With the Indian packaging industry being the fifth largest sector of the economy and expected to grow to $32 billion by 2020, let’s take a look what a leading player has to say about the business outlook today. In an interview to Cosmedic India, Shirish Vaidya, MD & CEO, Vaxom Packaging speaks about the positive changes in the packaging industry, the innovations of his company and the overall industry outlook. Excerpts of the interview:
Can you share your views on the mid-term outlook of the Indian market?
Overall, the economy is doing well and there is a positive business momentum. Organisations operating in highly technical space often face a decision snag. For example, to comment on today’s scenario, when the machines are getting ready, we need technical inputs and approvals from our clients. But these do not always come in at speed as clients have multiple priorities. This ends up extending the execution timeframe and subsequently the delivery timelines.
Besides, for industries like ours, where forex plays a major role, the last one year has been challenging. Since we do not manufacture in India, due to material and quality constraints, our procurement dealings are entirely in foreign currency. The currency fluctuation for the fiscal is at 17 per cent, which has directly hiked the cost of capital for us by an equivalent percentage. A steep drop in Rupee vis-a-vis Dollar and Euro have an adverse effect on import-driven businesses.
So how does business read the current government’s performance? Can you share a ground level perspective?
It is inappropriate to judge a government’s performance on a timeframe of four years for such a huge country like ours. However, the government has been trying to regularise norms and make them at par with international standards. But any major change always meets with resistance. It is one thing to take a decision at an executive level, but implementation at the operational level is a difficult task.
For example, there was a lot of resistance to GST, but slowly people have accepted it. There was so much defiance, that the government offered a GST waiver to the below ₹ 1-crore segment, by paying a one-time tax. Initially, the enrolments for this option were at 30 per cent, but have now come down to 7 to 8 per cent. This reflects how people are now realising the benefits of GST when earlier they could not comprehend how they could save money with this new tax regime.
Coming to the packaging industry, what are the key customer expectations today?
There has been a paradigm shift in the Indian packaging industry over the last 5 – 6 years, especially in pharmaceuticals and in some FMCG products. Companies are now looking at operating efficiencies of the machine vis-à-vis budget. Businesses are now focusing on streamlining their processes to handle the increased manpower, electricity and such operating costs.
Earlier, if a business had four products, it opted for a generic machine to do the filling and packing. But today, companies invest in specialised machines. While selecting a manufacturer, they give importance to technical parameters, precision, deliverables, and manufacturer’s commitment. So, this has given a big boost to the packaging industry.
How does the Indian packaging industry compare with its peers in the world?
Indian packaging industry always had an advantage over others. We have had a solid base owing to government policies even prior to 1992. So we were able to cater to the developed market. However, other local manufacturers are now gearing up and have upgraded their offerings to international levels. So, the competition and price pressure has increased immensely. And we are looking at innovations, improving our deliverables, and introducing process efficiencies. Overall it is a positive competition.
Are there any new products or innovations that are lined up?
Every year we have to review our products and offerings. Packaging today is about enhancing product delivery. For example, in colour cosmetics, there are two separate packs for a colour base and crème base. However, we have developed a packing product, which has a two-partition tube with a single delivery system. This enables the customer to go from burgundy to jet black by simply varying the per cent of colour and crème base. This may be more expensive than the packs available but gives you an advantage that now you need just one pack for different colour shades.
Take sachets, for example, today they are no longer simple tear-off sachets. The sealing patterns and features have improved. There are developments on the material as well as machine side to improve customer experience and perception of the product.
What are your business expansion plans?
Yes, we have started focusing on expansion. We have now tied up with Dott. BONAPACE for research and development support. Dott. BONAPACE is one of the oldest and renowned international company, exclusively into R&D equipment for pharma and cosmetic industry. We are looking to leverage their expertise and enter at R&D level and enhance our business role.
We are also looking at the consumables. We realised that in spite of us providing high-end machines, the high-end packaging is not available. It impacts our product performance as well. For the same, we have tied up with Bisio Progetti, an Italian company as their distributor in India for injection moulding packs required in pharma and cosmetics industries and food packaging.
With these new partners and new segments, we hoping to touch a turnover of Euro 7 – 10 million in a few years.
Will you be looking to localise your innovations to suit the domestic market?
Yes, the plan is to maximum localisation. In fact, we may manufacture the R&D machines in India under license. If you want to introduce new products or product innovations, then you must start at the research level. But if the R&D equipment is not cost-effective, then the commercialisation also becomes tough. So, we are looking fill this gap.
Are you also planning to open a manufacturing facility anytime soon?
We are taking a stepwise approach and have taken a 3-year plan. Firstly, we have started manufacturing some spare and change parts which require localisation. Secondly, we will be looking at the R&D machines. If they have a good feedback, then in a year’s time, we will start assembling the machine locally and supplying to the domestic market.