Armor: Knocking at the 100-million sq/ft thermal transfer market - The Noel D'Cunha Sunday Column

Question: Armor in India – it started with the acquisition in 2013?
Prabhat Sehgal: Yes, it was a small slitting company in Bengaluru. Armor came into its own in 2014, still not in a big way. But the growth was exponential in the first two-odd years. Once we saw the growth, it was decided that we move to a bigger building.

Mark Day: This was in line with Armor’s ambitions to produce its complete thermal transfer ribbon range as close to our customers as possible. India was a natural choice for our sixth converting plant due to the high growth expected in the years to come. Our growth in the first three years of trading in India has required us to move from the original Armor India building to a new facility that will enable the company to support the expected market growth for the next 10 years.

Question: Okay, but why with a slitter plant? A warehouse would do…
Prabhat Sehgal: Prior to 2014, Armor had customers, which was being serviced from Singapore. Traditionally, the thermal transfer business is a just-in-time business, with less lead-time for delivery. You have to be close to the customer because the product is used at the end-of-line operation.

India is an emerging market, and packaging is part of the India growth story. Servicing the growing Indian need from Singapore was going to be an issue.

For example, there are so many permutations and combination in the demand and supply chain. It is very difficult to estimate what and how much will sell. For example: we produce around 1-lakh rolls with 15,000-20,000 SKUs. Stocking that kind of an inventory will be very difficult because somewhere there will be a mismatch between the demand and supply.

Hence we have to be local and supply the finished products when it is required.

Question: A big plant, a well-planned plant that follows best practices – certification, lean manufacturing, environment-friendly. Was having all this a conscious decision?
Prabhat Sehgal: All the ISO certifications – ISO 9000, 14000 and OHSAS 18001 are important. It is Armor’s policy that all its locations worldwide will comply with these three certifications. The 9000 is for best practices and processes; 14000 for the environment, waste management; and OHSAS 18001 for occupational health and safety.

Mark Day: Product quality and consistency are two of the hallmarks of the success of Armor. It was, therefore, essential that the India plant was created in a way that could fully conform to Armor’s philosophy of consistently high quality.

Question: You publish a white paper on your carbon footprint?
Mark Day: Yes, every year the company publishes a white paper on where they were a year before and what improvement has been brought in the whole process in reducing carbon footprint.

Armor has always strived hard to reduce carbon footprint, and become more efficient in its production. Over the years we have reduced the consumption of solvent by 15%, even when our production is going up.

Prabhat Sehgal: As you may have seen, we also take occupational health and safety quite seriously. Armor’s philosophy is to conserve energy, and it is implemented wherever it sets up a plant.

Question: The ‘back to front’ industrial concept…. Sounds interesting…
Mark Day: Armor has continuously extended the range of applications that can be served by thermal transfer ribbon technology. This is driven by a desire to understand customer requirements for product labeling and identification and developing new ribbon formulations to meet these requirements.

Prabhat Sehgal: Our pursuit is to find – what does the customer require, and then go back and engineer the goods that satisfy the market.

Question: About 4% of your turnover is earmarked for R&D activities. Will we see Armor carrying out such activities in India?
Prabhat Sehgal: I don’t see that happening in the near future. There’s different skill-set required, and we have just begun here. For the moment, the R&D will happen from France.

Mark Day: Our R&D teams are based at our headquarters in France and work closely with the operational teams in each subsidiary to ensure all innovations are correctly implemented throughout the group. Each of our slitting sites are supported by a local application team, able to support customers on the usage of the products. The difficulty of our technology is to ensure the user is using the ribbon fulfilling the requirements of its application at best… and the choice is wide.

Question: Too much of coordination from France, in terms of technology and management?
Mark Day: It is that each Armor subsidiary can make local decisions to support the development of the thermal transfer market at a country level, but it is equally important that these decisions are taken within the framework of the Group strategy. We therefore use the term ‘think locally, act globally’ to support our business decisions and development.

Prabhat Sehgal: It may sound like Armor France is dictating the terms, but I would like put it this way: it is standardisation. The products are the same, where they are distributed even from France or any other place. The goal is: wherever Armor sells thermal transfer ribbons, each one has to be of the same standard, it should not be different. Hence, the control is in France.

Question: So when you talk about standardisation, would you say that you source and use the same input material both at the coating plants in France and China?
Mark Day: Yes, Armor standards are applied to all our processes throughout the Group.

Question: But China is a place from where most of what you manufacture is low-cost…
Mark Day: Our plant in China was created to enable us to address the falling price of wax products in the market. As such, we only focus on producing wax grades in China, but do not compromise on the quality of raw materials, which are always approved based on Armor Group quality standards.

Question: You consume lots of inks every day for coating the ribbons? Are the inks produced in-house? Sourcing of material?
Mark Day: All Armor ink formulations are produced 100% in house from materials that have been approved. These materials must conform to all relevant industry standards to ensure that the thermal transfer ribbons we sell to the market confirm to standards such as: food contact, REACH, RoHS, etc.

Question: Rise of raw material cost hikes the cost of making the ink. Do you accordingly hike the cost of the TTR or it is absorbed by the company?
Mark Day: We always try to protect our customers from volatilities in raw material prices to support the growth of the TTR market. However, if raw material increases become too much to sustain internally, as was the case during the worldwide PET shortage in 2010-11, we were obliged to pass a proportion of the increases to our customers.

Question: There’s lots of awareness, particularly what goes on the food packages, hence the inks have to be food-grade?
Mark Day: Our ink formulations are food-grade approved to European standards under EC Directive: 1935/2004/EC and LFGB (previously BGA) and American FDA standards.

Question: Do your customers ask for food-grade certification?
Mark Day: Yes, we are regularly asked to provide food-grade certifications for our products. A team in R&D is dedicated to the selection of raw materials, to ensure they are safe for our workers as well as for the users. This supposes that these components are also selected in accordance with safety regulations specific to each industry we serve. Food grade is one, but we can also meet halogen-free products for the electronics, by instance.

Question: Your performance in India shows that wax-based thermal transfer ribbons are more popular in India…
Prabhat Sehgal: Yes, wax is the entry-level product and has the biggest market share among our products with 60%, wax-resin-based around 30%, with resin-based just 10%.

Wax-based ribbons are the most economical products, plus in terms of application, its usages are in the retail, logistics, where the durability requirements are not that high, plus the life requirement is less. For example, in retail you may need an image on the label only for a week or in the logistic, the label has to last only the transit period.

Question: Mark, is this the trend in other markets?
Mark Day: Yes, it is consistent with most major TTR markets world-wide. However, the market for wax/resin and resin formulations is increasing as more and more automation is implemented in product supply chains, resulting in fines being applied if goods cannot be scanned when arriving to distribution centers.

Question: But in Europe, wax-resin has a bigger market, does it have to do with the regulations?
Mark Day: Wax is still the biggest market by volume in Europe. However, there is a higher proportion of wax/resin compared to other continents. In part, this is linked to the fines applied in the supply chain process for goods that cannot be immediately identified through barcode scanning. This has resulted in a higher proportion of wax/resin grades being used in this type of application.

Question: In the 100mn sq/m Indian market, you have a 28% market share as against 35% by the Chinese manufacturers – a lot of catch-up to do? Are the Chinese manufactures a threat to your growth?
Prabhat Sehgal: India obviously is growing market, so there will be an organic growth because TTR is directly linked to the population.

I would put it the other way round. Armor is the only company competing with the Chinese manufacturers where wax-based TTR products are concerned because that’s a big chunk of what they supply to the Indian market.

Question: Wax-resin and resin based products are the premium ones, which would be pushing up your top line growth?
Prabhat Sehgal: Yes, it does, like any other business. But it is also important for us to be in the wax market to sustain ourselves because that is a big part of our business. At the end of the day, one will have to grow the market share. Here, if you are selling wax to a customer, he will also be bringing in the business for the other two products range.

Again, as I mentioned, the fact that wax-based TTR is used in a wide range of applications wax-based TTR is driving its market share.

Question: But India is a cost-conscious market. The lower the cost, bigger is the sale. Does quality matter? And when you compare your wax-based entry-level products against your Chinese competitors, where do you stand as far as quality is concerned?
Prabhat Sehgal: Thermal transfer ribbon is a zero-tolerance business, where barcode has to be printed and should be able to be scanned. If a barcode is printed but does not scan or vice versa, the whole purpose of having the barcode is lost. Hence, quality is important.

Mark Day: Yes, India is cost-conscious, but it is also quality-conscious. A barcode that does not scan or a product serial number that cannot be fully readable is not acceptable in the TTR market. Armor will continue to develop more competitive offerings that offer higher performance without compromising quality.

Question: You spoke about technologies like RFID, inkjet/laser, direct thermal making inroads but these are not real threat to thermal transfer yet. How is that? One can see more of these technologies in use? Where does the confidence that thermal transfer is the technology that will be hard to replace coming from?
Mark Day: Thermal transfer co-exists in product labelling and identification applications alongside RFID, inkjet and laser technologies. Based on our long TTR experience we are confident that the TTR market will continue to grow as this still represents one of the most cost-effective methods for printing variable information on demand. We have identified some migration from one technology to another, but this can be in favour of TTR as well as the other technologies.

The key characteristics of thermal transfer, guaranteeing its ability to last over time: simplicity, safety for users, cost effectiveness, durability, legibility… NO other technology can today gather all these key elements.

Question: What are new developments happening in thermal transfer technology that can keep new developments in other technologies at bay?
Mark Day: Armor have just launched two new ribbons: AXR EL and AXR TX specifically for the labelling of PCB’s and the marking of fabric labels in items of clothing. These are examples of how Armor works to extend the range of applications that can use thermal transfer. Other evolutions from TT printer manufacturers in terms of print speed and print resolution improvements will also continue to keep Thermal Transfer at the forefront of automatic product identification applications.

Question: Back to R&D, when you develop a TTR product there would be areas like – the printer that will use it, the speed, printhead technology that will need to be factored in, or it’s just coat the film, slit, pack and supply?
Mark Day: The quality and consistency of our products starts at the R&D stage. Hence when we set out to develop a new product formulation there are specific criteria that need to be reached: Compatibility with specific printhead technology (flat head of near edge), maximum print speed, print performance and resistance characteristics are all part of the brief our R&D teams consider during the product development stage – As you would expect from Armor it is never a case of ‘just coat the film, slit, pack and supply’.

Prabhat Sehgal: There are three parts to the ribbon, the back coat, which comes in direct contact with the printhead, so the quality of the back coat is very important. A bad back coat can damage the printhead. That technology becomes the intellectual property (IP) of a company. Then there is the release coat and the top coat.

Question: And printhead safety?
Prabhat Sehgal: Irrespective of the grades of the products, the printhead safety is of paramount importance.

Question: Do you partner with the print equipment or printhead companies when you develop a new product?
Mark Day: Armor is working in partnership with many TTR printer manufacturers to ensure our products are fully compatible with the printers on the market.

Question: One saw a big majority of black jumbos in the stores, ready to be slit. No colours?
Prabhat Sehgal: As I said, most of the TTR are used in applications for retail and logistics like the barcode; hence the big numbers in black. You need the contrast to scan the barcode.

The colour rolls are used mostly for decorative purposes.

Mark Day: The market requirement is mainly for black ribbons across the main product families of wax, wax/resin and resin grades. However, there is an increasing demand of colours which are offered in all three grades. We have recently launched wax/resin grades in gold and silver to meet market demands.

Question: You consume 38 tonnes of ink every day for coating the ribbons, and you produce them. But you source the film on which you coat. Why don’t you backward integrate to produce your own films? It will give you control?
Mark Day: PET is an essential raw material in the production of TTR. It is Armor’s strategy to work in partnership with the major PET producers to ensure continuous supply of high quality PET that is specific for Thermal Transfer applications.

Question: Plans for India? Will we see an Armor coating plant in India?
Mark Day: Coating in India is not part of our strategy.