From tiles to missiles
How Karam Ceramics battles on, despite the odds
Friday, April 11, 2008
By Saad Hasan
KARACHI: Twenty-five years ago, Irshad Ali Kassim, President and CEO of Karam Ceramics Limited, started off a ceramics business with the ambition to become an exporter. Last Friday, he saw a third production plant being inaugurated at his factory site in Karachi with a strong yearning to somehow claw back the market share from importers in his own country.
The management of Pakistan’s largest manufacturer of bathroom and floor tiles was so happy at way things turned out for the new business that it was decided to acknowledge the blessing (Karam) of God instead of embroiling in a confrontation over infringement of its earlier patented name, International Standard Ceramics Limited, in the early 80s.
Thus, Karam Ceramics Limited, in technical collaboration with Doulton Bathrooms of England, started commercial production of sanitary ware in 1983. A year later, another plant for making tiles went online. So successful was this enterprise that Karam washbasins and water closets became a household name in a matter of months.
“We had actually gone to over-capacity,” said Kassim in an interview with The News, recalling the early years of production, when almost 30 per cent of the products was exported.
What happened afterwards to Karam’s sanitaryware brand is what has discouraged most of Pakistan’s established industry. Neglect, apathy and misguided policies on part of the government resulted in its cancellation of export orders. Two years back, the sanitaryware production line stopped completely.
“It was not easy to compete with the factories in the informal sector,” said Irshad Ali Kassim, citing the main reason to shut down his sanitaryware plant. “Even today in the US there are some hotels where you can find ceramics of Doulton England made by Karam Ceramics. And it makes me very happy to see that.”
The dilapidated road that leads up to the Karam factory situated along Mangopir area, speaks itself of the facilitation extended by the government to this industry. A single-track road for two-way traffic, it neither has street lights nor public transport for workers. The company has its own arrangement for transporting labour and producing electricity, from a 7 megawatts power plant.
As it turned out in following years, the journey was not an easy one for Karam after all, narrated Kassim, especially when it came to finding skilled labour. “We had no ceramics school at that time, so workers had to be literally trained from the scratch.” Today, he said, one could find different workers producing metallic glazes and shades like mother of pearl in tiles, something that requires technical know-how and skill.
“There is a ceramic institute in Lahore. But it is so obsolete that it cannot be even revamped,” he said, adding his company along with other big names in the ceramic business like Shabbir (Stile) Tiles, induct trainees from Indus Valley School of Arts and Architecture, who are further trained into qualified ceramic engineers.
The next big challenge Karam Ceramics encountered was in the market. “The market was then replete with marble. There was a perception that tiles are used by rich people,” he said.
To replace marble with tile, a campaign was launched to educate people. “We told them that there is a thing called porosity and that marble is 8 to 10 per cent porous. Shampoo and oil seeps into marble whereas tile is zero per cent porous.”
Various marketing techniques were adopted to achieve that end, he explained. “In the surgical ward of Civil Hospital, we replaced marble with tiles on complementary basis. And then doctors also realised that it was more hygienic.”
From bathrooms to butcher’s shops, now everyone uses tiles and initiatives like Karam’s to cut down marketing cost and sell tiles at lower prices in the first few years of operation had played a major role in promoting that.
The fight for market share did not end there. Now, Kassim says, his floor tiles are in contest with carpets. “People say carpet look lavish.
We tell them that it is an era to conserve energy. If a carpet is used, 70 per cent of (air conditioner’s) cooling is absorbed by it. They have finally started understanding this.”
Today, with an annual production of four million square metres of tiles, Karam Ceramics is the market leader with around 40 per cent share. The third plant will add another 2m sq metres to the total capacity, which the company plans to take up to 15m by 2012.
Along with the inauguration of the new plant on Friday, foundations of a fourth plant which will have a capacity to produce 4m sq metres have also been laid.
The company, which is listed on the Karachi Stock Exchange, is already looking at sales of Rs1 billion this year, up Rs300 million from last year’s Rs700m. “With plant three and four, we expect sales to reach Rs1.5 billion.”
Still Kassim is not satisfied. The production of tiles from his company, he said, should have been at least 12m sq metres by now considering the growing demand, almost half of which is met through imports.
Total demand for tiles in Pakistan is 30 million square metres against total production capacity of 16m sq metres. The reason for this stagnant production, he said, is that only three companies have come up in the business during the last 10 years.
“Industry didn’t grow because there was no protection (from importers),” he said, adding that industrialists and traders were getting bank loans at the same interest rate. “Everywhere else in the world, governments give protection to their own industry.”
China has emerged as the biggest threat to local ceramics industry. Borders, rectangular pieces of tiles used to give style, are being imported at Rs200 per metre. Cost for local producers comes at around Rs150 a piece.
Last year, the government had imposed anti-dumping duty on imports from China but the utility of that decision faded this year as it was too low and levied at varying degrees on specific companies. “This year, all imports have been made from the company, which was placed in the lowest anti-dumping duty slab of 5 per cent.”
Kassim said Chinese tiles were of what is known as project quality, which is mostly used in apartment buildings. “Despite this competition, Karam tiles are still the most expensive because we had not compromised on quality.”
However, he said it was imperative to have a protectionist regime to help the local industry grow. “Government should impose a high anti-dumping duty across the board for next five years and ask the industry to increase production.”
Asked as to why he was so confident that local production will increase, he said besides Karam, other big producers like Shabbir and Master all have plans to increase production. But Kassim draws his high level optimism, not only from the increase in production but yet from another avenue. “Today, ceramics have become a high-tech industry. Ceramics are being used in missiles, bullet-proof jackets and exhaust system of cars,” he said. “Now that is where Karam has to make its mark.”
http://www.thenews.com.pk/daily_detail.asp?id=106017