Analysing the indian writing instrument industry

The Indian authorship instrument industry has witnessed changeless alterations in footings of merchandises design invention, cost efficiencies and composing quality inventions.

The authorship instruments sector can be loosely classified under 3 caputs which include pens, pencils and others. The others section include markers/highlighters, refills, nibs, study pens, leads and crayons.

The pen industry can be classified as under 3 caputs: ball point pen, gel pen and fountain pen. However the demand for fountain pen has reduced well, and has become negligible.

Gel pens are going popular with pupil community. This can besides be divided as per the monetary value scope of

Upto Rs.5 merchandises

Rs.10-20 merchandises

Above Rs. 25 ( semi premium and premium merchandise )

The new merchandises in pen section include value added characteristics like better clasp, smoother nibs, and ink flow, clubbing with other composing instruments etc.

Although a pen is little mundane merchandise. However the engineering used is huge specifically for premium pens which range from Rs.30 in semi premium section to every bit much as Rs. 5 hundred thousand ( 18-carat gold ) . The mark market here is basically professionals and center and high terminal category.

The pen industry can be classified as under 3 caputs: ball point pen, gel pen and fountain pen. A ballpen pen is a composing instrument which consists of a exactly formed metal ball seated in a socket below a reservoir of ink. As the pen is moved along a authorship surface, oil based ink is automatically delivered. Gel pens are similar to ball pen except that they use ink that is gel based. Gel pens are short in life span but smooth in composing. However the demand for fountain pen has reduced well, and has become negligible. Gel pens are going popular with pupil community.

The markers include white board, hilighters and lasting markers. The tips used here would be fibre based. The natural stuff used in doing organic structure of pens and markers include metals or polymers. The tip used can besides be of different like a fiber tip made of polyster, nulon and acrylic fibers.

Gel ink pen is highly popular with school pupils and is at present sing a higher growing rate as compared to the other classs. Fountain pens are losing popularity as because it is cumbrous to replenish ink continuously and furthermore there is ever the hazard of spillage and escape. Hence clients perceive fountain pens as low in footings of public-service corporation & A ; convenience as compared to options available ( ball pen, gel pen ) .

The pencils would include wooden pencils and mechanical pencils or clasp pencils. A wooden pencil is made of wood, graphite clay, brass and a mechanical pencil is made of metal or plastic, but has a pencil lead inserted.

Macro-economic Scenario

The twelvemonth under reappraisal had been a disruptive 1. The first 3 months of the fiscal twelvemonth left one hint less sing the galloping rising prices and the petroleum monetary values. This threw to weave all the pricing and market scheme we had contemplated. The 2nd one-fourth saw softening of the polymer monetary values and a little sense of order seemed seeable. The 3rd one-fourth came as a bolt out of the blue with concern all of a sudden disappearing and liquidness evaporating. In the 4th one-fourth all of us were left creaming the lesions inflicted by the earlier quarters and were inquiring what is in shop.

About the Industry

The Writing Instrument Industry comprise of seven major participants in the organized sector and a disconnected but ample unorganised sector. The entire domestic industry is about Rs.3000 chromium with the unorganised sector representing 20 % . The participants are good entrenched in the concern over many old ages and most of them have the best installations to provide to the fictile pen industry.

The Writing Instrument Industry has been estimated at around Rs. 2100 crores. The Organized sector, today would account for 75 % of the overall Writing instrument industry. The Industry has been witnessing an one-year growing rate of around 7 -8 % .

Pen as a merchandise is close to people of all walks of life at different age and of different gender and the association of it is a womb-to-tomb one. For some with a good quality pen at finger tips really elevates their assurance degree and makes them experience good.

The pens market can be loosely divided in ball point pen and gel pen, fountain pen ahs neglible portion now, ball point histories for 72 % field-grade officer the portion and gell pen histories for 28 % . Gel pens are going increasing popular with the pupil community. Major international participants include fabulous palace, uniball, The marker pen today is besides increasing because of increased usage by the corporate sector. Major participants here are GM ( Cello ) , Luxor, Stic. Markers include white board, cadmium marker or lasting marker.

Harmonizing to the 2006 ACNielsen Retail Audit, ball pens forms the biggest ball of the pen market in India and histories for 72 per centum of the entire pen market followed by gel pen at 28 per centum ( Refer Table 1 ) . The trade name leaders in this market are Cello, GM pens and Jigneshwar.

“ Pen market antecedently suffered from deficiency of organized information on the market size or market portions of assorted participants, since most participants are non listed companies and distribution was largely limited to stationery shops, ” said Anmol Sherpa, Associate Director Client Services, ACNielsen.

“ The inclusion of this class in ACNielsen Retail Audit has made it the lone reliable tool to determine the market growing and size of the composing instrument market in India which was non antecedently available. ”

As the 2006 ACNielsen Retail Audit reveals, approximately 10.9 lac shops across urban India take the merchandise in stock at present which represents a distribution growing of 23 per centum within a twelvemonth ( April06 over July’05 ) . The increased distribution has brought about a phenomenal growing for the pen market of 82 per centum in gross revenues. The gross revenues peaked in the months of February and March owing to exam season and touched upper limit in the last 11 months

“ There is a consistent month-on-month growing in the authorship instruments industry fuelled by competitory pricing and merchandise invention. Today, one can purchase a Gel pen for rupees two and can take from a broad assortment of pens – with easy clasp to water-proof ink. Sherpa added. “ The positive mentality of the industry is besides apparent from the sum of airtime on primetime telecasting advertizement by about all cardinal participants in the industry. ”

The ACNielsen Retail Audit Report besides highlights some of the interesting findings about the assorted trade names of pens. Although the composing instrument market is led by good known names like Cello, GM ( Reynolds ) , Jineshwar ( Montex ) etc. Smaller participants such as Lexi, Agni and Elkos for illustrations have besides been able to keep their portion on a regional or choice pocket degree. ( Refer Table 2 )

The survey besides finds out that Marker Pens is another section that is turning in Urban India. GM tops the list when it comes to marker pens followed by Luxor and Stic. Most sections like Whiteboard, CD Marker or Permanent Marker have shown positive month on month volume and value growing in April ’06. ( Refer Table 3 ) .

Table 1: Ball and Gel Pen – Market Break-Up ( Value )

ACNielsen Retail Audit Report, April 2006

Table 2: Top Five Players – Pens ( Ball & A ; Gel )

Leaderships

Ranking

1

Cello

1st

2

GM Pens

2nd

3

Jineshwar

3rd

4

Linc

4th

5

Add

5th

ACNielsen Retail Audit Report, April 2006

Ranking based on Market portion % ( Units )

Table 3: Leaderships in Marker pens

ACNielsen Retail Audit Report, April 2006

Highly competitory market

The Industry is extremely competitory at the lower monetary value section due to low entry barriers. Because of simple fabrication procedure for low priced pens, there are many unorganised participants, which account for about 25 % of the entire market size. However organized sector portion is increasing because of better quality and trade name edifice.

Most Indian Brands cater to section upto Rs. 30, while international trade names cater to semi premium and premium section

Price push

The Industry is monetary value sensitive and trade push plays a critical function in the low monetary value section. The increased distribution has brought about a growing in this market, nevertheless it is still fragmented in nature.

Ad and trade name callback of import.

However, trade name callback is besides critical for volumes and some trade name trueness is besides seeable across the monetary value section.

Pen occupies 80 % portion in the writin instrument markets and major participants include Cello, Reynolds, Montex, Linc, Todays, Flair, Lexi, Agniaˆ¦ where cello is the market leader with approximately 30 % portion. While participants in premium and semipremium pens include Luxar-parker, uniball, etc..

India is on the way of going a major export hub for pens where presently we export about 20 % of the entire production. Besides the quality is beter than the Chinese pens. Currently China exports a major part nevertheless India is slated to come into competition.

Hazard and Concerns

The primary challenge the industry as a whole would be the distribution due to the disconnected retail construction in the state. Another of import issue would be the Retailer power to act upon client pick which is highly high in some countries where purchase procedure engagement is low.

The Un-organized sector and the organized sector shall co-exist and it is hard to battle the issue of the unorganised sector as because the barriers to entry in the authorship instrument industry are low. However, it has been observed that Sec A and B client prefer national trade names, while the unorganised sector caters to the lower strata of people, who are more monetary value conscious.

Chinese Pens besides seem to be deriving popularity nevertheless, since the Indian pens are more competitory than the Chinese pens – both in footings of quality every bit good as monetary value. As a affair of fact, the Indian pens are deriving increasing popularity even in abroad markets in recent old ages.

Global Markets

Global Market for Writing and Marking Instruments ( Source: Report by Global Industry Analysts, Inc, March 2008 )

Global pens/markers market is estimated at USD 12.3 billion for 2007.

Worldwide gross revenues of Writing and Marking Instruments are projected to make USD18.3 billion by 2010.

Global authorship and taging instruments market is turning at healthy compounded one-year rates in the developing economic systems such as the Middle and Far East, Asia- Pacific, Africa, and South America.

The market growing could be attributed to rapid addition in population, literacy degrees and lifting demand for good quality composing cogwheel in these economic systems.

Asia Pacific is poised to emerge as the fastest turning part over the period 2000-2010, registering a CAGR of 5.3 % .

Ballpoint pens market in the US is expected to be deserving $ 3.36 billion by 2010

Newell Rubbermaid, BiC and Pilot dominate the planetary authorship and taging instruments market, though regional participants command leading in choice niche markets.

While BiC continues to rule the ballpen pen market worldwide, the company is besides good positioned in the mechanical pencils class.

U.S Market ( beginning: Business Trend Analysts )

The U.S. Market for Writing Instruments and Art Supplies was estimated to be at $ 3.1 billion and was expected to turn at an mean growing rate of 5.5 per centum each twelvemonth from 2001, making merely under $ 5 billion by 2011.

Pens:

The largest section of the composing instruments industry is by far the market for pens which rose by 8 per centum in 2002 to more than $ 1.2 billion. And by 3.1 per centum in 2003 to $ 1.28 billion. Pens are expected to go on to turn in popularity, bring forthing more than $ 2.05 billion by 2011.

This section includes ballpen and roller ball pens in add-on to gel pens and executive type pens including penmanship and fountain.

Harmonizing to BTA, new merchandises in the pen section include many value added pens that contain excess characteristics such as particular clasps. Some makers have begun to roll up ballpen pens with other composing instruments.

Pens with built- in or multiple characteristics are besides popular with combination pen/ pencil/ stylus, pen/pencil, and even pen/screwdriver lifting in popularity.

Pens besides continue to be popular in the promotional merchandises industry.

The 2nd largest composing instrument section is the “ Marker ” market, which includes all types of markers and highlighters.

The marker section of the composing instruments industry grew from $ 563 million in 2002 to $ 581 million in 2003.BTA expects the market to go on to turn the four per centum yearly to more than $ 812 million in 2011.

At the 3rd place is the market for pencils, including mechanical pencils. The market for pencils is expected to increase at an mean growing rate of 6.3 per centum from 2001 to 2011. This would let the pencil section to catch markers and history for more than $ 929 million in gross revenues by 2011.

Desk Sets

Desk sets arc typically defined as a grouping of a pen or pencil with each other or with any other desk accoutrement including a missive opener or stylus to call a few. Traditional pen/pencil sets are popular among the school, gift and promotional markets and scope from a few dollars to 1000s of dollars depending on the maker and type of merchandise.

In 2001, the market for desk sets was a small over $ 21.1 million. Growth in 2003 was merely 1.4 per centum to $ 21.4 million, but 2003 estimations showed an addition of 4.2 per centum, forcing the desk set section of composing instruments to more than $ 22.3 million. By 2011, desk sets will account for a jutting $ 303 million

China Market

With a immense provider base of 3,000 shapers using 150,000 workers, mainland Chinas composing instrument industry is a dominant force in the planetary pen-and-pencil industry.

The countrys one-year end product tallies to one million millions of units each twelvemonth. In 2003, it produced 23.17 billion pieces, of which 57 per centum was exported. The China Writing Instrument Association forecasts the growing tendency to go on, with end product expected to increase by 25 per centum in 2004 and by 21 per centum in 2005.

Production of composing instruments is mostly centered in Zhejiang state, situated on mainland Chinas southeasterly seashore. Zhejiang histories for 70 per centum of mainland China ‘s entire end product and about 59 per centum of exports. Other production countries include Shanghai Guangdong, Jiangsu and Shandong.

Although most shapers in mainland China produce a assortment of composing instruments, ballpen pens account for the majority of both end product and exports. In 2003, ballpen pen exports totaled 5.5 billion units deserving US $ 254 million. The merchandise showed early marks of growing in the first four months of 2004, with export value at US $ 93.7 million, an addition of 32 per centum over exports of US $ 71 million in the same period of the old twelvemonth.

In add-on to ballpoint pens and gel pens, the scope of merchandises in mainland China includes multifunction pens, mechanical and non-mechanical pencils, fountain and India-ink pens, highlighters and markers, water-color and roller, tip pens, and refills, tips and leads.

Gel pens are a aggressive class, exhibiting 30 percent growing in 2003. A big figure of respondents to a Global Sources study ranked the merchandise as the most promising export point after ballpen pens within the following 12 months.

Most merchandises from mainland China autumn into the low-end to midrange classs. High-end merchandises, while available, are non as widely produced in mainland China as in Taiwan, which has an border in this market. Taiwan, whose exports sum to merely approximately 20 per centum of mainland Chinas, focuses more on midrange to high-end ballpen pens, mechanical and non-pencils, roller tip pens, gel pens, fountain pens, freshness or promotional pens, every bit good as pen parts.

Most writing instrument shapers prefer to beginning tips and ink abroad, as the quality of locally made stuffs is non yet suited for export points. However, a few providers have programs of bring forthing their ain inks and tips. Plastic and metal are largely sourced locally.

Since the production of composing instruments is mostly an OEM concern, most shapers reinvest merely a little per centum of grosss — an norm of 5 per centum — for merchandise research and development.

Major M & A ; A Deal

BIC Group, the letter paper, igniters and razors concern, has agreed to get a 40 per cent interest in Cello Pens, the Cello Group ‘s composing instruments concern, for a‚¬124 million ( ?117 million ) in hard currency.

The trade will be funded through debt and gives BIC a call option to increase its interest to 55 per cent at a monetary value based on Cello Pens ‘ future public presentation.

Cello Pens is India ‘s largest maker and distributer of composing instruments, with 37 per cent market portion and a presence in Africa, the Middle East and Asia.

The 40 per cent interest gives BIC entree to the aggressive Indian market, which is in line with its expansionist aspirations of developing its concern in new parts and beef uping its place in emerging markets.

Bruno Bich, BIC chariman, said: “ One of the grounds for the success of BIC ‘s scheme since the beginning has been to construct an international presence. India is one of the largest and fastest-growing markets in the universe. This partnership with the number-one Indian authorship instruments company is a enormous chance. It will reenforce the long-run chances for both BIC and Cello Pens and bring forth value for our stockholders. ”

Demand Growth

India has emerged as the best maker of tips and inks- two important constituent of the pen. This has resulted in new alien assortments of Direct fill pens ( i.e. usage and throw ) being introduced in the market. In bend this has affected the domestic industry where the monetary value points of Rs.2, 3 and 5 has been squeezed by the direct fill market which is presently estimated at Rs.2000 crores. This will in bend see the market participants make overing market scheme.

In short exciting action is expected in front in this industry

In Rs. Cr

FY 2004

FY 2005

FY 2006

FY 2007

FY 2008

Entire Production in Bn

1789.798

1954.123

2235.542

2432.41

2634.993

Import

43.8623

75.2442

97.8619

138.6568

190.3779

Exports

333.6599

329.3676

433.4036

491.067

475.3705

Net Market Size

1500

1700

1900

2080

2350

The industry has been turning at CAGR of 11.88 % for FY 2004-2008, making a market size of INR 23.5 Bn in FY 2008. It increased by 13 % YOY in FY 2008. The ground for this growing was increased demand from both schools and college pupils and corporate sector.

It has immense exports market and exports about 20 % of the production. Currently China exports a major ball but industry experts claim that India is likely to be a strong competition because of better quality.

Export-Import

India has been a net exporter for composing instruments, where the net exports stood at INR 2.27 Bn for FY 2008.

The exports have been turning at a CAGR of 9.25 % where it stood INR 4.75 Bn in FY 2008. However exports reduced in FY 2008 from INR 4.91 Bn in FY 2007, because of decreased exports of felt tipped, markers and other porous pens. Besides exports were less for high value pens.

Demand Drivers

The de-reservation of the sector has opened up exciting possibilities. International participants are taking acute involvement and India is emerging as the international hub for fabrication pens. Thus BIC of USA has entered India with their investing in CELLO and many are likely to follow suit.

This development will see immense investings fluxing into the industry and a moving ridge of modernisation and enlargement will be undertaken by all the participants. The industry has seen a tendency over the last twelvemonth of Indian clients migrating towards the higher monetary value points, possibly a consequence of the growing in our economic system and more people with higher disposable incomes.

While there was the welcome intelligence of the dereservation of pens, which hitherto was under SSI, the rise in rough oil monetary values and the consequent gyrating consequence on the polymer monetary values presented a dashing undertaking to the industry. The economic system did turn as projected but marks of a slow down was apparent due to a assortment of factors such as steep rise in rising prices, upward tendency of involvement cost and the broadening of the current history, trade and financial shortage which in bend impacted the rupee. The allotment of 19 % of the 11th program budget for instruction will finally hold a seeable consequence on the industry.

The strong questions from the export market and serious involvement of the planetary OEM participants for switching fabricating base to India wholly indicated that the industry is poised for a period of exponential growing but the domestic market challenges continue due to increase in polymer monetary values with the industry non being able to go through on all the cost to the consumer.

The Indian industry is easy looking at upgrading fabrication set up to travel towards a wholly automated scenario more in line with international set ups post dereservation of the industry. The addition in polymer monetary values have about wiped out the unorganised sector and has presented the industry an chance to travel in to that infinite and tap a significant portion of the Rs.650Cr market that was being catered to by them.

There is a consistent month-on-month growing in the authorship instruments industry fuelled by competitory pricing and merchandise invention. Today, one can purchase a Gel pen for rupees two and can take from a broad assortment of pens – with easy clasp to water-proof ink. Sherpa added. “ The positive mentality of the industry is besides apparent from the sum of airtime on primetime telecasting advertizement by about all cardinal participants in the industry.

The Economic Slowdown would non hold a important impact on the Writing Instrument industry in general. At present the focal point is on the mass section, which is unaffected by the lag. The demand for composing instruments and other letter paper points is turning in the background of fast enlargement in the economic system as besides the literacy rate touching 64.84 per cent.

Besides, outgrowth of concern procedure outsourcing and IT houses is adding to the demand growing. The IT roar and automoation have non slowed down the market for pens. There is a roar in the pen section as bulk of school kids use it. This is high growing market for us

The inflow of modern retail formats ( organized retail ) in the state is expected to catalyse acceleration of growing in Writing Instruments, where consumer interaction with the merchandises at the point of purchase is moderately high. Penetration of modern retail formats is still low, which nevertheless is expected to increase quickly over the following few old ages.

India ‘s per capita income increased from Rs.11,672 in 2003-4 to Rs.24,321 in 2007-8. The lifting disposable income degrees in India make it most exciting market offering good potency for the class. The average age of the Indian population is under 25 old ages – the highest user for the authorship instruments. Further new chances are emerging on history of:

Favorable demographic mix – Indian population is expected to acquire younger in short to medium term.

Increased literacy degrees.

Rise of Indian in-between category.

Expansion of working population.

New retail formats.

Vast untapped rural market

Unexploited districts in abroad market

However, the chances may pull new participants in the Industry due to low entry barrier and can escalate competition and set force per unit area on the borders. The upward fluctuation in the natural stuff monetary values besides affects the profitableness of the Industry.

The other chance has come from the turning economic strength of the 300 manganese strong Indian center category whose buying power is increasing by springs and bounds. The crisp addition in the disposable income and the crisp spike in the nest eggs rate is expected to hold multiplier consequence and exponential growing is expected in most of the sectors of the economic system in the following few old ages.

Evaluation