Sakata INX is a major Japanese ink supplier in India with manufacturing plants in Bhiwadi in the North and Panoli in Western India. In operation since 1998, Sakata’s first ink plant at Bhiwadi produces liquid inks for flexible packaging as well as offset inks for sheetfed presses and some cold-set web offset inks. In the main, cold-set offset ink production has now been shifted to the newer Panoli plant in Gujarat, which is much bigger than the Bhiwadi plant. Sakata supplies inks from Panoli to South India and parts of Central and Western India.
Sakata India’s headquarters moved to its own building in Gurgaon in 2009. According to the company, demonetization has left the entire Indian economy in a lurch. The FMCG sector received a huge setback and Sakata India has been growing at an average of about 10% or 11% since then; it is lower than the 15% and 17% annual growth of five years ago. The company has been trying to cope with the stresses in the FMCG segment that have particularly affected its packaging inks.
Profits under pressure
“However, profits have been under pressure,” says VK Seth, managing director, Sakata INX India. “This is because of the trimmed growth of the industry. Printers and converters had ordered some machines prior to demonetization. As such, there was excess capacity. There was a great stress to somehow hold on to your capacities. When the customer is running at 60% to 70% capacity, there is pressure on profitability.
“Even the converters who run a single machine want to undercut the bigger companies. This, in turn, put severe pressure on the bigger companies. This takes a toll on profitability. In the same way, in inks, if there is too much capacity available, profitability comes under pressure. The selling price for inks has been under pressure. Though Sakata’s revenue has grown by 10% to 11%, there has been a sharp decline in profits,” adds Seth.
Newspapers circulations still holding, pagination down
Seth believes that newspaper production is growing in India. “In the last 2-3 years, newsprint prices have been under pressure with international prices shooting up. The profits for these newspaper companies have gone down. Having said that, some of the local vernacular newspapers have still been growing. Dainik Bhaskar for instance is still growing.
“The Times of India is also investing in technology and machinery to enhance production. A good part is that the circulations have not come down. However, the pagination has reduced. This has decreased newspaper printing. Though the printed copies may have gone up, the number of pages have come down. That is directly proportional to the state of health of the economy. As we all know, the newspaper revenue model is advertisement only. Circulation revenue doesn’t even cover their marketing costs,” Seth says.
The FMCG companies have realized the importance of being a part of the 1.2 billion story. This has forced them to select a price point which can help these companies capture more volumes. As Seth says, “It has turned into a volume game.” In newspapers also, the cover price has mostly remained constant so that the volume can be increased. “All these newspapers are focussing on expansion, but because of the falling economic growth, advertising is the first to take a hit. Brand managers cut on advertisement expenses and that is one brutal force that is affecting newspaper revenues,” says Seth. For Sakata, though the company has been growing, the last financial year has been flat.
Innovation in inks
The current situation is not just due to the flat sales figures – the compliances, regulatory affairs and changing norms have all added to the costs throughout recent years. Sakata produces 60% of its inks for flexible packaging while 40% of its ink production is for offset – both sheetfed and web offset inks for newspapers. On the newspaper side, the company is witnessing a demand for innovations in inks.
Sakata’s customers are asking for innovations such as aromatic inks. Used specifically for advertisements, these inks are embedded with special odors that evoke particular smells and flavors.
“For instance, let us consider a coffee advertisement. Newspapers are asking for inks that can be used to print coffee cups or coffee beans. Once you rub your finger on that ink and smell it, you get the aroma of coffee. This is something new and innovative in the market right now. Sakata has many such ink variants. Another customer asked us for mosquito-repellent ink. We developed this ink, which has some neem-based extracts that repel mosquitoes. Other examples are fluorescent inks and touch-sensitive inks that change color on touching the image printed with the ink,” Seth concludes.