growth. Through this partnership, we get access to this exciting market.”

Established in 1983, Interlabels is a manufacturer of self-adhesive labels and labelling solutions and automated labelling machines. It has presence in Kenya, Uganda, Tanzania, Ethiopia, Nigeria, Congo, UAE, Saudi Arabia, Egypt, Pakistan and Bangladesh. It operates from five locations - Chennai, Vasai near Mumbai, Baddi, Kolkata and Nairobi. It has a team of 200 which looks into labels for cosmetics, toiletries, lubes, pharmaceutical, beverages, chemicals and detergents.

Packaging is taking off
The list is growing. There is news of Sai Security Printers, a paper packaging company having raised $7 million from Aureos South Asia Fund for expansion.

 Uflex Limited, a player in the flexible packaging industry started in 1983 with headquarters in Noida is planning for acquisitions in the US and Europe market. The company has already has a facility in Dubai and five manufacturing plants all over the world including in India, Egypt, Dubai, Mexico and Poland.

 India’s largest flexible packaging company expects to double its turnover by FY’15 while earmarking $250 million as capex in the next two years, Group President (Corporate Finance and Accounts) R.K. Jain stated during a press conference.

 The $250-million investments include $80-million being spent on setting up a polyester film plant in Kentucky, US, slated to be operational by December, Jain said adding that the plant will have an annual capacity of 30,000 tonnes. The facility will start production by December 2012 and will be the first greenfield investment to be made in Kentucky by an Indian company, as also Uflex’s first manufacturing facility in the US.

 During the financial year ended March 31, 2012 Uflex registered a growth of 30 per cent in consolidated net revenues at Rs 4,543 crore against Rs 3,540 crore in the previous year, on the back of favourable demand trends globally.

 “Currently we are getting 35 per cent revenues from overseas market and we expect this to be 50:50 by 2015. We are targeting to grow to $2 billion by 2015,” said Jain.

 “We are growing by 25 to 30 per cent CAGR and obviously we have $1 billion revenue. With that growth rate, we should be close to Rs 9,000 or Rs 9,500 crore by FY 15,” he said.
Conclusion: new revenues, new methods
 Clearly there is a lot of activity in the Indian label segment.

This is a lot more since the initial ripples that were caused when Manipal Technologies took up a majority stake in UPSL in 2008 to bring into its fold label production technologies. UPSL (based in Chennai) provides outsourced prepress services and label, magazines and catalog production services to leading players. 

Then there was the news of Reynders setting up a factory – after having seven factories in Europe. Today, Reynders India is a 100% subsidiary of Reynders, and the label-printing specialist has more than 125 customers who are catered to, from its facility in Bhiwadi, Rajasthan.

 In the past three years, other than high-growth, one can see a new-found confidence among the Indian players plus a yearning for self discipline. This self-defined discipline includes: purpose, uniqueness, sale-ability, expandibility (more machines, multi-locational) and being aspirational. 
As more and more Indian firms eye this five-fold mantra, the  label printscape looks interesting.

This article was published on 29 October 2012 and received 149 views