Real Touch Laminate, a brand from Rangoli Laminates Pvt Ltd, is one of the oldest players and respected brand from Morbi, Gujarat is going to expand its factory operations by installation of two new presses targeting export markets along with increasing domestic market presence. They are of the opinion that the stock management liability is going to shift to distributors, so they have to invest and precede their dealing in less credit in these changing times. The Ply Reporter talked to Mr Kanti Patel, Director of the company on his objective for expansion and changing industry scenarios.
What changes do you see from the time when you had begun your journey and today’s time?
There is no such drastic change happening in the industry except the competition that is impacting the margin negatively due to inability to increase the rate. Today, if the raw material prices are increasing at a rapid pace, people still look for some space to reduce or do not wish to pass on the higher input cost by increasing the price of finished products.
The price of the product genuinely didn’t increase in terms of the raw materials rate spike.
If we divide the period of the last 20 years in three parts, what price difference the industry has observed till date?
In the year 2001 the price of 1mm laminate was nearly Rs 411 when the price of phenol was Rs 32 only. In the year 2010 price of 1mm was nearly 600 and the phenol price was Rs 60 to70 and melamine price was Rs 80 to 85. Today phenol and Melamine prices are Rs. 120 and Rs 220 respectively, which are much times higher; the price of laminate did not increase in that respect. So, the biggest change is drastic reduction in margin in the laminate industry.
What changes did you see in designs in the laminate segment in India?
With the entry of China and their low cost materials, the design innovation boosts, but it did not see much change. It has just been transferred from one folder to another folder. With European design the scenario was different, either with their monopoly or if there is no monopoly the designs stay for long.
Real Touch being a reputed old brand, what advantage do you have with it?
There is no such advantage we have, except having a vast range. Having old distributors we don’t face any issue in terms of rate and its realization.
Real Touch was earlier having an impact in the northern region, especially in Delhi, Haryana, Punjab, etc. That is weaker to some extent now, why is it so?
With respect to price realization the market strength has become weaker now. The newly came up players are having mass production. Accordingly, they quote the price at a lower rate that creates unhealthy competition. If we go in that way we will be at zero margins and our survival will be at stake.
Is this the reason you are going for expansion?
This is not the case, we are going for expansion because one of our factories has become old and most of the operations are manual. With expansion we are upgrading its operation and the bigger land area will facilitate us to install more presses and easy handling of logistics and stocks.
What is the current production capacity and what it would be after up-gradation/expansion?
The current production capacity at the older facility is nearly 90,000 sheets that after expansion the capacity addition will be over 2 lakhs sheets per month.
The current production capacity at the older facility is nearly 90,000 sheets that after expansion the capacity addition will be over 2 lakhs sheets per month. With respect to price realization the market strength has become weaker now. The newly came up players are having mass production. Accordingly, they quote the price at a lower rate that creates unhealthy competition. If we go in that way we will be at zero margins and our survival will be at stake.
What would be the market exploration strategy after expansion?
Besides, increasing the foot prints in domestic markets, we will be focusing on exports as well. The new press for 10x4.25 ft will be installed targeting mainly to exports. At present our range of products are being offered through three folders, and in my opinion if the product sales are good with these folders, there is no need for the new folder. But, as the market is changing with a lot of new range of products having different thickness like 0.92mm, and if our sales do not cover up with it, we will also be manufacturing 0.92mm and a new folder may come up in future.
Being an old & reputed player, don’t you think that there should be a standard thickness in laminate?
I always disagree for the deviation from standard thickness. Why did 0.92mm come? It harms 1mm segment, but we can’t say anything to them. We have not manufactured in this thickness, but if our offerings are beaten up, we will come up in 0.92mm also. 0.8mm is standard thickness for rural and other tier 2 and 3 cities. If anyone asks for a cost effective product 0.8mm is good, there is no logic to offer 0.92mm with just a bit of Rs 50 less than 1mm price. There is also conspiracy as the retailers are selling it as 1mm giving them under thickness material.
Is the multi folder concept right or wrong for a factory?
In terms of sales, having folders in different thicknesses is right. Multi Folders' concept is the need of the hour; else the factory owners will not be able to sell their products. The distributors are facing difficulties in this competitive market, if they don’t have range.
Do you see any change in the selling model and dealing with distributors?
If a company will not work in cash, it will have to bear losses in the coming times. With changing time the distributors have to invest and shift their stock management in cash sales/ purchases. The company is willing to have a fixed margin of Rs 50 a sheet. In this way, the old practices of stock inventory with the liability of factory owners will not be in existence in times to come. This is the reason we have come up with small catalogues, which are lighter in weight having limited number of SKUs in it to just 150 at max. With a heavy catalogue of 400 pieces, the distributors do not take interest. The stock maintains are difficult at distant locations for one press players like us.