Across the board

by Stephen White

2009 was a difficult year for many manufacturers involved in the production of writing instruments, but globally there were pockets of growth. In the case of India, there are signs that it could become a major force in the global marketplace

It's difficult to know what to make of the worldwide $18 billion writing instruments market in 2009. On the one hand, you've got the global downturn doing what it seems to do best, namely squeeze the profits of some of the biggest office products and stationery industry's names and constrict some of the major markets, especially in Western Europe and the US.

On the other hand, the market has continued to grow at a relatively healthy rate in the developing economies of the Middle and Far East, much of Asia-Pacific, Africa and South America.

While Newell Rubbermaid, BIC and Pilot clearly remain the strongest players in the global market, local, regional companies have been able to carve out a niche and even strengthen their standing. Nowhere more so than in China and, increasingly, India.

Both countries should now be considered as in the upper tier of power blocs when it comes to the sector. Indeed, the global downturn has not withered China's standing as the world's biggest supplier of writing instruments, with exports still increasing at more than 20 percent annually.

The country's production is still focussing on the low-end and mid-range categories. Indeed, if there is a spiritual home for bright, coloured promotional pens, novelty-shaped highlighters and models with flashing LEDs or retractable paper rolls, China could very well be it. Although that may be doing the country's manufacturers a disservice.

Western manufacturers may bemoan much of the quality of the country's output, but it cannot be denied that the standard and range has risen in recent years. Chinese manufacturers are showing an increasing tendency to experiment by incorporating novel digital features and ergonomic barrel shapes. In addition, environmentally-friendly designs such as large-capacity highlighters, markers with reusable ink containers, and pens featuring recycled newspaper barrels, have been produced for a few years now.

Arguably its pre-eminence on the global stage, with exports estimated to be $1.5 billion, proves that the Chinese industry is not only competing but thriving in the international arena. It is certainly dominating many of the emerging markets, the areas where the battlegrounds for global pre-eminance are located.

Regions such as South America and Asia-Pacific have not been immune from the economic troubles, but market growth has been buoyed and stimulated by rapid increases in population, literacy levels and rising demand for good quality writing products in these economies.

Dominant it may be, but China does not have it all its own way on the world stage. The brand competitors have been stung in the past two years in some markets although, as we looked at a probable recovery, not irrevocably so. The B2B channels of Europe and North America have felt the strain in particular as the end-user has gone looking for value. But being a global brand owner has its advantages and some segments and markets have been kinder than others. Companies like Pilot, Pentel and others are looking at increases in market share in some places, while becoming much leaner and more competitive operations.

Whether they'll match the naked ambition and aggression of the companies that form India's industry is another question - one that is set to be answered during the next couple of years.

Bullish prospects

Several representatives of the Indian industry have been bullish about its prospects as an exporter for some time now. Up until this point, however, most Indian manufacturers have settled for a share of the country's $650 million domestic market.

Both local and international competitors (India being the outsourcing hub for many multinational companies) have benefited from the government's emphasis on education. As the number of schools in India as well as literacy levels are increasing, sales of stationery products are growing and the office stationery sector as a whole is expanding. In the next three years alone, it is expected to grow by 30 percent.

India also features some of Asia's most recognised brands which rival their Western counterparts for quality and presence in the region. For instance, Cello Writings' (in which BIC has a 40 percent stake) range of writing instruments is available in over 700,000 outlets in India and the company operates in 62 countries. But it could be the small and medium-sized manufacturers that are among the most interesting to watch on the international scene.   

Take a company such as Linc Pen & Plastics which, across India, has a relatively small 8-9 percent market share compared to the big players Cello and Reynolds, but is intent on spreading its wings internationally. Linc is concentrating on exports to the Middle East and to South America. Last year, exports totalled Rs39 crore ($40 million) - that's one-fifth of its production output.

The company has two state-of-the-art manufacturing facilities in West Bengal, which are equipped to manufacture nearly 2 million pens every day. A renowned name in the international market already, Linc Pen & Plastics currently exports its products to the US, Bangladesh, Nepal, the Middle East and South America. It has recently applied for registration of its brand 'Linc' in 20 new countries.

Despite his ambition, Linc's Managing Director, Deepak Jalan, is cautious about competing with China just yet and is among those calling for government assistance to help tap into foreign markets.

"There is a need to change the market development assistance scheme under which certain companies get subsidy to participate in international trade fairs and exhibitions. Currently, companies that are rated as export and star-export houses (with export turnover of more than Rs15 crore) are not entitled to this subsidy and hence the cost involved in tapping into new markets is very high," he recently told the local media.

Jalan fears that a lack of skilled manpower and poor infrastructure are other major obstacles to be overcome if the sector is to fulfill its potential.

Fortunately, India's Writing Instruments Manufacturing Organisation (WIMO) has been proactive in lobbying the government for tax breaks and financial assistance for the burgeoning industry.

"The government should provide incentives to exporters in a time-bound manner to tide over the present crisis," says DK Jain, President of Luxor Writing Instruments (Newell Rubbermaid's local partner) and VP at WIMO. The organisation is pushing hard for longer tenures for post-shipment credit as overseas buyers are demanding longer credit periods.

With issues of sourcing, supply and infrastructure still to be resolved, progress may not come fast enough for some, but the Indian industry, backed by its massive domestic demand, is beginning to realise its potential. Its global presence is assured.

"Despite the current challenging business scenario and rapidly evolving market dynamics, Indian companies have huge potential in the international markets," says Jalan. "In the coming years, India will pose stiff competition to China and emerge as the leading supplier of writing instruments in the world."