Castell To Storm In

 It is often said, “A pencil and a dream can take you anywhere.” And perhaps the closest realisation of this idiom is the story of German stationary major, Faber Castell. Established in 1761 by Kaspar Faber, the company is today among the largest and oldest manufacturers of pens, pencils, and other office and art supplies as well as high-end writing instruments and luxury leather goods.

“We manufacture more than 2 billion wood case pencils in a year and are market leaders in most of the categories we operate in,” says Daniel Rogger, CEO, FaberCastell. Rogger, who is the first professional CEO to run the family-owned business, spoke to Outlook Business during his maiden visit to India (post his appointment in 2017). “We are in the process of building a strong brand in India. It is already a part of our top 10 markets globally. The target is to double our revenues from India in next five years,” says Rogger.

While he refuses to divulge revenues from the Indian market, news reports state that the revenue of Faber Castell India went up 6.8% to Rs.1.8 billion in year ended March 2018 from Rs.1.69 billion in the previous year. This is despite its loss widening 134% to Rs.33 million from Rs.140 million during the same period. Rogger states that their target is to “grow its business consistently by 15% each year.”

But the company, which entered India in 1996, has had its own set of challenges. Firstly, in 2010,  its Goa plant was gutted after a fire broke out within the premises at the Corlim industrial estate. Then, in 2013, the company sued its then India JV partner Anup Bhaskaran Rana over alleged suppression, misappropriation and diversion of funds and fraud. “We have now closed that chapter and moved forward with proper learnings. We operate through a 100% owned subsidiary in India,” says Rogger. 

Currently, Faber Castell is present across segments such as pencils, wax crayons, oil pastels, inks, water colour, highlighters and modeling dough in India. Through its range of products, it primarily has two target groups in the country – children and artists.

Of their total demand in these two categories in India, the company meets about 75% through products made at their manufacturing plant in Goa. “We also want to use Goa as a sourcing centre and the capital investment will be in line with growth. About 33% of products made in India are exported to countries such as Peru, Chile and Germany,” says Dr.-Ing. Hans-Kurt von Werde, CTO, Faber Castell.

In line with its global brand positioning, Rogger is clear that they will continue to operate in the premium segment in India. For instance, while a regular pencil costs Rs.5, Castell 9000 costs Rs.50. “Every market is price sensitive, but a consumer buying a Faber Castell is looking for a product that is of highest quality. That is the case globally, and that is how we wish to grow in India as well. We want to grow in the premium segment, where we see plenty of potential, considering the demographics, and economic and purchasing power growth,” says Rogger.

They have also created a robust distribution channel in places where the discerning consumer goes. Partho Chakrabarti, MD, Faber Castell India, states that they are clear they won’t be present in kirana stores. “You will see our products at top-end stationary stores, gift and book stores such as Crosswords and W H Smith, because the distribution has to match the brand image,” says Rogger.

With a back-of-the-envelope calculation, Partho Chakrabarti, MD, Faber Castell India, points out the huge market available even within this niche segment. “In the age group of 4 to 24, there are 465 million students. Of which 260 million are registered in schools and colleges. Now even at top of the line within this segment, there is a huge market,” he explains.

At the same time, it might be noted that the market is highly competitive. From Kokuyo Camlin and Staedtler to Apsara and Natraj, to bigger conglomerates such as ITC, a large number of players are vying for a pie of this lucrative market. The stationary segment also has a large number of players in the unorganised market. According to 6Wresearch, ‘The Indian stationery industry is highly fragmented and is majorly dominated by the unorganised players." It however adds that demonetisation and the introduction of GST would help the unorganised trade to fall in line with the organised trade and this would benefit the industry over the coming years.