The immense potential of this small yet highly useful writing tool can be gauged from the fact that it constitutes over 80% of the global writing instruments market by value. For almost everyone, the ball point pen has become an indispensable, integral part of their lives. With rising human population implying a growing need for learning and expressions, for now, the pen IS mightier... by value in all respects!

Himanshu Vatsa | July 2015 Issue | The Dollar Business

The pen is mightier than the sword – this age-old adage seems to be still relevant in today’s world. Or what else could be the reason that in this age of rapidly advancing technology – where smartphones, tablets and several other such gadgets have revolutionised human communication – ball point pen, perhaps the world’s simplest writing instrument born out of the ancient feather-and-pot innovation, continues to be an indispensable part of our lives. Whether you are a scholar or a business tycoon, you cannot do without this small yet highly useful writing tool.

Its importance can be gauged from the fact that since its invention in 1888 (the patent for the first ball point pen was issued to an American inventor John Jacob Loud) though the ball point pen (actually, the writing instruments industry as a whole), has undergone several changes, the world is yet to find its ‘low-cost’ and ‘easy to use’ replacement!

According to a report by US-based research firm Global Industry Analysts, “the global market for writing instruments is set to reach $21.6 billion by 2017. There is a large demand for more basic writing instruments in Asia, Latin America and the Middle East, where populations and literacy levels are increasing.” While the low-end writing instruments account for 80% of the $18.3 billion market, the top-end accounts for just 1%. The balance is accounted for by the moderately priced writing instruments. This dominance of low-priced products means that there is a huge opportunity for low-cost manufacturing hubs like China and India.

Steady steps forward

The Indian writing instruments industry, which has been growing at a CAGR of about 15% over the last decade, is already worth about Rs.2,500 crore and is marked by a fierce competition among brands like Add Gel, Cello, Flair, Luxor, Linc, Reynolds, Rotomac, Stic, Today’s and hundreds of other small-scale and unorganised players. While the low-value segment (which includes ball point and gel pens with a price range of up to Rs.20.) constitutes 80% of the Indian market, mid (pens priced in the range of Rs.20 to Rs.500) and high-end (the price tag goes as high as in lakhs) writing instruments make for the rest 20%. It’s the ease of use and low price of ball point and gel pens that make them a popular choice among the masses. While the market for low-end pens is growing at a rate of 9-10%, the market for mid and high end pens is growing faster at 13-15% annually.

The industry too has evolved in the last few decades with metal pens giving way to pens made of plastic. Further, mechanisation has replaced hand-moulding and allowed the players to take advantage of economies of scale. Although there are thousands of pen manufacturers in India, it’s the top 10 that comprise 50% of the industry (by revenues).

Mass vs. Class

While on one hand there are brands like Mont Blanc, Waterman, William Penn, Cross and Parker that are popular choices when it comes to high-end pens, on the other hand, there are domestic pen makers like Reynolds, Today’s, Rotomac, Linc, Cello and others that dominate the low-cost segment with expertise in supplying products for the common user. Although the rate of growth of top-end writing instruments is higher (reason: their small base), it’s the low-end which leads both the value and volume charts. However, experts are of the opinion that both the categories have equal growth prospects. People generally look for a high-end pen for gifting or collection. But when it comes to writing, it is the basic ball point that serves the purpose.

“Users of gel pens and use-and-throw pens, which cost between Rs.1 and Rs.5 do not look for brands. But in refill segments, brands definitely play a major role because then pen users prefer to buy a writing instrument which can last longer and give a better performance. Hence, brand promotions activities have become all the more important in the present stationery trade,” Souvik Ghosh, Product Marketing Manager at Linc Pen & Plastics Ltd., tells The Dollar Business.

Overall, experts believe that the Indian ball point pen industry, which is growing 12% annually, has the potential to become a gamechanger in the international market by delivering high quality products at competitive prices.

Are we there yet?

When it comes to exports, Indian manufacturers are only beginning to focus on international markets. According to Ministry of Commerce (GoI) data, India’s export of ball point pen jumped more than 2.6 times from just Rs.392.71 crore in FY2009-10 to Rs.1,037.03 crore in FY2014-15. But then there is more to this than meets the eye. Although overseas shipments have increased both in terms of value and volume, India’s exports of ball point pen still has a long way to catch up with China, the world’s largest exporter. In fact, the dragon exported $1.76 billion worth of ball point pen in CY2014, more than double the combined exports ($1.64 billion) made by the next two biggest exporters Germany and Japan.

However, industry insiders believe a focus on quality along with innovation is what sets Indian pen makers apart from all other low-cost manufacturers, including China. “The ability to provide high-grade writing system, use of better ink, shorter turnaround period, innovative products, reliability, availability and delivery of products give Indian exporters an edge over their major competitors,” says Vimal Rathod, Chairman, Bombay Fountain Pen Manufacturers and Traders Association.

If industry insiders are to be believed, then in the last few years, a number of multinational brands (the list includes Walmart, Office Depot and Staples) have left Chinese vendors and turned to Indian manufacturers for bulk sourcing. Experts attribute this emerging trend to the improving quality of Indian pens and the ability of its manufacturers to deliver quality products in lesser time and competitive rates.

What also works in favour of India is that the target market for Indian ball point pens is totally different from that of China’s. Made in China pens are preferred mainly by gel pen users. “Chinese pen makers are largely into the direct-fill (use and throw) category. On the other hand, we target more on the refill segment in ball and gel categories and try to provide quality products to our customers. And, that is an advantage for us. We do not see China as a major threat. In fact, a lot of technological advancement has come from China and it helped us improve our quality,” says Ghosh of Linc Pen & Plastics Ltd.

While US and UAE buy over 75% of Indian ball pens, countries like Mexico, Myanmar, Iran, Turkey and Germany are markets that offer vast export potential. However, there is a lot of catching up to do when it comes to matching the Chinese supplies to these countries. According to the International Trade Centre data, while India’s exports constituted only 4% of the overall exports of ball point pen across the world in CY2014, China accounted for 28.6% of the total exports. Nevertheless, industry leaders believe that Indian pen industry certainly has more opportunities in exports than it has in the domestic market.

Need a helping hand!

Industry players allege that nothing much has been done from the government to encourage the trade and boost exports. Limited support from policymakers continue to play spoilsport for an industry that creates millions of jobs.

Although exports of ball point pen (HS Code: 960810) from India is entitled to a 2-3% reward under Merchandise Export from India Scheme (MEIS) [as per the new FTP] and a duty drawback of 8.3% (when CENVAT has not been availed), exporters feel that the incentive is not enough if the government wants the industry to be at a level playing field with global competition. “Since it is a labour-intensive industry, the MEIS incentive should have been at least 5%,” says Rathod, who also runs the Mumbai-based pen company Flair Pens. This will increase liquidity for exporters. “We also want the government to simplify the procedures and documentation required to claim export benefits and make our lives easier,” he adds.

Chirag Drolia, President, Today’s Writing Instruments Ltd., too believes that managing labour is a big challenge and a bottleneck for the industry’s growth. “The nature of the pen manufacturing business is such that we cannot even fully automate the production process,” he tells The Dollar Business.

The last word

Those involved in the trade believe India is positioned well to take on the Chinese competition and will definitely benefit from the rising overseas demand in the long run. In fact, the intense competition has prompted several Indian players to use innovative methods when it comes to manufacturing and marketing of ball point pens. This has only lead to an increase in its exports from the country.

A margin of 10-12% (after adding raw material, logistics and marketing costs) may not sound too appealing, but a predicted double-digit growth rate going forward with profitability being 14-15% higher in the exports business (as compared to domestic sale), do make Indians acutely aware of their exporter-instincts! Put pen to paper, do the math and you’ll realise that while the pen being mightier... may be a cliché, it is worth pondering over.