Challenges and opportunities for Indian label industry

With the initial results in from the e-survey of Indian label converters carried out in
2005, and on the basis of a number of visits to Indian label converters, Mike Fairley
analyses the Indian label market, its challenges and opportunities.

The value of the global label market over the past year was estimated to be in the
region of US$50 billion and still growing on an international basis at between 4% to
7%, largely buoyed by the high growth levels being achieved in the emerging markets
of Eastern Europe, Latin America, Asia and, and most recently that of India.

While China –with growth rates over the past few years of up to 20% or more per
annum –has perhaps been the key focus for many industry suppliers, it is India that is
now beginning to lead global label growth. Growth rates in India have been revised
upwards over the past eighteen months and are now estimated to be as high as 20%-
25% for the coming year. Even wet glue labels in India are achieving double-digit
growth, while shrink sleeve labeling in the country is now believed to be growing in
excess of 25% per annum.

Having said that, the total label market in India is still than 2 billion square meters –
although anticipated to rise to more than 3-4 billion square meters over the next 4-5
years. Although still dominated in volume terms by wet glue labels, pressure-sensitive
labels have certainly overtaken wet-glue labels in the annual value of sales in India.

This is rather where pressure-sensitive labels were in North America and Western
Europe some 10 years ago. In these markets today, self-adhesive labels dominate the
market in volume of square meters as well as by value –something that India will
achieve in probably far less than ten years.

Being dominated in volume terms by wet glue labels, the Indian market still relies
heavily on sheet-fed offset presses while, for web-fed printing of self-adhesive labels,
the sector predominantly uses letterpress (often semi-rotary), screen, foiling and more
recently, flexo presses –many of these machines would have been used machines.
However, this is now beginning to change.

Already, modern rotary letterpress, flexo and UV flexo, as well as combination

process presses –all from well known global press manufacturers - are being
imported into India in growing numbers, with the technical skills and quality of label
printing of the leading Indian label producers using, say, Gallus presses, being equal
to that seen anywhere in Europe or America –and all produced on a considerably
lower labour cost basis than in any western markets.

Certainly, the India Label Show at the end of 2004 proved that all the leading
international narrow-web label press manufacturers –Gallus, Nilpeter, Mark Andy,
Ko-Pack, GiDue, Focus, etc –are active and selling machines into India, including
presses with as many as seven or eight colours in combinations of rotary screen, UV
flexo and foiling. Frequently, it is sheet-fed label or commercial printers who are
buying these new, sophisticated narrow-web machines
As a major manufacturing country of plastic films, it is perhaps not surprising that the
growth of filmic labelstocks for pressure-sensitive, shrink sleeving and wrap-around
films in India are attaining some of the highest levels of growth. Like the developed
markets, this now includes hi ghg rowt hf orc lear‘ no-label
’lookf ilms .Inter
e st
ingly ,
sleeving in India is still a lower cost solution for brand owners than pressure-sensitive
labels –which is certainly not the case in Europe or North America. Again, the
growth of film converting is moving the Indian printing industry towards web-fed
solutions.

To try and have a better understanding of the technology, trends, requirements and
issues impacting on the Indian label industry Labels & Labeling undertook and e-
survey of Indian label converters during the middle of 2005. Some of the key findings
of this comprehensive survey are set out below.

Like most markets, a range of different types of labels are produced in India. Self-
adhesive labels dominated the types of labels produced (see Fig.1) by the responding
companies –at some 44% - while wet-glue applied paper labels made up the second
largest sector. Sleeve labels, wrap-around film and cut-and-stack film were also well
represented. In-mold label labels were only a small minority of those produced by the
surveyed companies.

From visits to India it is interesting to note the use of wet-glue applied labels in
sectors which are dominated –even mandatory –in most of the rest of the world, such
as pharmaceutical labels. Similarly, some other end-user sectors which are largely
self-adhesive in the highly developed markets of the world are decorated with sleeve
labels in India. Both wet-glue and sleeves are lower in cost than self-adhesives in this
market.

Some two-thirds of all the companies surveyed had some kind of in-house label
design and origination equipment (Fig.2) and 27% had their own in-house plate-
making capabilities. Just a handful of converters to date have installed any kind of
computer-to-plate technology in India –although is expected to become more
commonplace in the future.

In terms of printing technology used, the survey found that some 40% of converters
had narrow-web presses, 36% used sheet-fed presses, with 15% using wider web
presses (see Fig.3). A wide range of printing processes are being used for label
production, with flexo/UV flexo making up some 27% of the total (Fig. 4). Screen
printing is also widely used, with all printing processes having a place in the industry.
Like most countries and regions, combination process printing makes up about 10%
of the market.

Ask almost any label printer about what they see as the barriers to growth and there
will be a wide range of factors that are given. Indian label converters seem to be little
different to any others in the world. However, the top two issues cited are the same as
those quoted by virtually every other label converter in the world today –downward
pressure on prices and rising costs (Fig. 5).

Availability of quality cost-effective labelstock continually raises its head when

converters are discussing barriers to growth, and particularly so amongst those
producing for the more added-value sectors such as cosmetics, toiletries and
pharmaceutical products.

Education and training, understanding new technology, and recruitment issues are
also raised, as well as concerns about the high-cost of investing in state-of-the-art
printing technology. Competition from the wet-glue label sector is still a concern of
many label converters in India –again particularly from those producing
pharmaceutical labels.

In looking at where Indian label converters see their main opportunities for growth
and product diversification in the future (Fig. 6) it is interesting to note that more than
a quarter see the RFID smart label market as a key sector, although this is perhaps not
so surprising when it is understood that much of the software development for RFID
is written in India. Certainly, talking with Indian label producers, there is an interest
in them becoming RFID smart label manufacturers to export cost-effectively to
markets such as Europe or North America.

The whole field of brand protection, tamper-evidence, authentication, security

printing and holographic devices seems to be a key area for development in India and
should provide a stimulus for international suppliers of these types of products to
invest more time and effort into India.

Digital printing is of some interest to Indian label converters –particularly after the
demonstrations by HP Indigo at the Indian Label Show in December 2004.
Nevertheless, it still comes way behind RFID and security as a major investment
opportunity. Undoubtedly this will change in the future.

What needs to be done to further stimulate the Indian label market? Well, again like
most label markets around the world, the wider aspects of education, training,
research, conferences, market information and global trends seems to be at the
forefrontoft heI ndi
a nc onve rt
e rs’thinking (Fig.7), as well as continuing to develop
an active label industry association(s).

When asked about the number of people employed, some 32% of label converters
responding cited between 10 and 25 employees, 16% had between 25 and 50, 20%
between 50 and 100 and 20% more than 100. Just 12% of companies employed less
than 10 people. Almost all companies undertook other types of printing other than for
labels. Commercial printing, stationery, flexible packaging and cartons were the most
frequently cited products.

The most common end-user sectors for which Indian label converters were producing
included food (16%), healthcare/pharmaceutical (16%), industrial products (13%),
cosmetics/toiletries (11%), automotive/aeronautics/marine (11%) and consumer
products (10%).

Despite all the various issues related to barriers to growth, stimulating the market and
problems of raising investment, the response from the Indian label converters appears
to be fairly positive (Fig. 8). Some 36% of respondents reported profits in 2004 of
between 10% to 15% and 28% were in excess of 15%. This should hopefully be good
for future investment and growth in the Indian label industry.
What seems certain is that as investment into India by the leading global brand
manufacturers and major retail groups moves further ahead, so the demand for labels
of all kinds will continue to grow rapidly. The Indian label industry is already capable
of the highest quality of printing, not only for the domestic market but also for export
to other markets around the world. Indeed, some 52% of respondents to the survey
claimed to export to another country in the Asia region, 40% exported into Europe
and 52% into North America.

These trends can only continue to grow in the future, with Indian label converters
becoming ever more global in their aspirations and markets. India is undoubtedly a
country to watch –and to begin investing more time and effort in to build and
support. It will become one of the key label producer markets of the future.