“This certainly made us re-think out strategy, and we mothballed more than half of our plant – two press rooms and extruders and implemented the 80-20 rule,” says Banga.

“We took a hard decision. We weren’t using our new equipment effectively and while the older lines gave us good turnover, they weren’t adding much to the margin so we shed the 80 per cent of our customers who were giving 20 per cent of our margins, mostly high volume-low cost customers. These included customers like Unilever’s Indian operation Hindustani Lever, selling soap powder at US$0.40 per kg, and Britannia who produce glucose biscuits retailing at less than US$0.85 (Rs40) for a 100gm pack. They themselves can’t be making any margins from those prices, which are low even for the India market.”

Low margins tend to be a result of greater supply than demand, so when SB exited the low end of the business, there were plenty of smaller players keen to step in and take its place.

Today, SB Packaging focuses only on the high value end of the market, as a P&G pre-qualified supplier

Revitalisation

“Thankfully, the Indian economy has picked itself back up, as a result of the government’s pro-business policies.” Foreign investment is being encouraged in certain sectors, while the country’s arcane tax structure has begun a reform process to eliminate double and triple taxation on inter-state shipments. Property prices have tripled in the last two years, and the recent announcement that the oil giant Reliance is to inject US$20 billion into the retail sector to build more than 10,000 supermarkets by 2010 puts SB back on track.

“We had quite a worrying few years from 2003-05, but even without factoring the future growth of retail as a result of Reliance and the other main retail chain Pantaloon, we are seeing more money circulating in the country.

“Oil prices have continued to go up - they’re now at US$75 a barrel - but nobody seems to be hindered by it, and India is moving like it doesn’t matter, the momentum is now so strong.”

As the only converter in the country with both flexo and gravure capabilities for poly-bags, pouches and laminates, SB sources resin from Reliance or Dow. During the expansion, SB invested in a flexo press and solvent-free laminator from Sciavi and then an eight-colour gravure press from Indian manufacturer The Expert.

SB has its own gravure cylinder engraving capability as well as a cylinder engineering division for special customer requests: “We’ve seen a fall in gravure cylinder prices in recent years, as volumes increase. We are also able to indigenise; chrome and copper plating can be done in-house. However, for advanced engraving we have to have proper imported equipment.”

SB sources pre-press and photopolymer plates from Numex Blocks for the Italian flexo line, in Mumbai and A-Designer in Baroda, both more than 1,400km away. “There are no flexo trade-shops in the north of India,” says Banga. “We did consider bringing some plate-making in-house but the famous flexo revolution never really took off as promised or anticipated.

“We have a DuPont Cyrel, Macroflex computerised plate mounting system so we can accurately position plates on the Schiavi and reduce set-up times.”

He adds: “SB has enough space in the press hall for another flexo line, but it is a constant the major FMCG manufacturers in India, such as J&J, Uinlever and Kimberly Clarke would transfer their international experience of flexo into India, and we wouldn’t have to re-invent the wheel by trying to convince them to specify the flexo process.”

Banga says that despite these companies’ efforts at global integration, and the fact that a key (SB?) management objective is to convert to flexo away from solvent-based gravure inks, the message does not seem to have reached their offices in India. This means it has to go through the whole process of educating them, but he adds: “Yet when we have finished the presentation, they reference the best quality gravure print as their standard!

“Gravure will always print to a higher quality than flexo, no doubt about it, but there is no consistency in gravure printing on PE and flexo is best at PE printing. It’s such a basic thing, particularly when we hear messages like ‘global brands require global consistency’ but that apparently excludes India!”

India has had very few product liability issues which prompted the flexo move in Western markets.

Investment justified

With the long expected growth of retail, SB has justified its early vision of investment: “We are now positioned with the right equipment configuration and quality levels which are now in demand

We are now positioned with the right equipment configuration and quality levels which are now in demand

SB has even started to get some tentative feelers for the mothballed capacity, but there are no plans to dust off the press-room yet. “What’s clear from the market signals is that commodity foods are going to become big business. Right now a very low percentage of wheat and flour is being packaged, virtually no sugar, salt or pulses are packaged. So when the retail sector takes off in earnest there will be huge demand for low value-added packaging – then it might be worth re-opening the old plant.

“If not, then we always have the option of disposing of it,” he adds pragmatically.