The World Through The Eye Of A Needle

Updated: May 25 2002, 05:30am hrs
It has pierced the global market with clockwork precision. Udhagamandalam-based (Ooty) Needle Industries India (P) Ltd prides itself with the envious position it has carved for itself in the global needle industry. Consider:

* It is the largest producer of hand sewing needles in the world-five million of them in a day-and one of the two major players in the European market for the entire range of needle solutions—a place it shares with German major Prym.

Theo Devagnanam, Managing Director, Needle Industries
* The Rs 45 crore Indian company manufacturers an astounding range of around 20,000 products.

* Today, Needle Industries caters to over 50 international brand owners’ needs and all exports are made in bar coded retail packages for supply to 60 countries around the world.

* This is apart from maintaining its own successful and globally well known brand ‘Pony’.

‘‘Even today there are instances of people comparing needle production in India to some kind of backyard operation with crude facilities. Hence, we make it a point to bring all associated with our products to the manufacturing facility in Ooty for them to see the infrastructure that we have here,’’ says Mr Theo Devagnanam, the second generation entrepreneur and current managing director of Needle Industries whose family controls 60 per cent of equity stake (the rest 40 per cent is with a foreign joint venture partner).

Charting Out Future Course
Today, Mr Devagnanam is busy working out strategies to further advance into specialty needles used by medical professionals. ‘‘Now we have to be aggressive on the suture needles. In the next three years we expect suture business to be second major contributor to turnover next to hand sewing needles while relegating hand knitting needles to the third position. We have identified markets in South America,’’ he says. Around 8,000 suture needle products is now expected to be pushed by Needle Industries. The vast South American market is also not new for the company since around 16 per cent of the current export turnover is contributed by this market.

Currently it is also putting in place a totally new integrated system covering all aspects of production and management. The ERP package is again being tailor-made to suit the company’s requirement. Needle Industries is also in the process of further modernisation during the current year and developing assembly lines for steel crochets, funded largely by internal accruals.

‘‘We are expanding the product range in two ways. Apart from manufacturing, we will also import items falling in our core competency area for re-exports if adequate volumes are not guaranteed,’’ Devagnanam reveals. Though Needle Industries has the advantage of a depreciated plant and machinery compared to any new entrant, it is also threatened by the cheap products of China origin. The Chinese are now aggressive in large parts of Africa and have not succeeded reasonably well in the quality conscious EU region.

Gaining Global Confidence
How did Needle Industries gain confidence of the international buyer In the early eighties, after gaining a majority holding of 60 per cent in Needle Industries, the family decided to leverage further the little exposure that the former British company had in the overseas market. It embarked on a novel idea - open offices in overseas markets, rope in a local representative who has been in the needles’ profession for a reasonably good time to run the office and after couple of years convert him into an exclusive commission agent of Needle Industries.

The first such experiment was carried out in Hong Kong in early eighties. ‘‘The commission agent is an integral part of the company. He visits markets, liaisons between us and the customer, keeps track of the competition and helps evolve the best marketing and pricing strategy for his region. Usually the business is transferred once a good turnover is established and our brand stabilises. The Hong Kong representative became an agent in three years and today his daughter runs the business,’’ says Mr Devagnanam. The Hong Kong success story was repeated in Australia and New Zealand too around mid 1980s.

The biggest break however for Needle Industries came from the huge European markets for which it identified a representative in late eighties. However, the relatively small company had to face teething problems of western aversion towards ‘Made In India’ label. ‘‘The most important policy decision we stuck to was not to give up on the country of origin. We consciously decided to have Made In India labelled on every Pony package that went from here. Quality of the product was as good or even better than some of the leading brands in Europe. Pony retailed at the same price as any other top brand and not a penny less. Our Scottish representative stood by the product,’’ recalls Mr Devagnanam who succeeded his father when Devagnanam Sr. he passed away in 1989.

The European market was handed over to the representative, who became the commission agent, in 1996 once business grew substantially. UK and Europe today is the single largest export market for Needle Industries contributing around 38 per cent to the export turnover.

The most surprising aspect of the success story of Needle Industries is cracking of the European market and the deep penetration that its ‘Pony’ brand boasts today. ‘‘The brand name had to be a short word easily pronounced by all across India and easily recognisable. We thought of it mainly for domestic hand knitting market. Pony is also not new to anybody, be it Hungarians, Russians, Italians or Polish,’’ justified Devagnanam on the choice of brand name. Moreover, the choice helped the company extend brand name to all products and further onto all its literature and packaging. The brochures and product packaging are done in four languages—English, Spanish, German and French - and Pony gelled well with all.

Low unit value of the products required Needle Industries to keep a tight control over costs and capital expenditure without compromising on quality. The challenge was met by indigenously designing tailor-made machinery to suit the working of the company. Opting for purpose-built machinery and in-house design while upgrading and modernising helped the company save on capital expenditure, training costs and maintenance costs.

Banking On Strengths
But Needle Industries is also witnessing a slower growth in topline compared to the early nineties when the export turnover went up from Rs 4.40 crore in 198-’89 to hit Rs 15 crore in 1994-’95. The exports touched Rs 30 crore in 2001-’02 (Rs 28.10 crore). The domestic turnover last year was Rs 15 crore (Rs 14.70 crore), up from Rs 7.50 crore in 1988-’89. However, Mr Devagnanam is not perturbed by the slow growth in turnover and hopes to register a major jump once specialty needles establishes in the market.

‘‘We are not going to diversify into any unrelated area and there isn’t going to be any IPO even,’’ says a cautious Mr Devagnanam. Needle Industries, it may be noted, still manufactures gramophone needles, the first product of the company 53 years back, for antique collectors against demand.

‘‘At Needle Industries, the the word ‘integrity’ is revered most. Be it business dealings, employee affairs, taxation issues, quality or management a great deal of integrity is maintained. We are ready with a monthly statement of accounts whenever our board meeting takes place. Ours is small but professionally run company,’’ Devagnanam sums up.