For private circulation only
VOL. 01/16
Packaging: Packaged food market reached $51 million mark in 2015
According to recent ASSOCHAM-TechSci Research joint study
the packaged food market in India is expected to have crossed
$51.5 million (mn) mark in 2015 as against $25 million in
2010 Registering a compounded annual growth rate (CAGR)
of about 16 percent. In the wake of the increasing disposable
incomes and growing number of nuclear families, market share
of packaged food in the processed food market is expected to
marginally increase to about 29 percent in 2016, from about
28 percent in 2015. The food and beverage packaging market
in India was estimated at about $16 billion (bn) as of 2015, up
from about $12 bn in 2010 and registered a CAGR of over six
percent. With a size of over $4 bn, the plastic food packaging
market currently accounts for a lion’s share of about 63 percent
in India’s total plastic packaging market, which is currently
valued at about $7 bn.
Market for multilayer plastic food packaging is currently
estimated at about $1 bn, which is about 22 pe cent of India’s
total plastic food packaging industry. However, in the total
food and beverages packaging market, multilayer plastic food
packaging accounts for over a six percent share in value terms.
Sales of Packaging industry fell 21.6% YoY in the Q1FY17
while PBDIT decreased 15.1% and PAT fell 10.6% compared
to corresponding previous year period with the average
industry PBDIT margins standing at 15.2% and PAT margins
at 4.8%.
For FY’17 we expect PBDIT margin to remain same as 10.5%
as in FY’16, and then it is expected to fall to 10.3% in FY’18.
PAT margin is expected to increase to 3.1% in FY’17 from
2.7% in FY’16, which is then expected to fell to 3% in FY’18.
Global Paper Packaging Material Market will reach around
USD 362.65 billion by 2021
As per a recent research report by Zion Research global paper
packaging material market was valued at around US $286.61
billion in 2015 and is expected to reach US $ 362.65 billion in
2021, growing at a CAGR of around 4.4% between 2016 and
2021. In terms of volume, the global paper packaging material
market stood at above 186.42 million tonne in 2015. Paper
packaging material market is mainly driven by increasing
demand for paper packaging due to rising awareness of
ecological issues around the world. Paper packaging is used
for packing the products like food & beverages,
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02 November 2016
pharmaceutical, and cosmetics. It is an eco-friendly option
and can be recycled and reused as against plastic. These
advantages help to boost the demand of paper as a packaging
material.
Paper is one of the most prominent materials used for
packaging compared to other packaging materials. Paper
packaging material has the high demand due to its cost-
effectiveness and environment friendliness. Poster paper, craft
paper, and glassine paper are the different types of papers
used in packaging. The paper packaging material is an eco-
friendly option as it does minimum damage to the environment.
Paper, timber, pulp and other such forest and recycled products
are basic raw materials used in paper packaging.
Global bakery packaging market is expected to grow at a
CAGR of around 4% until 2020
As per Technavio the global bakery packaging market is
expected to grow at a CAGR of around 4% until 2020. The
global bakery packaging market is categorized into three major
segments based on type of materials used for packaging-
Flexible packaging, Rigid plastic packaging, Metal packaging.
The global bakery packaging market by flexible plastic is
growing owing to favorable properties such as it being
lightweight, which reduces transportation costs and
consequently the carbon footprint. It has certain additional
advantages associated with it such as, reduction in landfill
waste, and reduction of energy required in the manufacturing
process in comparison to rigid materials. Flexible plastic
packaging includes films and sheets, pouches, and bags. This
market is characterized by innovative offerings such as
biaxially-oriented polyethylene terephthalate (BoPET), which
is made from stretched polyethylene terephthalate (PET) and
has high tensile strength, chemical stability, transparency, and
reflectivity.
The global bakery packaging market by rigid plastic is facing
intense competition from rival packaging materials as they are
cheaper and thus more economical to manufacture. However,
despite this, it is a growing market and is impacted by certain
technology trends such as hot-filling products in polyethylene
terephthalate (PET) packs, aseptic cold-filling in polyethylene
terephthalate (PET) and high-density polyethylene (HDPE)
packs, which increase the shelf-life of a product without it
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 being kept in desired conditions. Also, recyclability of rigid
packaging makes it a preferred choice of packaging. The
demand for bakery packaging by rigid plastic is further fueled
by the expansion of centralized retail distribution and
advancements in polymer materials.
The bakery packaging market by metal includes products
such as containers, tins, and boxes. The demand for metal
packaging is largely declining because of the increasing
demand for cheaper substitutes. Approximately 50%-60%
of bakery packaging products globally are made of aluminum.
In the US, aluminum is used for packaging, but in some
parts of Africa, Europe, and APAC steel is still used. The largest
markets for metal packaging are US, Japan, China, and Brazil.
Cosmetic Packaging Global Market Expected to Grow at
8.7% CAGR by 2022
According to Researcher, the Global Cosmetic Packaging
market accounted for $1.94 billion in 2015 and is expected
to reach $3.5 billion by 2022 growing at a CAGR of 8.7%
from 2015 to 2022. Compatible packaging, Simplicity,
Packaging Size, and Labeling & Finishing in Cosmetics
Packaging are the major drivers favoring the market growth.
The restraining factor for Cosmetic Packaging market is
fluctuating material prices. The challenges faced by the
market include environmental mandates and difficulty in
managing the supply chain.
Uflex plans to spend Rs 700 crore this fiscal
With rising demand of packaging solutions in the country
and abroad, India’s largest flexible packaging firm Uflex plans
to spend Rs 700 crore this fiscal as part of modernisation
and expansion plan on its domestic facilities. Focussing on
the upcoming plant at Sanand industrial area in Gujarat, the
company has already spent Rs 580 crore and the rest of the
amount will be spent on other units as well. The company is
expecting the plant to be ready by December this year and
start production by April next year. Besides, the company
also plans to launch an innovative new product in the middle
of next year to aggressively cater to the pharmaceutical
industry all over the world. The Sanand facility would be a
liquid packaging unit which is completely a new innovation
in packaging. The company aims to manufacture packaging
material for liquid products, such as milk, juices and energy
drinks at Sanand and export them both nationally and
internationally.
As per industry estimates, currently the India’s aseptic
packaging holds around 8-9 billion packs, while China has a
market size of over 80 billion. Looking forward to the packaging
industry’s rapid growth, no doubt, Uflex has been retaining its
leading position in the flexible packaging in the world with an
international presence in five major locations — Mexico, Egypt,
Poland, Kentucky and Dubai. The company sees a huge
potential for growth in aseptic packs, especially with rising
consumption of beverages and dairy products in the country.
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Essel Propack to acquire 100% stake in Essel
Deutschland Germany
Essel Propack has announced a complete buyout of Essel
Deutschland Germany (EDG), in which it has been holding
24.9% share as a JV partner. Following this deal, EDG will
become a 100% subsidiary of Essel Propack propelling its
revenue by 11%. The enterprise value of EDG stands at USD
32 million. The acquisition will help Essel enhance cross
selling opportunities in the German markets, sourcing
flexibility and better capacity utilisation at all of its Europe
plants. This acquisition is in line with Essel’s Mission
20:20:20 – EBITDA margin of 20%, Return on Equity (ROE)
at 20% and Return on Capital Employed (ROCE) at 20%
within next two years. The EDG revenue of approximately
USD 40 million will now be consolidated in Essel’s global
revenue and will boost consolidated revenue by 11%. In
FY16, Essel Propack’s consolidated revenue stood at Rs
2184 crore.
Industry Overview
Packaging industry is worth Rs 70,000 crore, which today
corresponds to the 10th largest industry in India. Rigid
plastics has about 26% market share of the industry - 50%
of rigid packaging market accounted for the non-food
sector, 29% beverage and rest is food. Several brand
owners who moved to the rigid plastic segment due to
economics are now seeing a rise in demand for high quality,
enhanced performance and premium plastic packaging.
Such plastic and PET packaging not only enhance the brand
image but also due to high performance bring down the
total cost of ownership for brand owners in India.
Indian PET industry is very well developed with heavy
investments in this segment by large corporations, however,
when it comes to specialist PET and plastics packaging,
the country has just recently seen. PET packaging segment
is seeing a strong and robust growth in this part of the
world. With the growing population and increasing
disposable incomes, demand for premium and high
performance packaging products is also increasing. Majorly
4 – 5 structured players are dominating the PET packaging
market while we have thousands of SME/MSMEs engaged
in this segment as the barrier to entry is not significant due
to low investment requirements.
The growing food and beverage market will drive significant
growth for the PET and plastic packaging market in India.
The growth of 20 litre bulk water segment / introduction of
beer, wine and drinks which require barrier properties in
high performance PET would be another area driving growth
for the plastic packaging market. Challenge would be to
work with the consumer perception of PET packaging and
also continuously working on educating the customers that
PET is a safe package which is not only approved by BIS
standards, but also the EU and US FDA.
India today has become the fastest and the largest-growing
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 market for PET packaging due to low cost and the increasing
foreign investments. The government’s Make In India
initiative has given a boost and created opportunities for the
foreign players investing in India. There has been a
considerable increase in new manufacturing hubs in the
country. The export is only going to enhance with these kind
of initiatives. The country today sees very low level of import
of PET packaging however India is a net exporter of PET
packaging to the world.
Packaging is used to cover or wrap a product to preserve its
quality and extend the shelf life of its contents by reducing
the risk of contamination. Packaging plays a very significant
role in transportation, warehousing, logistics, and sales of
products.
The packaging materials used are available in two forms:
rigid packaging material and flexible packaging material. Rigid
packaging material comprises rigid plastics, glass bottles,
containers, and metals. Flexible packaging materials include
bags and pouches, squeezable bottles, stand-up pouches,
CD cases, and materials used in foam packaging. Packaging
market in India is expected to grow at a CAGR of 15.44%
over the period 2014-2019.
Flexible packaging
Flexible packaging has been one of the fastest growing sectors
in the packaging industry over the past 10 years, thanks to
increased consumer focus on convenience and sustainability;
this rapid development will continue to accelerate.
The total global market for flexible packaging is forecast to
grow at an annual average rate of 3.4% during the period
2015-2020, reaching $248 billion. Food packaging occupies
over 70% of the global consumer flexible packaging market;
it is growing by 4.0% on average in volume terms and reached
over 18.8 million tonnes in 2015. Whilst Asia-Pacific and
Western Europe have enjoyed the largest areas of growth
over the period 2010-2014, sales of consumer flexible
packaging have been growing at a high average annual rate
in Asia-Pacific and Eastern Europe.
The global flexible packaging market is segmented based on
end user, packaging types, printing processes, material, and
geography. By end user type, the global flexible packaging
market is segmented into consumer products, industrial,
medical & pharmaceuticals, retail food, retail nonfood,
institutional food, institutional non-food, and others. By
packaging type, the global flexible packaging market is
segmented into stand-up pouches, flat pouches, converted
roll-stock, gusseted bags, wicket bags, laminated flexitubes,
aseptic cartons/ packs, big bags and others. By material type,
the global flexible packaging market is categorized into
Polypropylene (PP), Polyethylene (PE), Polyethylene
Terephthalate (PET), Poly Vinyl Chloride (PVC), Ethylene Vinyl
Alcohol (EVOH), Polyamide (PA),and others (paper, aluminum,
and cellulosic).
02 November 2016
By geography, the global flexible packaging market is
segmented into North America, Europe, Asia Pacific, the
Middle East and Africa, and Latin America. Currently, North
America dominates the global flexible packaging market in
terms of revenue share. However, Asia Pacific is expected to
expand at the fastest growth rate in the global flexible
packaging market owing to the rising disposable income,
and rising demand, and changing packaging trends in the
end user sectors, which are expected to have a positive
impact on the global flexible packaging market. Currently,
rising population and the significant demand for beverages,
packaged foods, pharmaceuticals, and personal care
products are driving growth of the flexible packaging market
in countries such as India and China, whereas the North
American flexible packaging market is expected witness
moderate growth in the coming years, due to the highly
saturated end-use market globally.
The main products of this business are laminates made of
various combinations of Polyester, BOPP, poly, metalized &
hologram films and others in roll form and in various preformed
pouches & bags of many sizes, laminated flexitubes,
rotogravure cylinders for various types of rotogravure printing,
Anilox/Coating, rollers for flexo printing, elastomers & sleeves,
Shims for holographic embossing and holograms, other anti-
counterfeiting and brand protection solutions (to keep look-
alikes at bay from eroding brand equity of customers), printing
inks, adhesives, coatings, polyols, packaging & converting
machines. This business entails customization according to
the needs of customers globally.
Tinplate Packaging during FY2016
Tinplate, a downstream flat steel product, is a versatile
packaging substrate across a wide-array of applications -
food (edible oil, processed fruits & vegetables), non-food
(paints & chemicals, aerosol sprays, battery) and beverages.
With its excellent barrier properties Tinplate is well suited
for packaging processed edibles. As a re-cyclable packaging
material, the sustainability credentials of Tinplate will
continue to evoke positive consumer mindshare with
increasing environmental consciousness. At the same time,
Tinplate will need to compete with other packaging
substitutes for improved shelfappeal and consumer
convenience.
In the domestic market, overall tinplate consumption FY’16
remained nearly at the same level as the previous year.
Competition from various sources and pressure on margins
intensified during the year, especially in the last quarter -
with cheaper imports from China on account of supply
surplus; imports from Japan & Korea on account of the Free
Trade Agreement; domestic competition; safeguard duty and
minimum import prices imposed on various steel items but
not made applicable to imports of tinplate.
The total apparent domestic consumption of tinplate in India
is more than half a million tons per annum of which close to
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 40% is met through imports and the rest through domestic
supplies.
The per capita consumption of tinplate in India is very low
as compared to many developed countries and developing
economies like China. High growth in modern retail, FDI in
multi-brand retail combined with Government’s thrust on
the food processing industries augurs well for the growth of
the packaging industry in India. In addition, Government’s
focus in rural economy in the budget, especially the farm
sector, is expected to boost rural consumption in the coming
year. Packaging demand in general and tinplate demand
specifically is likely to increase provided indigenous
manufacturers undertake robust developmental efforts.
However, significant imports of non-prime tinplate and their
possible use in food packaging may dampen the demand for
prime tinplate. Currently there is no duty differential between
prime and non-prime tinplate. The customs duty for tinplate,
continues to be relatively low and is not a significant barrier
to the dumping of tin mill products into India mainly from
USA, Europe and South America. Further, the Free Trade
Agreement of India with Japan and South Korea has led to
considerable increase in import from these countries.
The average Brent crude oil price was down 3% to US$ 47
per barrel in September 2016 over September 2015 and 0.3%
compared with August 2016. The monthly average prices of
naphtha, a primary raw input for petrochemicals and one
which tends to establish the value of olefins, polymers and
other products, fell 11% in September 2016 over September
2015 but rose 6.1% over August 2016 to US$ 396 per tonne.
Prices of olefins, a group of hydrocarbon compounds, that
are building blocks for many petrochemicals, improved in
September 2016. Ethylene prices rose 46% over the year
and 5.2% over the month in September 2016 to US$ 1143
per tonne. High-density polyethylene (HDPE) prices were
down 4% over the year but rose 0.8% over the month to US$
1130 per tonne. Low-density polyethylene (LDPE) price was
up 1% over the year and 2% over the month to US$ 1197 per
tonne.
Propylene prices rose 35% over the year and 12.5% over the
month to US$ 833 per tonne in September 2016.
02 November 2016
Polypropylene (PP), the polymer produced from propylene,
fell 1% over the year but rose 0.6% over the month to US$
1026 per tonne in September 2016.
Prices of aromatics, a group of scented hydrocarbons with
benzene rings used to make a variety of petrochemicals, were
higher in September 2016. Prices of paraxylene, a building
block for producing polyethylene terephthalate (Pet) resin
for food and beverage packaging, polyester and other
materials, was flat over the year but fell 1.1% over the month
to US$ 772 per tonne in September 2016. Benzene prices
rose 11% over the year and 17.8% over the month to US$
648 per tonne in September 2016.Toluene prices fell 3%
over the year but rose 7.6% over the month to US$ 569 per
tonne in September 2016.
Polyvinyl chloride (PVC) price rose 7% over the year and
4.1% over the month to US$ 863 per tonne. Polystyrene (PS)
prices were up 4% over the year but fell 2.1% over the month
to US$ 1164 per tonne.
Outlook
As we stand at the threshold of the upcoming festive season,
the flexible packaging industry is preparing to work overtime
for catering to the demand from FMCG/F&B companies as it
generates a substantial part of our annual revenues during
this time. The economy is buoyant thanks to an excellent
monsoon earlier this year and the coming months shall be
exciting not only for packaging but for the entire industry.
Furthermore, rural India is not far behind in the race, with its
FMCG market expected to grow at CAGR 18.1 percent this
fiscal, the packaging industry is also donning the fervor of
the festive season with impressive order pipeline.
Although, the flexible packaging industry is estimated at $8
billion; it is yet to catch up and be at par with international
standards/developed markets. In India, the ‘per capita
consumption’ is pegged at 4.3 per kg/person per year as
compared to Taiwan where figure is 19 kg; in Germany the
figure stands at 41kg and in the United States, the figure is
a staggering 71kg which is the highest in the world. Currently,
the growth rate is between 15%-17%; but the growth rate
could increase to 20% in the coming years. Hence, the Indian
markets have a substantial scope for growth.
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