The rise in organised retailing in India’s second-tier cities made for a competitive packaging market in 2008. Companies like Hindustan Unilever Ltd, Procter & Gamble India Ltd, Nestlé India Ltd, ITC Ltd, Coca-Cola India Ltd, PepsiCo India Ltd and Dabur India Ltd became very aggressive during the review period, and packaging became a big tool for launching new, India-specific products in different shapes and sizes. The review period witnessed a flux of partnerships and joint ventures, with many foreign packaging players entering the scene to gain a slice of the large pie. Alcan Packaging- part of Rio Tinto Alcan, Klockner Pentaplast Group (KP) - a German-based packaging solutions provider, Polish firm Can Pak and Bosch Packaging either announced new investments or disclosed plans for the expansion of their existing investments during the review period.

Environmental concerns hamper Polymer-based Packaging

Environmental concerns are fast catching the attention of all the stake holders in the Indian packaging industry. The expansion of packaging as a profitable industry in India, dragged along by that of the retail and FMCG sectors, has brought with it environmental concerns. Organizations such as the Indian Centre for Plastics in the Environment were actively seen promoting awareness in this regard in order to promote the packaging industry and make people aware of the real concerns about the environment. The centre is the accredited body of The Ministry of Environment and Forests (MOEF) and undertook continuous awareness programs by publishing information on waste management materials, statistics, as well as going in to school and colleges and teaching people about the correct usage of polymer. Corporations were also seen to be making efforts to adapt greener technologies.

Cost advantage makes India 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, 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. On the global scene ruled by the World Trade Organisation, it is imperative for India to upgrade its packaging standards through innovative technologies in order to be on a par with the world’s best practice. Packaging labels must inform consumers about the ingredients of the product, the nutritional value, and the manufacturing and expiry dates of the products; something which is being made mandatory by the government. Almost all the major players were seen to expand their existing capabilities to tap into the fast growing export market for Indian packaging products.

Inflation & Oil prices eat into margins of Packaging Companies

Many flexible and paper-based packaging manufacturers experienced difficulties relating to the rise in the cost of paper as well as high oil prices during the first half of 2008. The rising costs of paper reduced the margins of industry players. The Indian government announced a cut in the excise duty imposed on the finished goods from 12% to 8% in 2008, yet this was not sufficient saving for the industry that was badly reeling from the high production costs. The government, in the budget, reduced the excise duty on paper mills from 12% to 8%, which the paper manufacturers did not pass on to the customers. High oil prices during the first half of the year affected the businesses of polymer-based packaging providers who also found it tough to survive in the market.

The booming Indian economy and a flourishing organised retail have raised the expectations that consumption of corrugated packaging will begin to expand again as the number and volume of goods packaged in corrugated increases. MNCs are demanding corrugated boxes of international standards and the pattern of buying the packaging is changing.

Prices of corrugated sheet and converted boxes have remained low due to the 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 located near the customers. Over 4,000 corrugated board and sheet plants are highly labour-intensive, employing over half a million people – both directly and indirectly. The industry is converting about 2 million tons of Kraft paper into corrugated boxes. Factories are spreadout in all parts of India, even in the remote industrially backward areas.

This present scenario is already being challenged by the sweeping changes that are beginning to take shape. More and more in-line automatic plants are being set up, as corrugated box makers gear up to meet the new demands for high precision boxes with attractive graphics and large integrated production capacities.

Future Trends

• Increasing demand and high volumes will trigger consolidation and setting up of large automatic plants.
• Inline Automatic Board and Box making plants will ease out the present semi automatic production processes.
• Deployment of Folder Gluers, Rotary Diecutters will be on the increase.
• Use of corrugated for display/promotional packs, POPs and dispensers.
• Advances in multicolour, flexo printing will facilitate in-house flexo printing and do away with screen & offset printing.
• The emergence of e-commerce, reverse bidding, concept of First Pak will give large scale units the advantage of competitiveness and the concept of locating corrugated box units nearer to user locations will become obsolete.
• Large Corporates and Bulk users of corrugated boxes will start looking for single/multiple alternative vendors – capable of meeting stringent specifications, offering alternative designs, test-in-time deliveries at optimum cost.
• Growing interest in machines made in China, Taiwan and other Asian countries.
• Many machinery manufacturers will begin entering into alliances with Chinese, Taiwanese manufacturers for manufacturing/marketing.