JK Sharma, CEO – Yansefu, India and Neelakamal Mohapatra, VP – R&D/innovation – Yansefu, India talks about the impact of COVID-19 on ink manufacturing sector.
India is the only country which imposed a complete lock-down in the entire nation for 21 days during the initial stages of the Corona virus outbreak. A day before completion of the first lock-down, the Indian government took an audacious decision to extend the lock-down period for another 19 days, from 15 April to 3 May 2020. In this extended lock-down 2.0, keeping in view the interests of farmers and daily wages earners, the government permitted services like transportation, farming, fisheries and few other industries established in non-hotspot zones to resume their operations post 20 April, strictly following the norms and guidelines provided by the central government. However, the packaging industry, including printing ink manufacturers, has already been allowed to operate industrial plants with limited manpower, so that the supply of packaging materials for essential consumer goods is not hampered.
A race for survival and not just being on top
Although most of the countries have been implementing the lock-down method to slow down and break the unstoppable spreading chain of corona virus, the COVID-19 pandemic shows no signs of ebbing. The world’s economy has been undergoing wretched suffering. The International Monetary Fund (IMF) has revised its global GDP growth rate which is estimated to drop from 3.3% to 3% in just 3 months, something which has not been seen since the 1930s. As per the estimation of IMF, nearly all the countries except China and India, which largely contribute to the world economy, will not be able to reach the levels to GDP growth at 2019 even in 2021. India’s GDP growth has contracted from 5.80% to 1.9% between January and April 2020. According to IMF, India will be the fastest growing major economy in 2020. However, one should not forget that this pandemic is still at the early stages in India. And the fastest economic recovery is only possible, if corona virus cases don’t spike in the later phases of the novel corona virus.
Blow of corona virus pandemic on Indian printing ink manufacturers
The impact of COVID-19 pandemic on printing ink manufacturers is heavily dependent on the consumer goods and pharmaceutical companies. On one side, the demand of printing ink for pharmaceutical packaging is likely to increase at a constant pace amid the lock-down and post pandemic that may take a quarter or almost a year to end. However, it is expected that the impact of the corona virus crisis on the FMCG sector will be varied, so on the printing ink industries and rest of the packaging sector. The change in consumer’s behaviors will influence the consumer goods companies differently.
Escalation phase – opportunity for consumer goods and e-Commerce sector
In the initial escalation phase of the corona virus spread, people reacted more quickly and stockpiled the goods including shelf stable food staples, healthcare, skincare, and basic essential products. This initially led to an increasing demand for many food, beverage, and home care categories. With the extended lock-down, the preference of the Indian citizens has been changing. As travel, entertainment, social gatherings, hospitality and restaurants came to a screeching halt, the threat of COVID-19 spread has left the business leaders around the world, counting costs and trying to access what this epidemic means to their businesses. But, these heavy restrictions on going outside the houses lead to tremendous increase in the rate of buying groceries, skincare and other essential products from online grocers.
Now, people are adopting the habits of consuming packaged food products over loose products, using more hygiene products such as hand wash, sanitizers, cleaning wipes and preventive essentials like floor and home appliances cleaners, as well as to changing brand preferences. The increasing demands and changing preferences are creating newer business growth opportunities for FMCG sector, meanwhile significantly impacting the printing ink industry. The demands for printing inks will rise sharply for packaging of groceries like packaged food, pharmaceutical, healthcare products, and e-commerce transportation whereas the demand for industrial, luxury goods and some B2B-transport packaging could decline at the same time.
Increasing demand of packaged food in rural areas
Few years back, people living in rural areas of India used to complain about the quality, hygiene and shelf life of food staples such as sugar, flour, milk, rice and others. This is because most of these products were sold in loose conditions since the availability of packaged food products were limited to urban areas only. And, people living in small towns and villages went to cities to buy the packaged products of big brands. However, flexible packaging which inherits qualities like versatility, lightness, flexibility, strength and durability, has made the transportation of packaged products to small towns and rural areas more convenient and easier. In the near future, people will largely opt for packed food products over loose, which will be much healthier, compared to the latter. This will have direct and positive impact on the growth of printing ink segment.
Future opportunities for packaging sector
The increasing use of flexible packaging also drives the opportunities for innovation and development for printing and packaging sector. In the past two decades, the growth rate of flexible packaging has been multiplying tremendously. Now, big companies and brand owners are substituting rigid packaging, containers and bottles with flexible packaging. In developed countries like the US and Europe, the per capita consumption of packaging is far more than the consumption rate in India. Therefore, the potential growth of packaging sector is very high in our country.
Although, plastic is largely consumed for packaging, but still it is heavily criticized as a curse due to the increased plastic waste in the world. But, packaging sector has evolved a lot in past few years. The use of barrier coatings with flexible packaging to restrict the transmission of oxygen and water vapors has become more significant these days. This reduces the amount of plastic used in the packaging. Additionally, flexible packaging could be easily recycled repeatedly. Now, various technologies are available for recycling of mono-layer as well as multi-layer packaging structures into materials which can be reused to make packaging materials, concrete roads, furniture etc. The growth of packaging industry will aid government’s plastic waste management programmes to become more functional, meanwhile creating more job opportunities in the country.
Slow motion economy
In the second phase, that is post lock-down when the pandemic is expected to be under control, consumer’s sentiments will be changed. Reduced household income, savings and weakened balance sheet will result into the slowdown of stockpiling of pantry load, medicines, sanitizers and other products. Additionally, consumers may cut down on expenses in a number of categories, reducing demands of packaging and consequently declining the printing ink supply. Plus, the hikes in raw materials prices and slow down on import and export of goods are other challenges to be faced by the printing ink manufacturers in this phase. On the far side, restrictions on import of raw materials provide new opportunities for local manufacturers and vendors.
Time to bloom again
However, in the third phase that is the recovery period post pandemic crisis, it is expected the demand for packaging materials including printing inks will gradually return to normal. In this rebound period, consumers may likely become hesitant to return to luxury products, travel and hospitality sectors. However, the purchasing of consumers goods would be normalized and consumers will possibly choose to buy their products through channels different from those they used to buy before the pandemic. As a result, e-Commerce platforms will definitely experience a growth in their businesses. These changes will impact the printing ink sector positively. Nonetheless, the speed of recovery of printing ink manufacturers will be differentiated largely by segment, depending on the degree of disruption among the customers and challenges of different players including printers, distributors, suppliers and brand owners, among supply chain.
Packaging regulations will become more stringent
Considering, the present COVID-19 crisis and future opportunities for packaging industry, there may be more stringent national as well as international packaging regulations. For instance, China government is believed to be tightening the regulations for the handling and distribution of meat and sea foods, post the recovery of pandemic crisis. Similar actions are likely to be taken by other countries, particularly for the distribution of packaged food products.
Post lock-down strategy – be an opportunist and take a leap of faith
The impact on printing ink manufacturers will depend on their portfolios, exposures to different regions and end user applications. It is the high time for all printing ink manufacturers i.e., big, medium or small players to choose whether they want to pivot or perish through the situation. No doubt, the current situation is more challenging to SMEs but doing nothing and waiting to see what others are going to do is definitely not a correct strategy. The best option is revisiting capabilities, evaluating available resources, making a review and responding to the situation accordingly. Utilize the lock-down period in learning new skills through online training, collaborating with new raw materials suppliers and boosting communication with the customers, in order to revive the business growth. Also, constant talking, providing motivation to the employees and team members is equally important, in order to make them confident and be clear about how they can contribute in the upcoming journey of organization’s growth.
The smart approach is being an opportunist and grabbing chances and creating new opportunities for innovation, collaborative working and business growth. Being an optimistic printing ink manufacturer, we are positively looking at this challenging period of pandemic as a boon for printing ink and packaging industry not as a curse.