Harsh Pati Singhania, managing director, JK Paper, doesn’t look like a man in a hurry. But if one is operating in an industry like paper, one needs to keep that margin for the unexpected up one’s sleeve. Besides being capital intensive, procurement of raw materials and fluctuating international prices are big issues one has to grapple with. Then, of course, there is the task of differentiation and branding. Singhania, who is currently spearheading a major expansion project of Rs 1,650 crore for the company, talks about all these issues and more in this interview to Alokananda Chakraborty and Richa Prakash.
How do you create differentiation in a category like paper?
Paper is a commodity and in that sense it doesn’t have a branding in the same way as a mobile phone, a watch or a pen. Even until 30 years ago, Indian paper brands were known more by the names of the companies and the reputation they had. For example, we were the first to come up with what is called Maplitho paper; it was a name coined by JK Paper way back in the early 60s. Now Maplitho, in technical terms, is actually ‘surface-size’ paper. Because we were at the forefront of introducing a new, superior writing and printing paper, we became synonymous with the brand.
What I am saying is, the branding exercise starts when the customer starts valuing your product. I would jump forward and take the example of JK Bond, which we introduced in the 70s. Even today, if you say JK, people remember it as the maker of JK Bond though in volume, JK Bond is a very small part of our total tonnage. The reason why one still makes the connection is that it’s a watermark paper. Then, of course, there was some communication done that time on the marketing side. So people became familiar with JK Bond.
Now, we step into the nineties or the late eighties, when photocopy machines became common. We found people were buying our Maplitho, for example, and shopkeepers and traders were cutting them to A4 size. A printing press is sensitive about its supplier because it buys directly from the mills but the retail consumers buy from the stationers and shopkeepers. We saw that shopkeepers were cutting our paper and putting them in small packs. Some good stationers would even put their own name on the pack.
So on the copier paper side, we became the first company to introduce our paper in a packaged form and mass market them. Our JK Copier was the first mass-marketed copier paper or office paper available. And then we went into a whole lot of things — starting from creating the right product. We studied what kind of paper would perform better in a copier machine because it goes through high heat in the machine. We asked how can we engineer and develop a product that would perform better? Mind you, the technology was also changing all this while and there were different requirements for inkjet, bubblejet and now there are whole new requirements for digital printing. So on the one hand, we looked at the product development aspect, on the other, we looked at distribution.
In sum, a brand is not just a label pasted on a pack; it’s a product engineered for a purpose, and it meets specific customer needs.
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You say branding is difficult in a category like paper because you can’t put the brand name on every scrap of paper. Now consider Intel. “Intel Inside” was the first, and arguably the best, “ingredient” branding to come out of Madison Avenue…
We have done it but in a different way. We haven’t done mass advertising because paper as a category doesn’t lend itself to it. Intel also innovated to do this and it requires a lot of money. Intel has a different scale and in that sense the spends are justified. JK is among the few paper companies which have advertised in the mass media over a period of time. But we have advertised in a targeted fashion. The kind of money that is required for effective consumer recall via mass media advertising would be large and may not be justified given our scale at this point in time. But we have worked on a whole lot of below-the-line stuff. For example, we have a dealer loyalty programme called “super sitaare’”. It has been running for the last five-seven years. It’s basically a dealer loyalty programme, and there is the concept of getting stars based on the volumes they sell and so on. It’s working well for us and we find that it’s creating a lot of interest in the market.
What about technology and innovation? You did mention the technology landscape is changing fast…
Technology is key at every stage. For example, we bought an automatic cutting-packing machine which ensured better quality than when the paper was chopped manually. What I am saying is you’ve got to put your marketing and distribution and branding efforts side by side so that your product lives up to the promise. And like any other successful products, in our industry also you have to keep upgrading yourself. Our brand remains the same, but the technology we use has changed, our investments have changed. About 12 years ago, we invested in our Orissa plant and put up a new pulp mill, that was the largest and most modern in the country at that time. The pulp mill gave us a more consistent quality of pulp which helped us produce a better quality of paper. We are the largest selling product in the country, and we also offer the best price. These two don’t often go hand in hand.
Procuring pulp is a big issue for the industry because it affects quality. As an industry, what are you doing to address the issue?
The industry has been engaged with the government for a very long time on the fundamental issue of raw material. And not just engaged, the industry has made several proposals because ultimately the success of the branding will depend on the quality of the product. Quality consistency and product development have to go hand in hand. The industry has made several proposals to the government in the past to, say, allow industrial plantation, which we don’t have now. The industry has come up with a model, a multi-stakeholder partnership. This essentially means you allow the industry to just plant, the land remains with the government. And the trees, the harvest that grows, is done in a sustainable manner that you chop off some and grow some more. So it’s in a cycle - that will provide employment, green cover, soil conservation, water conservation, the whole gamut.
But we do not have a policy like that. So what did the industry do? The industry has, over the last decade or so, worked a lot with farmers on what we call ‘social forestry’ or ‘farm forestry’. So a company like JK Paper, for example, grows about 4 crore or 40 million seedlings a year, which is given to farmers to plant on their own lands. With the use of new technology we have clonal propagation of seedlings which gives thrice the yield of a normal seedling. There are some limitations — even though we have a sort of buy-back, we can’t enforce it on the farmers. There is also the issue that farmers’ lands in India are small, marginal. So the productivity and the survival rates from those are not so high.
If you look at countries like Brazil and Indonesia by contrast, they have policies for what they call ‘production forestry’ which allows them to get more consistent quality of raw material. They can become much bigger because they have the raw material. The single biggest limitation in India is that. We are setting up a pulp mill that has a capacity in excess of 2 lakh tonnes. But if I wanted to set up a 5 lakh tonne pulp mill, I can’t do that. Not because of money, but because there is no raw material pool in a certain vicinity that you can transport economically. To run your company entirely on imports is not economical. But in order to sustain the brand, one has to be very conscious of the quality of the product.
Over the last three decades we have been hearing about how offices will go paperless sooner than later. As a paper company, how do you react to this hypothesis?
Well, I certainly hope it doesn’t become a reality. But more importantly, it is not going to become a reality. Let’s distinguish between India and countries like India, and what we generally call the West, which is the US, Scandinavia, Japan and so on. The level of activity in our country on a whole lot of fronts is so low that even with a rapid leapfrogging of technology, the basic requirements is bound to grow. Take literacy. In a country of 1.3 billion people, literacy levels are abysmal. You cannot move the entire education system on an electronic platform. Look at offices — they are guzzlers of paper. Even with the introduction of things like emails, a whole lot of stuff gets printed out. Take your utility bills. Inter-connectivity means there is so much more information. Look at printers, they have penetrated homes. The proliferation of all these machines drives this demand.
When you talk about the West, a lot of their consumption was wasteful. There you will see stagnation to some extent and decline in some countries. But in this entire developing region — and India is at the very forefront of it — there is actually a huge pent-up demand waiting to explode.