Apart from coming up with new variants in the gel pens category, Linc Pens and Plastics plans to enter the stationery market and in the process, maintain a 20 per cent growth rate in the coming years
A prominent player in the writing instruments industry, Linc Pens and Plastics (Linc) was incorporated in 1994 and has today, grown to be one of the top three players in this Rs. 2,700 crore organised market. However, Deepak Jalan, managing director, Linc, indicates that it has become a very crowded space and there is a lack of differentiation in products, because the technology adopted to manufacture ball pens and gel pens is quite simple.
In order to overcome this challenge, Linc leverages its B2B and B2C branding and communication strategies. “As cricket and Bollywood are popular among students, who are our core target group, we try to bring these two elements into our communication strategy,” says Jalan. In the last five years, the company has invested Rs. 50 crore in advertisements (a substantial amount when compared to industry standards) and has roped in celebrities such as Shah Rukh Khan and IPL franchise Pune Warriors to endorse its products. Going forward, the company plans to set aside three per cent of its revenue towards brand building activities.
In a move to expand its market presence, Linc tapped the capital market in 1995. Since then, the company has maintained a track record of paying consistent dividends. Currently, its stock trades at Rs. 35.85, offering per share earnings of Rs. 5.88. Its revenue has grown steadily in the last ten years, from Rs. 100 crore to Rs. 300 crore in FY13, but, its profit after tax has grown only 2.5 times. In the current fiscal, the company aims to improve its bottomline while maintaining the growth in its topline. To achieve this, it is improving its operational efficiencies and revamping its product mix and increasing market presence.
Mixing it up
Jalan reasons that it is difficult to have a price or product innovation every year. “Instead, if we are able to come up with something new every five to six years, our topline and bottomline growth will be taken care of,” he says. For instance, ten years ago, gel pens were made available in the price range of Rs. 20 and above and a section of the students found it hard to invest in this segment on a regular basis. Hence, the company launched pens for Rs. 5 and found its market expanding. More recently, Linc launched a ballpoint pen with a pencil (Twin model), which is sold at Rs. 10.
For the mass market, Linc has entered into a strategic marketing alliance with Mitsubishi Pencil Company Ltd. (Japan) to market its writing instruments across India. There was also a Rs. 20 crore capital infusion by Mitsubishi during 2012-13, with the multinational picking up a 13.5 per cent stake in Linc. “Katrina Kaif was the brand ambassador for promoting Mitsubishi’s Uniball. It was a two-year contract which has ended now,” states Jalan.
In the premium segment, we have launched German-made pens called Cruiser, priced at Rs. 10,000 and above. While penetration in this segment is not easy due to the presence of well-established brands, in a five-year to ten-year window, we hope to create a substantial brand presence.
In the premium segment, Linc has launched a brand called Cruiser pens (made in Germany), which is priced at Rs. 10,000 and above. “Penetrating into the premium segment is not easy as there are established brands like Mont Blanc, Parker and so on,” says Jalan. The company is looking at a five-year to ten-year window by when it hopes to establish this brand in the market. As a part of its promotional strategy, Linc is aiming to establish this brand mainly in the corporate gifting segment.
Linc currently has manufacturing plants in West Bengal at Serakole and Falta SEZ. The plants hold a capacity of manufacturing 1.5 million pens per day. The company supplies to global retail chains such as Walmart, Asda and Tesco, for their private label business. It also has a strong distribution network across the country, with a presence in every state with over 3,050 stockists.
The company exports to over 30 countries, out of which regular shipments go to at least 20 countries. Its export market includes the U.S., the U.K., South East Asia, Bangladesh, Nepal and the Middle East. Commenting on the difference in distribution in these markets and in India, Jalan says, “In India, modern trade is very limited. We mostly distribute our pens in the traditional outlets and serving a million such stores is a big challenge.” He further adds, “In the U.S., there are big chain stores such as Office Depot and each chain has more than 1,000 stores. If you sell to such stores, you have already covered the whole country,” explains Jalan.
Almost 25 per cent of Linc’s turnover comes from the export market. “Until the last five years, our export products used to be different when compared to local products,” says Jalan. To achieve production efficiencies, the company has developed products, which can be sold both in the international as well as domestic markets. While today the products are common, the packaging may be customised depending on the country’s requirement. As far as its international marketing strategy goes, Linc identifies a strong distributor with distribution channels across each country.
On a growth path
Linc believes that the growing population and the increase in literacy levels will continue to drive its growth. Talking about the impact of digitisation on the industry, Jalan says that in the next 20 years, he does not see it affecting the usage pattern of pens. He believes that tablets and other electronic gadgets will take a long time to pick up in India and replace this market. “Students are our core target group and they have to use pens,” he says. While there is a slowdown in demand from the U.S. and the European market, Jalan is bullish about the growth potential in developing economies like India and Latin America.
While there is a steady growth potential for the industry, Jalan believes that only a great product will drive the company’s growth. He expects new products such as the recently launched Twin to help in increasing its share in the writing instruments market. The company is also coming out with some innovative consumer packaging strategies. For instance, currently, its pens are sold in singles. “In the overseas market, we have seen that retailers sell in packs of two, three or ten,” points out Jalan. Accordingly, the company has recently launched a pack of three for Rs. 20.
Linc also plans to enter the stationery business. While Jalan agrees that there are established players in this segment, he is working on a strategy that will differentiate the company from the current players.
Linc plans to maintain a 20 per cent growth rate and become a Rs. 500 crore company over the next three years. “This may not be possible from the pens category alone. We expect our stationery business to start contributing and are also aiming for a higher growth in the export market,” concludes Jalan.
Linc Pens and Plastics
Founder: S.M. Jalan
Turnover: Rs. 299. 74 crore in FY13
Come up with innovative consumer packaging strategies like the recently launched three-pen pack for Rs. 20
Enter the stationery business
Focus on growing the export market
Establish the market for the recently launched Cruiser, German-made premium pens