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Writing Instruments Industry In India

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Writing Instruments Industry in India

INTRODUCTION AND BACKGROUND Easing of Quantitative Restrictions led to rising imports from China but however they have not posed a major threat to the domestic players, as the Chinese pens are not perceived to be of high quality. Entry of Reynolds through GM Pens India in 1990 made the organized sector take note of the vast potential of the domestic market. This was followed by entry of many players
MARKET SIZE

Domestic market -1500 crores growing at the rate of slightly above the GDP that is 9 % p.a. Organised sector accounts for more than 60 per cent. Most of the recent growth also has been at the cost of the un-organised sector. Similar trend was seen in the Ink market where the unorganised sector has largely been wiped out and it is now dominated by less than a handful of major players such as Chelpark, Camel and Bril.

GROWTH DRIVERS

Export thrust TODAY`S Writing Products Limited Terms of quality of pens, India ranks amongst the best in the world, well ahead of even China. But while China exports Rs 5,000 crore worth pens every year, India barely exports pens worth Rs 200 crore. Indian manufacturers are only now beginning to focus on global market. Today's Writing Products Ltd. export plans are being hastened in the wake of the company recently becoming the first Indian pen manufacturer to get its own brand of pens sold in Europe through Poundland, Europe's leading single price retailer. Poundland, which has over 100 stores and a million walk-in customers, has accepted a pen manufacturer to retain its logo on a specially designed packaging. The new packaging will have the logo `Today's by Poundland' prominently displayed. This is indicative of the trend of international buyers switching to Indian writing instrument products. The company will export pens worth $1 million to Poundland in the next one year, with orders over $2.10 lakh already being booked. Global sourcing

Writing Instruments Industry in India Another area that is opening up for Indian pen manufacturers is the trend among overseas stationary companies to outsource their pen requirements from India. Industry sources say that in the last six months, several foreign companies, including Wal-Mart, Office Depot and Staples of the US, which have so far been procuring pens from China, have visited India for outsourcing their pen requirements. While at present China has a market share of 10 per cent of the Rs 50,000-crore global writing instruments industry, India has not been able to corner any significant share of the market. Domestic Market - With growing disposable incomes, consumers are upgrading their purchases and luxury items are gradually finding their way into the shopping baskets of even upwardly mobile middle class consumers B2B Corporate Segment For gift and customized writing instruments purposes. NATURE OF THE INDUSTRY Alliances - Most of the domestic players have strategic alliances with global players. The alliances can be for strategic reasons like Marketing arrangements (Luxor India Sanford group Parker, Waterman), technology transfer (Rotomac India with Mitsubishi Japan) and tapping export markets. Seasonal demand drivers - Schools and examinations, Gifting Occasions (Corporate) Pricing and Margins Traditionally, pen industry experts say that mass-based pens have a profit margin between 10 per cent to 15 per cent. The Parkers make 15 per cent, which goes up to 20 per cent in the school and college opening season. But for the high-end pens like Waterman, the margins vary between 30 per cent to 35 per cent. Pricing segmentation - In India the Parker portfolio is broadly divided into functional (Beta, Vector and Reflex priced between Rs 50 and Rs 400) and highline range (Sonnet, Riatio and Frontier priced between Rs 350 and Rs 8,600). At the US-based $2 billion Sanford Group, the makers of Waterman, pens start at Rs 2,000 (for the cheapest range) while its 18-carat gold limited edition pen retails at Rs 400,000. Distribution Channels

Writing Instruments Industry in India Mass products under the Rs. 10 /- price are sold through the distributors route. These distributors can cater to the requirement of the outlets. Premium products - sold in multibrand high-end lifestyle outlets and also exclusive shops. These outlets also stock watches and accessories and multi-branded outlets typically have a separate corner dedicated to the premium brand. Distributors for premium brands are also sometimes not appointed and the company prefers to directly supply the outlet.(Waterman) For instance Modi Senator has tied up with London-based clothing company DAKS to sell its products through their exclusive shops located in Hyatt Regency in New Delhi and Leela Kempinski in Bangalore. The Senator range will also be available at retail stores such as Ebony in Delhi, Akbarally's chain of department stores in Mumbai, Landmark chain of stores in Chennai, and standalone stores such as The Blues in Delhi, Crossroads in Mumbai and other premium retail outlets. Product innovation Gel pens market- The market is estimated at Rs 350 crore, and the main players are Add Gel, Montex and Flair brands. Demand Drivers for this segment has been collegegoing Students. Promotion The pen market is marked by a fierce bout of competition among brands like Jetter, Reynolds, Cello, Todays, Add Gel, Rotomac, Flair, Stic and hundreds of small-scale players. As such, expenditure on media, promotions and celebrity endorsements pen brands are endorsed by the likes of Amitabh Bachan (Parker) Javed Akhtar, Salman Khan, and Hrithik Roshan (ADD Pens) is among the highest in the ad industry. Luxor plans to have an outlay of between 15 per cent to 20 per cent of sales. Linc's ad-spend is about eight per cent of its sales turnover and this year would see a shift in marketing to more above-the-line activity. MAIN PLAYERS AND MAJOR BRANDS GM Pens India (Reynolds-India)- Chennai based subsidiary of the Reynolds( Now part of the Sanford Group) Luxor along with brands like Parker, Papermate, Waterman has about 15 % market share. ADD Pens

Writing Instruments Industry in India Publicly listed companies Camlin Limited Today`s Writing Products Limited Linc Pen & Plastics Limited High-end brands have 1 % market share. Most of the high end brands have entered India Mont Blanc, Senator, Cartier, Pierre Cardin. The gold and the sterling silver range branded Waterman 100 retail between Rs 200,000 to Rs 400,000 The Luxor-Parker-Pilot-PaperMate foursome, all under the LWIL umbrella, account for a 10 per cent share of the branded market, with a combined annual production figure of over 220 million pens. While the market leader is the Chennai-based Reynolds with a 12 per cent share, followed closely by Cello Pens, other significant players include Add Gel, Today's, Flair and Stic. Parker brand has crossed the Rs 50-crore turnover mark. Luxor overall as a 15 per cent market share

Revenues in Rs. Million

Revenues in Rs. Million 2000 1500 1000 500 0 2000 2001 2002 2003 Year Camlin Linc Today`s

Writing Instruments Industry in India

Profits (PAT)
70 60 50 40 30 20 10 0 2000 2001 Year 2002

in Rs. Million

Camlin Linc Today`s

PAT

2003

Writing Instruments Industry in India

KEY PLAYERS Luxor Writing Instruments Pvt Ltd (LWIL) In late 2000, The Gillette Company signed an agreement to sell its stationery products business to Newell Rubbermaid, including Gillette's 50 per cent stake in the 50:50 Luxor-Gillette joint venture in India. The Gillette stationery products business comprised the PaperMate, Parker and Waterman writing instruments brands and the Liquid Paper correction products franchise, as well as related assets. Subsequently, the D.K. Jainpromoted Luxor group bought out the foreign partner, the $9-billion Newell Rubbermaid, from its 50:50 joint venture, LWIL. With this acquisition, the Jain family is now the 100 per cent owner of LWIL. Luxor continues to hold rights to manufacture, market and sell all SANFORD`s globally best-selling brands such as Parker, Waterman and PaperMate. A division of Newell Rubbermaid (a fortune 500 company) Sanford is a $350-million leader in the writing instruments market, with one pen in five sold in Europe. It has a history of brand acquisitions and has a multiple brand portfolio. Some of the other brands in its portfolio include Parker, Waterman, Reynolds, Paper Mate, Rotring, Sharpie and Sensa.
While the cash cow for LWIL remains the Luxor brand umbrella, accounting for 60 per cent of the company's turnover with the rest coming from Parker.

Parker already accounts for 40 per cent share of LWIL's turnover. While Brand Luxor will remain the mainstay for LWIL to mop up volumes at the mass end, an ambitious strategy for Parker is being thrashed out. The objectives for next fiscal: to sell 10 million units of Parker, and turn it into a Rs 100-crore brand against the current Rs 50-crore sales. LWIL's B2B division, which customises pens for corporates, contributes about 15 per cent to the company's turnover The division has currently been working primarily towards promoting Parker as a corporate gift. Luxor has a database of over 5,000 companies and plans to build on that network to promote Waterman. Luxor, which has a 15 per cent market share and expects turnover to grow by 12 per cent to 15 per cent by this fiscal year. Sales will be backed by heavy advertising and Luxor plans to have an outlay of between 15 per cent to 20 per cent of sales. With expectedly low volumes for its high-end brands, the pens will be imported from the US till volumes justify it. As of now Luxor will only market them. The import duty on pens is almost 60 per cent.

Writing Instruments Industry in India

The pen-maker also has plans to treble its existing network of Parker Shop N Shops in the next 14 months. They are in the process of tying up with major departmental stores and high-traffic life-style establishments.
Driving its targeted growth will be the Parker brand, which already accounts for around half of Luxor Writings turnover.

Luxor Writings focus on Parker is expected to lead to a larger utilisation of the brands installed capacity of 15 million a year. Also, a shift in favour of Parker away from lowpriced brands like Luxor, Pilot and Papermate, would mean better realisation for the company. For Parker, LWIL has achieved manufacturing indigenisation to the tune of 80 per cent, with products falling in the range of Rs 65-500 being produced locally. The remaining 20 per cent, which falls in the premium segment, will continue to be imported. Import duties of writing instruments priced under Rs 100 average 40 per cent, while duties to the tune of 60 per cent have to be coughed up for importing models priced above Rs 100. LINC Pen and Plastics Ltd Linc is a premier manufacturer of quality writing instruments having three manufacturing bases and seven branch offices to support its activities. On the export front, Linc has a sizeable presence in Asia and other parts of the world. Linc is a major exporter of "ball-pens", "refills", "ball-pen tips" etc. to a number of countries. To cater the need of highly demanding domestic market Linc has business associations with international giants like Mitsubishi Pencil Co. Ltd, Japan for their uni-ball range and Bensia of Taiwan for their pencils and ball pens. Having a strong presence in the mass segment (below Rs 10 segment), Linc has made a major foray into the high quality market through both assembling and manufacture of some of Mitsubishi's new products in the roller and gel pens segment. The Japanese company is a world leader in Uni-ball pens. The prime objective of tying up with an international player in the fast evolving writing instruments market was the scope for manufacturing these products at home. Linc is now fully equipped to manufacture these products at its modernised factories in Goa and Kolkata. The company now markets some 15 roller and gel pens of Mitsubishi, which contribute 25 per cent to the total sales turnover of the company. Linc has more than 50 products in its armoury, and is well geared to cater to the vast Indian market for writing instruments, set to grow at an annual average of 15 per cent. Financials -Revenues of Rs. 62 Crores with exports of Rs. 8 Crores with a PAT Rs. 2 Crores in 2002-2003 (Revenues in 1998-99 was Rs. 2.2 Crores)

Writing Instruments Industry in India

LINC strategic alliances - Bensia of Thailand (for non-sharpening pencils) and Mitsubishi (writing instruments company) of Japan for the Uniball variety were continuing with great success. Today's Writing Products Limited -while the promoters own about 54 per cent stake in the company, its partner, MonAmi, Korea's leading writing instruments and stationery manufacturer, has 13 per cent. The rest is with the public. As part of its plans to increase focus on the burgeoning export market for gel pens, Today's Writing Products Ltd, a major player in the pen sector, is planning to set up an exclusive plant. The plant, which will have a production capacity of 1.1 million pens per day ROTOMAC Pens Pvt. Limited, belonging to a multi million-dollar turnover VIKRAM KOTHARI ENTERPRISES, was incorporated in the year 1992. The promoters and the manufacturers had conceived this project with an objective to provide a good quality and economically priced ball pens in the market. Rotomac today is a leading manufacturer of writing instrument and has now increased the product portfolio under its umbrella. Montex pens The export of the Company's products is to countries that span all of five continents. The company has been primarily in exports for the last few years, but has recently entered the Indian Market, and true to form, has turned out to be one of the leading pen manufacturing brands in the Country. Calcutta based Schefields had a turnover of Rs 10 crore in 1998-99, with around 40 per cent of the revenues coming from exports. Schefields had started off as an export oriented unit with a factory near Calcutta, exporting most of its products to the west Asian countries. Later the market expanded to Russia, Europe and USA. Schefields is one of India's leading manufacturer and exporter of Gel Pens and Ball Point Pens. It consists of the two companies Schefields Exports and Schefields Ltd., each of which offers a unique line of products. Schefields gel pens and ball pens have been widely accepted because of the excellence in quality. Their pens are being exported to 26 countries around the globe including countries like USA, UK, Germany, Switzerland, Japan, Austria, Spain, Malta, Portugal, Russia, CIS, Turkey, Israel, Mexico, Brazil, Sri Lanka. Germany based FABER-CASTELL started its Indian operations by opening a Sales & Marketing Office in India at Mumbai in 1997. Products were imported and sold in India through a distribution channel of a local stationery company until 1997. In 1998, FABER-CASTELL India built up its own channel of distribution. In October 1998, the first factory was operational, manufacturing erasers for the local market. Gradually the product range increased and three more factories were built in Goa. India manufactures products like erasers, wax crayons, oil pastels, fibre tip colouring markers, brush markers, magic markers, mechanical pencils, geometry boxes, lead tubes, overhead projection markers, ball pens, stamp pads, highlighters, highlighter inks, permanent

Writing Instruments Industry in India

markers and white board markers. FABER-CASTELL India has a Research & Development Department, which is continuously working on new product development and improving existing product formulations. FABER-CASTELL India markets its products to the SAARC countries and East Africa. It also exports products like wax crayons, oil pastels and fibre tip markers to Far East countries, Australia, Europe, USA and the Gulf. FABER-CASTELL India employs nearly 200 people.

FUTURE SCENARIO

Outsourcing -A striking feature of the writing instruments segment, which is now becoming the order of the day is outsourcing. For instance Linc, outsources to the extent of 30-40 per cent of its requirements. Consequently, a great deal of attention has to be devoted to vendor development, as quality is of paramount importance in the pen segment. Consolidation -Mergers and acquisitions would come into play in this business in a big way as competition would have become quite fierce. Government Policies Small-scale industry classification- The Writing Instruments Manufacturers Organisation, reserved for the small-scale industry (SSI), has appealed to the Government to increase the SSI limit for the writing instruments sector from Rs 3 crore to Rs 5 crore. If this does happen, it would lead to more investments being infused in plant and machinery and pave the way for further consolidation of the industry. Custom and Excise Duties Considering the competition in the industry and race towards free trade world, customs duties may reduced in future. This will make it difficult for the players to survive if excise duties are not reduced accordingly.

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