large number of monocarton printers and converters have purchased 6- color plus coater machines and invested in reasonably effective quality as- surance labs and systems. They have been driven by the export packaging
needs of the pharmaceutical industry to expand and improve their facilities with respect to security, track and trace and compliance issues. As these converters con- tinue to learn and absorb the requirements and process needs of their customers, they have been compelled to expand. However, many packaging customers do not really appreciate the real or long-term cost of these investments, and they contin- ue to look for the best packaging at the lowest price that can be obtained in the short-term.
Quality crisis
There are crises at several levels in the monocarton industry particularly amongst the middle-level producers. There is a serious problem with print quality and the lack of consistency often leads to huge rejections. The over-dependence on pharma cus- tomers requires the continuous printing of solid and special colors that can play hav- oc with offset presses where the expertise in operation, maintenance and cleaning is minimal over extended shifts. Color management and standardization is not seen as critical by most pharma customers and can only be driven by brand owners who are looking at high quality process printing of halftones and perhaps inevitably looking at primary packaging for FMCG and food exports.
Second-hand multicolor offset presses continuously used for pharma simply do not produce the quality that is required by multinational customers especially for localized FMCG products with a variety of European and Asian flesh tones. Many of these products like hair coloring, fairness creams and other cosmetics re- quire a total color match from batch to batch and hence a better understanding of prepress software and standardization. If converters are only able to output print ready files given by their customers without integrating them with their own in- house standardization and quality control processes, they cannot really be effi- cient.
Food packaging presents its own issues for middle-level players who are not able to cope with the plant hygiene required by this segment. Hygiene, safety, health and environment compliances require a genuine change in the culture of an organization. There is a significant cost in terms of infrastructure, testing equip- ment and skilled human resource. Increasingly, quality packaging buyers also re- quire access to ERP systems that entail both investment and the willingness to trans- parently provide workflow and process data.
Human resource
The human resource crisis is fairly serious since there is still no real graduate pack- aging production or management program associated with the industry within the country. While the Indian Institute of Packaging is planning to initiate this lev- el of education in the near future, currently the best graduates of its diploma pro- grams are quickly grabbed by the packaging departments of the large consumer product companies. The owner-managed monocarton industry is also uneven in motivating its next generation either because it is unable to grow fast enough or because the next generation is unwilling to make the sacrifices needed for serious growth. In any case, the rate of growth is moderated by the rate at which either the next generation or professionals become available, are inducted and become ef- fective leaders.
Fortunately some of the middle level players have recognized the crisis and are attempting to induct professionals with incentives beyond just money. And there is also an increasing band of professional consultants who are being called on to help in the optimization of plants where capacity has been created but cannot be realistically used for lack of understanding of quality, workflow and standardizati
Growth — organic and inorganic
Another question is whether the industry is seeing any green shoots in the economy, or signs of better capacity utilization. In this context, the capacity expansion in the last year has been limited to the larger and most organized monocarton and con- verters. They have in some cases slowed down the induction of their new presses but have still continued their systematic expansion plans. In their situation, they can- not really afford to slow down since the growth process generally requires almost simultaneous investments in marketing, sales, quality assurance, plant and build- ing and printing, finishing and converting equipment that cannot be executed easily in a short time frame.
Even for the leading Indian monocarton companies, anywhere from ten to twenty-four months are needed and the investments cannot be done serially. To remain competitive, the large organized and structured players must invest si- multaneously to increase their locations, market share and innovative niche prod- ucts without allowing significant gains for any of their perceived rivals.
Although investment is not easy when the economy is flat, it is still possible because the few leading converters are able to hold their prices to sustainable levels — they are efficient and manage their finances reasonably well. Partly be- cause of their tighter and more predictable performance and governance, they also have access to funds at lower rates than the middle-level players. Thus, the organized players will continue to outpace the growth of smaller and newer play- ers in the carton industry. In fact one can foresee both organized Indian players and global packaging companies continuing to look for acquisitions of the bet-
ter assets that are unable to grow on their own.
