Kumar Labels positioned to reach heights in label production - The Noel DCunha Sunday Column

Anuj Bhargava began his tech talk by talking about how his company, Kumar Labels, began its journey. In 2007, before establishing the company, he spoke to prospective customers to get a sense of the challenges they faced. He addressed three main concerns — the lack of quality, timely delivery, and suppliers that were willing to do short runs.

Bhargava also spoke to equipment suppliers, competitors in the market, and label suppliers, all of whom recommended he purchase a Mark Andy flexographic press. The Mark Andy press was efficient, and able to produce volumes, but at that time flexo prepress couldn deliver only reasonably decent quality.

Eventually, Kumar Labels became the first converter in India to install a Korean letterpress. The company’s strategy was to take on short-run orders and deliver high-value labels. Bhargava said, “We had orders for 5000 to 40,000 labels that we were able to deliver on the same day, we had very good margins. And we did.” Bhargava continued with this strategy until 2011. In 2012, the company invested in a flexographic kit, signalling a switch toward longer runs. 

Bhargava realised quickly (very quickly, as he said) that there were two scalability issues — one, the balance sheet, and the flexographic machines were “terribly expensive”. He said, “When I did some calculations, it turned out that if we continued to buy the equipment we pay for, then we’d end up working solely for the banks. This left nothing for ourselves.”

And voila! That is how, in 2013, Kumar Labels decided to manufacture machines. Bhargava said, while we have European machines, all new additions now are Indian made machines.” 

The second scalability issue that Kumar Labels came across was how the company’s profits  and customers were controlled by raw material suppliers. He said, “So, we decided to explore backward integration. This meant manufacturing of label stocks.”

In 2020, the company scaled up and established a plant in Goa. In 2022, it established a plant in Indore. In 2023, Kumar Labels separated and set up a different plant for producing label stocks, and an entirely independent factory for raw material.

In 2022, Bhargava came across the third limitation to scalability — people. There weren’t enough people, there was a lack of skilled personnel who understood the little things that go into label production. Bhargava said, “We just couldn’t find enough people. Even if we were to build our machines, or make cost-effective raw materials, who was going to run the show?”

So, Kumar Labels established a training centre. This was a combination of an instructor and an operator. Their job was to bring in talent from the local colleges and train them to become operators, assistants, and supervisors. Bhargava said, “With our team, we produce 200 million labels each month.”

After outlining his strategy, Bhargava dove straight into what 2030 would look like according to him. He began with some broad observations and said that volumes would be doubled. He added that the GDP will double much sooner in the industry — because premiumisation will kick in. According to him, there will be a high demand for quality in terms of form and function.

Premiumisation will be a huge trend. While likening consumption to a pyramid. Bhargava said, “In the next ten years, the pyramid will invert. You will see that as we make more money, and as the middle class grows, more people will drive better cars.” According to Bhargava, there will be premiumisation in terms of form and function, quality requirements will become stringent and tougher, and ordering will become completely automated.

He added, “The interactions between the customer and the printer, with technology, and automation, will reduce.” Notably, kickbacks will be eliminated. This, he said, is good news for us. Bhargava said, “From the beginning, we have been a zero-kickback company.”

In terms of size and technology, there will be a divide among businesses. The businesses would either be very agile and art-intrinsic, or very large businesses which are either private equity driven or listed. Bhargava asked the delegates in the room to consider printing and packaging as a science as well as an art. He said, “For boutique companies, profit can be derived with a focus on art.” He said that larger companies will not be able to replicate this with ease.

Bhargava added that the label industry will see a lot of consolidation in 2030. He said, “The industry would get consolidated, at least so that the larger players will have a topline of Rs 500-1,000 crore.” 

Bhargava observes that as that happens, there will be financial constraints or technological barriers for mid-sized companies. He said, “A very good example of this is Tetra Pak. Not all of us can afford to have a Tetra Pak line or print for Tetra Pak. So, the larger businesses will create technological barriers like patents or special coatings, to protect their investments. RFID could be one such tech.”

Bhargava said that it would be imperative for larger companies to milk their assets. He said, “This means that you might need industry 4.0 level sensors, and other methods of data collection wherever possible, to know what your Overall Equipment Effectiveness (OEE) scores are. Are you running at 20% thinking that you’re running higher and wanting to buy another press?”

Bhargava added, “Assets will be very expensive as compared to today. People will be expensive. So, complete milking of assets would be an absolute necessity in 2030.”

Then, Bhargava moved on to what Kumar Labels has done to prepare for 2030. He said, “We balance our business between volumes and margins.” He said that the company is currently evaluating collaborations with larger groups to see how it could scale up to grow from being a mid-size company. 

Bhargava said, “We were one of the first ones to start ERP in 2011.” He said that the company is upgrading it to an ERP that is coming in with automated updates, which will minimise communications between the company and clients.

Bhargava signed off by saying, “We need to do certain things today. At Kumar Labels, the things we do today, prepare us for the next decade.

Anuj Bhargava and smart innovation
2030 will see an increase in disruptive technologies. For example, consider how tubes transitioned from printed labels to being printed tubes. Innovation is a key driver, and probably the only way to keep making money. In India, frugal innovation will always remain the way of life. 
We worked on labels for a whisky brand. In 2012, the label was being purchased for Rs 1.52 per label. It was printed on cast-coated paper (mirror-coated paper), with hot foil and a UV varnish, and it was non-self adhesive. After a longish back-and-forth between my team and the client, that involved changing substrates, in-house stock production, and the incorporation of metallisation with film on uncoated papers. This resulted in a significant reduction in the price of the label to Rs 0.36.

The point is, if you’re not taking a risk, then you’re not being creatively profitable.

Anuj Bhargava: The importance of sustainability
Everyone talks about sustainability, but no one wants to do it. The customer doesn’t want to cut their pockets for the environment, but they want you to cut your pockets for the environment. Unless green is also cost-effective, sustainability cannot be successful. He said, “Unless the cost of sustainability comes down along with its environmental friendliness, no one is going to buy that idea.”

Sustainability would be an absolute driver in terms of the selection of print suppliers — not just in terms of material, but in terms of the sustainability of the factory. In terms of compliance, the governments would be very strict. We know annual performance reporting (APR) is here. There will also be a massive increase in disruptive technologies.”

Anuj Bhargava: The manpower puzzle
Manpower changes will be the biggest factor by 2030. Brainpower holds the key. The biggest challenge in 2030 and beyond would be to find people to run our machines, and run our factories. Today, print graduates don’t wish to run a printing press, imagine what will happen tomorrow. This would pose a big challenge for mid-sized companies.

In 2030, the segment of salespeople who facilitate one-to-one communication asking for business will be hurt by automation. The customers will not have time to talk to the junior-level folks in the sales teams. Systems and processes will be in place.

AI and the label industry
Label machines will become a lot more sophisticated — it will include artificial intelligence and automation — and these changes will be controlled entirely by the machine manufacturers.

By 2030, pre-press will almost entirely function using artificial intelligence. This part of the process is repetitive, predictable, and understandable. You can specify whether you want a warm hue to an image, or if you want a specific kind of trapping.

The point is, that there would be a lot less human intervention required in pre-press.