Inefficient offset printers face existential threat

Health of commercial offset industry

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printers
L to R: Sahil Rao and Girish Rao of Akruti

The commercial offset printing segment in India was hit hard last year, first due to the implementation of demonetization announced in November 2016, and then due to new GST regime that came in effect in the middle of 2017. However, things were not very healthy even before the double whammy of demonetization and GST. The market was reeling under severe overcapacity, falling prices, rising raw material costs and shrinking margins. Although offset still dominates the Indian commercial print segment, digital printing has been consistently nibbling at offset’s market share. As run lengths have been coming down, digital printing costs have become more competitive.

Indian Publisher and Printer spoke to some prominent printers in Maharashtra and Gujarat to assess the current situation in the commercial offset segment and what the near future holds for the industry. The consensus among all the printers is that overall print demand is still growing but the nature of that demand is changing, and the industry continues to face the same set of challenges such as price decline and reduced margins.

Sagar Nanavati of Surat-based Shilp Art says that the real growth in commercial offset is now concentrated in certain specialized segments such as fashion catalogs, which is thriving. Shilp Art is one of Surat’s leading printers of fashion catalogs with multiple presses from Heidelberg, Komori and RMGT.

“Printers who are doing run-of-the-mill jobs are facing severe pricing pressure due to overcapacity in the industry. Print houses have bought many presses, both new and used, in the last five years and now do not have much option but to compete on price. Even Shilp has seen its margins reduce,” he says.

Surat is a major fashion and textile center, and offset printers in the city cater to this segment which has seen strong growth in India due to rising demand for clothing owing to increasing disposable incomes. Founded by Manoj Nanavati almost three decades ago, Shilp Art too has seen growth along with the fashion industry.

In the western part of the country, Pune is another city which has seen influx of numerous offset presses in the last five to seven years due to demand for print from the real estate industry. However, just like Surat, printers in Pune too are facing similar challenges.

“I agree that the number of offset presses in Pune has increased in the last few years, but a large chunk constitutes of used presses. New offset presses are being bought mainly by printers who are operating in a niche. However, the overall capacity is in excess and this has put a lot of pressure on prices. Also, in Pune there has been a noticeable shift of offset jobs towards digital. For example, a lot of real estate customers now get their brochures printed on digital presses because of need for small quantities,” says Girish Rao of Pune-based Akruti, which has offset presses from KBA and Komori.

Kayyum Menon of Vadodra-based Concord agrees with Rao and says that there has been a significant shift from offset jobs to digital.

Forging partnership to utilize overcapacity

One of the ideas put forth by a number of printers to tackle the issue of overcapacity in the commercial offset printing industry is that of forging partnerships. Kalpesh Mehta of SRK Creative is a vocal advocate of this strategy and argues that the business conditions presently prevailing in the market need a different approach from the printing industry.

“Due to the present overcapacity in the offset industry, printers need to come together and have a tie-up where they can complement each other. I think under the current market conditions, printers should carefully weigh all the pros and cons before investing in a new press. Complementing each other is the best strategy now,” he says. SRK Creative diversified away from digital technology in 2013, by installed a refurbished Komori 528 5-color plus coater. In 2016, it further strengthened the offset printing department by buying a brand-new Komori Lithrone A37.

Rao of Akruti also agrees that partnerships can be a workable solution for the industry. “This is something we at Akruti do. Some of the jobs we are unable to undertake, we pass them on to our friends in the industry. This is a great idea, but I feel printers need to have a very good understanding among themselves.”

Nanavati of Shilp Art, however, disagrees with this and says that issues will invariable crop up in the partnership. “I do not believe this strategy of many printers coming together to form partnership will work as there will always be some differences. This is my opinion and we will not opt for such a partnership.”

Exploring new areas

In the last five to seven years, many commercial offset printers have diversified into packaging printing in search of growth. Nemlaxmi Books, another Surat-based print house, recently ventured into packaging printing and manufacturing of boxes and cartons. They still are involved in commercial printing but their prime focus now is on packaging.

“Regular commercial offset industry, especially around Surat, is stagnant and will continue to be so in near future. Printers will continue to compete in a commoditized market. New offset presses will be bought only by packaging printers or commercial printers who do specialized jobs,” says Vineet Sekhani of Nemlaxmi Books.

Pune’s Akruti too has diversified into making premium rigid boxes under the brand name Unbox. The purpose of Unbox is to cater to clients who demand items such as designer chocolate boxes, cake boxes, gift boxes, wedding ring boxes, promotional boxes, invitation boxes, etc. The focus is on high-end clients who would pay a premium for the high-quality jobs.

Run-of-the-mill printers face extinction

A common theme that has emerged from the conversation with these prominent printers is that run-of-the-mill commercial offset printers face a grim future. These printers will continue to compete on prices but face eventual extinction. In fact, many small-time printers have already shut shop in Mumbai, Surat, Pune and Vadodara. These small printers will face existential threat not only due to lack of niche and expertise but also due to the new GST system.

“Many small-time printers were able to quote unsustainable prices because they were evading taxes. That will not be the case under the GST regime. They will not be able to derive unfair advantage like they did earlier by not paying taxes,” says Rao of Akruti.

In 2024, we are looking at full recovery and growth-led investment in Indian printing

Indian Printer and Publisher founded in 1979 is the oldest B2B trade publication in the multi-platform and multi-channel IPPGroup. It created the category of privately owned B2B print magazines in the country. And by its diversification in packaging, (Packaging South Asia), food processing and packaging (IndiFoodBev) and health and medical supply chain and packaging (HealthTekPak), and its community activities in training, research, and conferences (Ipp Services, Training and Research) the organization continues to create platforms that demonstrate the need for quality information, data, technology insights and events.

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