Challenges of Label in Middle East Market
Challenges abound in the Middle East. Whether because of the recent real estate crash in the UAE, the effects of the global recession, war or political upheaval, the business environment can be tricky. And for a Westerner attempting to enter the market, transitioning to the Middle East business environment is not seemless. Dynagraph's Diana El Kara observes that the region's printing industry in general has been very sluggish in the past couple of years. "We believe this trend will linger for the next one or two years. However, countries have witnessed the downturn in different ways, and some even have been unaffected, while countries like the United Arab Emirates and Kuwait were most affected. Others such as Qatar and Saudi Arabia felt the wrath of the global economical crisis to a lesser extent," she says.
Elmar Zanforlin of Mark Andy notices economic improvements in Lebanon over recent years, resulting in some in-line flexo machine installations. "Before the real estate crash in UAE, this market was also showing some growth, but we expect it will take some time for this market to recover," he says. Iran, Saudi Arabia and Syria were not affected by the recession, mainly because of domestic demand, notes Nilpeter's Babu. He says, "Other countries were affected due to lack of confidence and anticipation regarding the future. But now it seems that we have got positive waves and its been great to see how the printers are making expansion plans and are currently busy with their setup." Flint Group, which has had a presence in the Middle East for over 15 years, and in 2004 set up a branch office in Dubai to support the region, has a differing viewpoint. "The recession has not really impacted the Middle East. In fact, we have seen steady growth since 2008 when the recession started, and we continue to grow in new areas," says Murphy, adding, "With the acquisition of Torda Middle East in 2010, Flint group now can even improve its service further by its increased ability to serve the region both technically and with locally held stock."
And finding the right mix of materials can be difficult, notes Zanforlin. "Middle East converters, whether purchasing new, or running existing presses, are challenged with sourcing consumables like inks, doctor blades, material, etc. Often these are not offered locally and the converter is required to source them overseas, resulting in higher import costs and longer lead times," he says. "Another challenge is to find quality press operators in the region, with converters often looking for operators from other regions such as the Philippines or India. And finally there is the challenge of exporting. Some Middle East countries are quite small, and should those converters decide to export their product, significant setup and logistical planning needs to be done," he adds.
Al-Fayez points to a competition and pricing hurdle. "The problem we face as a label printer is that the number of major companies who consume large volumes of labels are relatively small, and all local label printers are keen to supply these companies which leads to cutthroat competition as every printer tries to undercut other competitors, which results in very small margins and unhealthy competition," he says. Pitkin's Fishman echoes this sentiment, and says it's rampant in Israel. "Our main problem is low prices and 'impossible' competition. We try to give good quality and service at reasonable prices. But we do lose some customers due to these competitive forces. So a goal is to find new niches where there is less competition," he says.
"There are many challenges that we face," Al-Fayez continues. "However, the main challenge has always been 'how to ensure the high utilization of machine capacity'. In other words, how to ensure that sufficient orders are in our order book that will keep our machines running." It seems that the challenges facing Middle East converters are not unlike those in Europe and North America. Cost of raw materials has been on the rise since 2009, Al-Fayez says; area converters are not able to pass on such increases, and everyone risks losing their own customers. "As a result, each company tries to find ways and means to increase efficiency and productivity in order to minimize costs."
Edit by Vikas
25 April, 2012
