ICCMA Congress 2018: A fight against detrimental pricing

Ramu Ramanathan (RR): Sir, has the biz environment improved?... How does one explain the investment and new projects in the corrugation box industry in the past two years...
Kirit Modi (KM): Business environment has definitely improved to some extent as we all have left behind the temporary disruption caused by demonetisation and GST last year. Investment in new projects which has been done over the last two years in the box industry is mainly on the hope that Indian economy will improve substantially post GST implementation as India consumption story starts showing the results.

RR: Since I visited your plant at Peenya, there has been a surge in automatic plants in Bengaluru and Mysore. Why so? And how what is your assessment of the situation?
KM: Fresh investments in the Karnataka region in last two years is definitely some cause of concern as the total installed capacity has gone up substantially in this region. It is sincerely hoped that demand increases in this region to absorb this extra capacity.

RR: What is the ICCMA view on the plastic ban policy by the Maharashtra government?
KM: It will soon spread and ultimately many other states will follow it. It will definitely create positive impact for paper-based packaging industries including corrugated box packaging.

RR: Does our industry need to seriously re-look at shopfloor ops to minimise the waste? What are the potential areas of loss?
KM: There is an urgent need for the industry to remove waste and inefficiencies from the shopfloor. This is one of the important topics which we are covering during the conference.

RR: Expertise in the corrugation industry is under-rated…
KM: Automation or upgradation undertaken by many players in the industry has still not been given its fair and due recognition by the users. Although most of the brand owners have slowly begun to understand the value these investments generate as their supply-chain transit losses are reducing on account of better quality boxes being supplied now.

RR: Skill shortage: Therefore how does one hire a candidate? Is ICCMA contemplating a module for short-term training?
KM: Box industry has traditionally recruited its human resource requirements from within the industry. Of late, however, the leading players are utilising various other platforms bridge the skill-gap. ICCMA is in talks with some of the established training institutes to integrate industry-specific training courses which would provide the skilled manpower that is badly needed by the industry.

RR: Has our industry seen a shift in the manner in which contractual agreements are drawn between vendor and client? What kind of monitoring and evaluation systems are in place now?
KM: The industry has recently seen a shift in the manner in which the brand owners are engaging with the vendors. There is a strong emphasis by almost all brand owners on 100% compliance and audits conducted by them before enlisting any new vendor. Quality and service expectations from the brand owners are getting tighter by the day.

RR: What sort of yields should a corrugator target while creating an operating model? In terms of a profitability tree, are the existing models sustainable?
KM: The real challenge before the industry in protecting its operating earnings is perfect execution of any projects/initiatives. Not only in the stage of implementation but also in day-to-day operations. Investing in new machines or equipment is not that hard, the real challenge is to manage overall costs, wastage reduction and shying away from accepting business at ridiculously low and unsustainable prices. Unhealthy competition in my view is the biggest challenge the box industry is currently facing.

RR: Final question: If you gaze into the crystal ball, where do you see the industry in five years?
KM: Unless all the players in the industry act wisely as far as a fresh addition to the capacities is concerned and on top of that than marketing it at unsustainable pricing; the risks of sickness percolating in the industry cannot be wished away. Otherwise, the industry as well as the entire packaging sector will definitely benefit as India consumption story plays-out fully over next a decade at least.