Packaging Sector -Treks Professional Path

The visible boom in India’s food industry is attracting new investments. The scope for investment is indeed much high, say leading machinery mackers & packaging industry representatives, whose focus now is on innovations and professionalism to meet the challenges of a competitive world.
Agri Business & Food Industry correspondent Naveen Grover had a chat with some leading industry representatives. Excerpts :

Packaging Industry
‘Composite cans are in great demand’
---Abhishek Kumar, Associate Manager,[DS Group (Canpac Division)]

These are times of Globalization. It means you will have to compete not only with other local companies, There are Global products to contend with – and these products come into the Indian market, all packaged so well and attractive to the Indian consumer. The new importance to packaging is something you may be welcoming, isn’t it?

Packaging always had importance but after liberalization, we are witnessing a rapid growth and development in Indian packaging sector. The reasons are pretty obvious, the influx of foreign products, and challenges from local player has given rise to consumerism. Now consumer has got lot of option to satisfy their wants. Hence today packaging has achieved a never before unique position, and is being taken very seriously across all sector.

You will agree that the new importance of packaging carries with it new challenges. Specially, what are the new challenges that you perceive? Is the industry ready to meet the challenges?

One of the more competitive segments, the going has been quite tough for the Indian companies in the flexible packaging industry. Even as Indian Industry has generally been rejoicing over the recovery, the flexible packaging segment continues to face problems.

The tough operating environment was reflected in the movement of the share prices of companies, either in the mid-or the small-cap space. For instance, stocks of Paper Products and Essel Propack have been the laggards in the market. The value of a portfolio of eight of these stocks appreciated by 36 percent in the past one year against a 67 percent increase in the CNX Mid-Cap 200 Index.

The flexible packaging segment constitutes 20-25 percent of the total packaging industry and is highly fragmented. Organised players account for 5 percent. Flexible packaging can be broadly classified into two segments – basic material (polymer) makers and converters.

Polymer manufacturers make films – PET (polyethylene terephthalate), BOPP (biaxially-oriented polypropylene) or other polyethylene based films. Companies such as Cosmo Films, which make BOPP films, and Jindal Polyester, which make both PET and BOPP films, belong to this segment.

Converters make the end-product (flex-packs). Depending on the user requirements, converters process various raw materials such as films inks and metal sheets into flex – packs such as laminates, labels, cartons, wrappers and tubes. Companies such as Paper Products and Orient Press fall under this segment.

Few vertically integrated players also form a part of the flexible packaging Industry. Essel Propack, for instance, has the capability that straddles the entire range, from filmmaking to tubing and capping.

Flex – packs, due to its convenience in handling and disposal, lower raw material cost and barrier against moisture and gases, find application in the packaging toothpastes, soaps, shampoos, detergents, processed foods, beverages and pan masala. To a lesser extent, it is also used in automobile and healthcare products. The revenue growth of converters depends on the fortunes of the fast moving consumer goods industry.

The frontline companies in the consumer goods industry have been having a difficult time over the past two years. Barring a few, most FMCG majors, including Hindustan Lever and Nestle, have seen sluggish or declining volume growth in select product segments.

Flex-Pack converters have, however, not had such a major problem in achieving volume growth. In 2003, for instance, Essel Propack recorded 7.5 percent increase in volumes over 2002. the volume growth of paper products was, however, higher at 22.5 percent because it also focuses on smaller FMCGs that are growing at a faster pace. The revenue growth of these companies, however, was not commensurate with the volume expansion. The revenue of the former grew 0.3 percent and the latter 19 percent. The drop in revenue growth vis-à-vis volume growth could be attributed to the increasing pressure imposed by FMCG majors on pricing.

Due to this reason people are now talking of innovation and are willing to experiment with their existing conventional pack, Market acceptability of New Pack like Composite Cans, Effervescent Tubes and desiccant cap, Child resistant closure and containers, plastic pilfer proof closures, etc are clear indication to this effect. Today in this competitive world, companies are willing to spend extra buck to make their product stand out from the rest. Hence, early mover has always an advantage before competition sets in.

You may want to tell us about your company. When did it started? How is it going?

Dharampal Satyapal Limited (Canpac Division) was started in 1999 with a sole purpose of starting a new trend in rigid packaging sector. It is a landmark achievement for DS Group which joined hands with CANPAC International AG, Switzerland to set up a state of art unit manufacturing Composite containers and became the pioneers in bringing this technology in India.

DSL Capac division manufactures world-class containers, employing patented technology and machinery from Switzerland. These cans are rigid packaging in cylindrical shape, made of biodegradable materials. These cans are far superior to any other form of conventional packaging in terms of quality, functionality, ease of use, cost, aesthetic appeal and is Environment friendly. This unique and patented technology assures of product / packaging protection and makes it impossible to duplicate the packaging.

Our Hon’ble Director Gaurav Kumar has always insisted on operating a business that provides Extensive packaging knowledge and technical expertise to help customers reduce costs and better manage their total packaging procurement requirements. The cans are being used world wide to pack varied products especially tea, coffee, health drinks, seeds, pharmaceuticals, wafers, savories, Herbal products spices, candles and nuts. They are also used for automobile parts and components, toys, liquor cosmetics, mailing tubes and many others.

With the emergence of Shopping malls, retail chains and fast changing buying behavior of Indian consumer, Composite cans are much more in demand than ever before. There are various advantages associated with these types of cans compare to conventional Tin/Plastic Cans. Viz.

Overall, what is present scenario like in packaging industry in India? Are new investments coming in, given the challenges ahead?

The Indian packaging industry itself is growing at 14-15% annually. This growth rate is expected to double in the next two years. The turnover of the packaging industry is estimated at Rs. 150 bn. These figures indicate towards a change in the industrial and consumer set up. However, the Indian fascination for rigid packaging remains intact. It is estimated that more than 80% of the total packaging in India constitutes rigid packaging, which is the oldest and the most conventional form of packaging. The remaining 20% comprises flexible packaging.

Rigid packaging constitutes glass bottles, metal cans, Composite Cans, aerosol cans, battery cell cans, aluminum collapsible tubes, injection molded plastic containers made of PVC, PET, HDPE, barrels made from HDPE, paperboards, and corrugated boxes. However, with the expanding middle class and rising income levels, the patterns of consumption are bound to change substantially and the demand for quality and convenience based products will increase. Concurrently, the increased interaction with the developed world will considerably influence the aesthetic and quality norms of the Indian consumer and lead to better consumption standards. This is expected to stimulate greater consumption of branded products and increase the use of rigid and flexible packaging.

Now more and more Multinationals and big corporate house are coming up with their own packaging plant. Financial institute are also willing to invest and capitalize this opportunity. Just a year ago We (DS Group) have also set up new Flexible Packaging unit in Bhonda, Assam with an annual capacity of 3600 MT catering to East and Northern states.

As far as professionalism is concern, companies now understand the need to implement fair practices to sustain in long run.

May be the packaging industry itself is poised for good times ahead. We say this for an important reason. Take the food processing sector, which depends on packaging for its own growth. This sector is alone attracting investment of the order of Rs. 100,000 crore.

You are right. The reason behind the healthy growth in this sector is same. The growth trend in packaging sector has lured many big Corporate houses and Financial institutions to invest in this sector. Now many foreign multinationals have no hesitation in outsourcing their packaging need from India. Tiffany foods, lkea, Walmart, etc. are already taking benefits of outsourcing their packaging needs in India.

On technological Front, how does the industry stand vis-à-vis international standards? What is the extent of dependence, if any, on imported machinery and know how? Are you happy with the developments?

World’s packaging machinery market is set to cross $30 billion in the next two years as the demand for the packaging equipment has been witnessing an unprecedented growth, of late. According to a recent report, Latin America and the Asia/Pacific region present the most promising markets. Faster population growth and rapidly increasing levels of industrial output will stimulate demand for packaging machinery in these emerging markets. China will record some of the strongest increases, with packaging machinery demand rising over 8 percent annually through 2008, and India will also post strong gains, suggests the report.

Across all industries, the US is the largest producer of packaging machinery, followed by Japan. Other leading producers include Germany, Italy and China, all with annual shipments in excess of $1bn. The major net exporters of packaging equipment in 2003 were Germany and Italy, followed by Sweden and Japan.

Despite the growth triggered by globalization and the resultant resurgence of industrial growth, the packaging and machinery sector in India is still lacking in innovation. Reluctance to invest in research to invent novel solutions to diverging requirements has led to increased dependence of imported machinery.

We have a new composite law to govern the food processing sector. Labeling regulations are there, quality control and the like. Have thought about these? How do they impact you in your business?

The foundation of growth for any organization is quality and service. Awareness of law and regulation always lead to standardization of process and thereby helps in the betterment of industry.

Quality has always been our prime focus right from the raw material intake in our plant to final shipment of material. At DSL Canpac Quality has been the backbone for our growth. We strongly believe that the Key to success is through perpetual Quality service and there is no other short cut to success.

You will agree that packaging in the final analysis is customer oriented. It means that the tins and Cans that you produce should be attractive enough, first, plus they must be also such that the ordinary consumer and the maid or servant at home – is able to open them without injury.

The bottom line of using Canpac is the fact that there is no sharp edges unlike Tins. It is very convenient and user friendly. While we make all types of cans our specialty is in making heat sealed soft peelable Membrane Cans. The reason behind its popularity in the international market is its attractive looks, user friendly and no chance for any duplicity of pack.