It has not been independently verified by our Company, the BRLM or their respective legal advisors, and no representation is made as to the accuracy of this information, which may be inconsistent with information available or compiled from other sources. Similarly, our Company's internal estimates, if any, which we believe to be reliable have not been verified by any independent agencies.
Packaging plays a very distinct role in today's modern consumerist economy with the need for widespread adoption of branding and development of consumer preferences. Any manufactured item, to gain market share, requires packaging to ensure safety, convenience and attractiveness. Packaging is a key component for consumption and consumer preferences in today's economy.
Packaging helps in preservation of quality and lengthening shelf life of products such as milk, biscuits, drugs, processed and semi-processed foods, fruits and vegetables, edible oils, etc. Packaging is also required for most other manufactured goods to preserve it from any damage during transit.
The packaging industry has evolved over the years from a relatively small range of heavy, rigid containers made of wood, glass and steel to a broad array of rigid, semi rigid and flexible packaging options increasingly made from specialized lightweight materials.
The packaging industry's growth has also led to greater specialization and sophistication from the point of view of health (in the case of packaged foods and medicines) and environment friendliness of packing material. The demands on the packaging industry are challenging, given the increasing environmental awareness among communities.
Key Drivers and Trends
The progression of demand in the packaging industry is influenced by a wide range of factors and includes both year on year short term factors and other long term factors. Like any other industry, while the economy plays a central role in influencing the size and growth of the market, there is a multitude of other factors which can be seen as having a direct or at least an indirect influence on the demand in the packaging industry, irrespective of the performance of the economy. These include:
- Ageing of world population;
- Trend towards smaller and nuclear households
- Increasing trend towards convenience and quick access among consumers;
- Rising health awareness among consumers;
- Trend towards 'on-the-go' lifestyles among increasingly time-poor consumers;
- Growing requirements for brand enhancement/ differentiation in an increasingly competitive consumer environment;
- New technology and modern packaging material;
- Increasing awareness of environmental issues and the adoption of new regulatory requirements on packaging recycling.
Global Packaging Industry
The global packaging industry is growing fast. Growth in the packaging industry is typically higher than GDP in emerging markets and in line with (or sometimes even below) GDP in mature markets.
Packaging plays a vital role in all industries ranging from food and beverages, healthcare, cosmetics and other consumer goods. Packaging cost is incurred not only on the end-product but at every intermediate stage of production, right from basic raw materials to finished goods. We believe that all products manufactured are packed in some or the other form except airplanes, locomotives and ships but even these are assembled using packaged components.
Indian Packaging Industry
Indian Packaging Industry Market: The Indian fascination for rigid packaging remains intact. It is estimated that more than 80% of the total packaging in India constitutes rigid packaging, which is the oldest and the most conventional form of packaging. The remaining 20% comprises flexible packaging.
(Source: The Indo-Italian Chambers of Commerce and Industry)
The Indian packaging industry is expected to grow to Rs. 82,500 crore by 2015 from the current Rs. 65,000 crore. The global packaging industry is currently estimated at US$ 550 billion. Currently, India stands at the 11th position in the world packaging industry.
With rising consumer demand and new technologies, the global packaging industry is expected to grow at 18-20% from the current 15%. Among packaging sources, currently plastic packaging is at 6.8 million tonne and growing at 20-25% per annum, whereas paper packaging is 7.6 million tonne. Glass packaging contributes to 4-5% and metal, 8%. 40% of the total paper production goes for packaging.
(Source: Indian Institute of Packaging (IIP))
Classification -Packaging Industry in India
(a) Functions of Packages
Protective Function Convenience Function
- Shock, Drop - Transportation,
- Pressure, Vibration - Stocking (User, Ware House), Image, Design,
- Heat Size Protection,
- Water or Moisture - After Re-Use Productivity
Graphic Design Psychological Function
- Design - Attraction
(b) Classification of Packaging By Shape (Form or Size)
Heavy Packaging (Large) Medium Packaging (Middle) Light Packaging (Small)
- Container - Carton Box - Flexible Packaging
- Wooden Packs - Woven Bag - Bottles, Can (Small)
- Can, Barrel, Tub - Paper Container
By Methods (Way of Packing)
- Vacuum Packaging
- Aseptic Packaging
- Retortable Packaging
- Shrink Packaging
- Strip Packaging
- Gas Flush Packaging
- Moisture - Proof Packaging
- Blister Packaging
- Skin Packaging
- Tamper - Evidence Packaging
- Food Packaging
- Cosmetics Packaging
- Powder Packaging
- Toiletry Packaging
- Drug Packaging
- Liquid Packaging
- Clothing Packaging
- Bottle, Metal Can
- Wooden Box
- Metal Box, etc
Semi Rigid Packaging
- Carton Box
- Plastic Bottle
- Paper, Plastic
- Film, Alu- Foil
(Source: Indo Italian Chambers of Commerce and Industry)
Some Important Packaging Sub-Sectors
1. Corrugated Packaging
The corrugated packaging industry is finding itself at the crossroads. Increasing prices of kraft paper, non availability of international standard papers at affordable prices, resistance of corrugated box user industry to offer sustainable prices, increasing competition, non viability of automatic plants are proving to be hurdles. As global companies set up their manufacturing bases in India to meet the growing demand for consumer and white goods - the need for high quality boxes is appearing evident. Progressive corrugators are setting up automatic board/box making plants to increase production and enhance performance of boxes.
The corrugated board and sheet plants are highly labour-intensive, employing over half a million people - both directly and indirectly. The Indian industry is converting about 2 million tons of Kraft paper into corrugated boxes. Factories are spread out in all parts of India, even in the remote industrially backward areas.
Prices of corrugated sheet and converted boxes have remained low due to over-capacity, manual operations and low productivity. Besides, transport constraints and high freight costs have meant that small to medium sized corrugated box plants are usually located near customers.
(Source: The Indo-Italian Chambers of Commerce and Industry)
2. Pharmaceutical Packaging
Pharmaceutical packaging occupies a considerable portion of the overall drugs and pharmaceutical market in India and is growing steadily along the same pace as that of the industry. Pharmaceutical packaging consists of various types of glass, pet bottles, strip and blister packs, injectibles, ampoules, bulk packs, etc.
The Indian pharmaceutical packaging industry is witnessing a spurt in growth. Today, the packaging industry in India is considered a growing industry and its linkages are extensive and have resulted in high employment creation.
On one side, it involves manufacture (and sometimes import) of a wide range of packing material - paper, paperboard, cardboard, a range of polymer products including rigid and flexible packaging material, aluminum foil, tin, wood and steel. Other backward linkages of packaging including printing, labeling and binding/adhesive tapes, etc. Machinery for making/processing these products and for packing/packaging is another segment closely linked to this industry.
Growth will follow the upward trends in global medication consumption, which will expand at a strong pace as aging demographic patterns lead to an increasing number of diseases and disorders. Pharmaceuticals will assume an expanding role in worldwide health care delivery based on new product introductions and economical advantages over other forms of patient treatment.
(Source: The Indo-Italian Chambers of Commerce and Industry)
3. Rigid packaging
Rigid packaging accounts for the major packaging market in India. This is the oldest and the most conventional form of packaging. Rigid packaging includes glass bottles, metal cans, aerosol cans, battery cell cans, aluminum collapsible tubes, injection molded plastic containers made of PVC, PET, HDPE, barrels made from HDPE, paperboards and corrugated boxes.
4. Flexible Packaging
Flexible packaging contains multi-layered laminated sheets of single or a combination of substrates such as plastic, paper or aluminum. Flexible packaging finds varied use because of its ability to provide strength, moisture resistance, aroma retention, gloss, grease resistance, heat retention, seal ability, printability and low odor.
Convenience in handling the product and the cost benefits are added advantages. Flexible packaging is primarily used in the packaging of food and beverages, personal products such as hair care products, pan masala, tea, coffee and industrial products.
5. Bulk Packaging
The Indian bulk packaging market started moving significantly only in the 1990s as industries acquired bulk handling capabilities to compete in the global market. This market took off at the turn of the new millennium spurred by an export led and domestic growth in agro produce & food; bulk drugs & generics; chemicals & pesticides and petroleum & lubricants led markets. The market grew at around 28 per cent for the first 6-7 years and currently is at a 15-20 per cent band.
The Indian rigid packaging industry that comprises of drums and containers made from metal, plastics, fiber board and composite materials is growing at about 13 per cent per annum. Within the industry, there is a migration to plastics and the major metal drum manufacturers have joined the bandwagon themselves by setting up parallel facilities for manufacturing plastic containers.
The 6 million units plastic drum market (Rs 5 billion) is growing at over 16 per cent while the 10 million drum steel market still manages a positive growth of 2 per cent and is valued at around Rs 2 billion. The fiber drum and composites valued at Rs 4 billion is also growing at around 10 per cent.
The Rs 140 billion flexible bulk packaging industry that includes woven sacks, leno bags, wrapping fabric, and flexible intermediate bulk container ('FIBC') is growing at over 20 per cent with FIBC containers expected to grow three fold in the next 5 years riding an increased industrial production and a shift toward higher-value containers offering enhanced performance and supply chain efficiency.
The economy growth is the single most important factor for influencing packaging consumption. The level of economic activity has direct influence on demand for bulk/ transport packaging. Packaging is the heart of a marketing strategy in terms of functionality, shelf appeal and convenience.
Every market has stringent quality standards for packaging aimed at ensuring health and hygiene for consumers. Though India is a major producer of agricultural products, it processes and packages just a fraction of the output.
Despite the potential to emerge as a major exporter, it is yet to tap the export markets. The food processing sector in India has been accorded a very high priority by the Government of India with a number of fiscal incentives to encourage commercialization and value addition to agricultural production.
The government's increasing focus on the food processing industry is expected to give a boost to agriculture exports in value added form, which in turn is likely to boost the demand for food packaging in the coming years.
Government Vision 2015
The Government of India has rolled out a very ambitious plan to consolidate the fragmented food processing industry in India. In its declaration, the Ministry of Food Processing Industries has clearly put forward the Vision of 2015 which states that:
- India to become the food factory of the world;
- Treble the size of processed food;
- Increase the level of processing from 6% to 20%;
- Increase the value addition from 20% to 35%;
- Increase the share in global agricultural trade from 1.5% to 3%;
(Source: Press Information Bureau)
Cost advantages make India a preferred packaging export hub
Due to lower manufacturing costs, India is fast becoming a preferred hub for packaging production. The Indian packaging industry has made a mark with its exports that comprise flattened cans, printed sheets and components like crown cork, lug caps, plastic film laminates, craft paper, paper board and packaging machinery, while the imports include tinplate, lacquers, coating and lining compounds. In India, the fastest growing packaging segments are laminates and flexible packaging, especially PET and woven sacks. Almost all the major players were seen to expand their existing capabilities to tap into the fast growing export market for Indian packaging products.
Second-tier cities become centre of packaging activity
The rise in organized retailing in India's second-tier cities is opening huge opportunity for packaging industry. Companies are continually adding new products to their portfolio and packaging is a big tool for launching new, India-specific products in different shapes and sizes. The liberalization of the Indian economy, coupled with globalization and the influx of the multi-nationals, has improved the quality of all types of primary and secondary packaging. Also industrialization and expected emergence of the organized retail industry is fuelling the growth in packaging industry.
Lifestyle trends that are impacting upon consumer purchasing decisions are important. For the packaging industry, many of these trends are positive and encouraging. Consumers are becoming increasingly demanding with their lack of time as a result, seeking out convenient and easy food solutions. The expectations of food quality are rising and growing awareness of health and other issues present new challenges to retailers, packers and packaging suppliers.
- Smaller and nuclear households and smaller pack sizes: Social change is indirectly leading to modifications in packaging design. The average size of households is declining in line with the rising number of single-parent households and single-person households. As a result the consumer is moving towards smaller pack sizes. This trend is being reinforced by the decline in the family meals, as more and more women enter into the workplace. As working hours become less standard, opportunities for the family to eat together are becoming fewer.
- Health awareness: Consumer health concerns are influencing markets for quality packaging. Examples include: rising sales of bottled water, fruit juice and milk and increasing demand for packaged fresh food products.
- 'On-the-go' lifestyles: 'On-the-go' lifestyles have emerged as a result of several factors. Longer working hours, longer commuting times and a wider range of leisure activities have all contributed to the notion of "time-poor" consumers. In addition, consumers are less inclined to spend whatever valuable time they have in preparing food. The main consequence of this has been an increased incidence of snacking during the day and rising out-of-home consumption as well as a greater reliance on ready-prepared foods in the evening.
Brand enhancement and differentiation: Packaging is a major aspect of differentiation in most consumable goods. Where differentiation competition is intense, packaging can provide a marketing advantage at the point of sale. Packaging is a major cost component in the majority of consumable products. The power of global brands continues to increase strongly. Where markets are dominated by a small number of companies, the success of a new packaging product can often be assured by its adoption by just one major global brand.
Retail boom: The retail industry is increasing in power and diversity. On-line retailing is expanding strongly worldwide, where goods are delivered through the post or via retailers own fleets of delivery vans. Today, items delivered are often "overpacked" in packs that are not specifically designed for the purpose. In the future, packaging development tailored to the needs of on-line retailing will be necessary.
Rapid growth in packaging usage in fast-growing economies like Asia, Middle East, Latin America and Eastern Europe have presented new opportunities for the packaging industry. The Indian economy is also growing at a promising rate with high growth of outputs in agriculture and manufacturing.
Overall economic growth has proved to be beneficial for the consumer goods market, with more and more products becoming affordable to a larger section of the population.
The FMCG sector is the largest customer for the packaging industry. Several players are now using packaging as a means of differentiating their product in the market in FMCG industry. Another growing sector is the pharmaceutical industry where several innovations in packaging have taken place, especially in the OTC segment.
With increasing consumerism, preferences towards convenience foods, the packaging industry is in for good times. However, rising costs of inputs is a major concern for industry.
(Source:Paramount Printpackaging Ltd. - 20/04/2011)