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A near-saturated domestic market is forcing pen manufacturer Linc Pens to explore international markets for growth.
Exports currently contribute nearly one fourth of the company's Rs 250-crore turnover. In two years, exports to countries in South-East Asia, West Asia and Africa could contribute to nearly half of Linc's turnover. “We are yet to realise the full potential of all these markets,” said Mr Deepak Jalan, Managing Director, Linc Pens.
Premium products
According to him , “Exports in 2011-12 have seen a 20 per cent growth. But growth in domestic market has been a mere five per cent. We are looking at entering new markets and changing our product mix.”
Primarily a mass market pen maker, Linc, in its bid to boost revenues in India, has forayed into the premium category segment with its “Cruiser” brand.
Imported from Germany, the in-house fountain and ball pens range is priced between Rs 1,000 and Rs 50,000 and is aimed primarily at corporate and other niche gifting segments. It has also started distributing Lamy pens in India.
Linc is also strengthening its distribution channels for consolidating its position in western and southern India markets. The estimated writing instruments market size, in India, stands at nearly Rs 2,500 crore.
Pressure on Margins
According to Mr Jalan, the writing instruments market is already limited by oversupply. A further increase in raw material prices including plastics and metals, have led to a pressure on margins.
Margins have declined from 20 per cent to just about 10 per cent over the last five years.
“We have not been able to pass it on to the customers as it is a price sensitive industry,” he pointed out.
Consolidation
To improve profitability, Linc has closed down 10 of its 20 standalone stores across the country. It has closed stores Mumbai, Kanpur, Lucknow, Ahmedabad and Indore. Of the 10 operational stores; eight are in Bengal while two others are in Mumbai.
“When we set up standalone stores around five years back, we had aggressive plans. It is not a very viable option as rentals are high and a long time to break even,” he said.
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