Trend 1: Upsurge in e-commerce
The packaging paper segment has grown quickly, thanks partly to the flourishing e-commerce sector, particularly after the COVID-19 pandemic. The e-commerce business is expected to grow from $29 billion in FY20 to $100-105 billion by FY25. This trend has led to a growing need for packaging materials, including corrugated boxes, cartons, and wrapping papers.
Effective and efficient packaging solutions have become paramount as more consumers turn to online shopping for their daily needs. In addition, packaging paper and paperboard provide an eco-friendly solution for businesses seeking to deliver their products safely and efficiently.
Trend 2: Rising income levels
The second driver of growth for packaging paper is the rise in the middle class, which has grown from 14% to 31% of the population between 2004-05 and 2021-22 and is projected to rise to 63% by 2047, according to PRICE (People Research on India’s Consumer Economy) survey. Rising income has boosted consumer spending, with more people buying products with high-quality packaging solutions. The Indian paper industry has tapped into this opportunity by capitalizing on the growing demand for high-quality paperboard and packaging paper.
The increasing demand for high-quality paperboard and packaging paper has encouraged paper manufacturers to introduce innovative products and expand their distribution channels. In addition, increasing consumer demand has allowed them to cater to a broader range of consumers who demand safe and secure packaging solutions.
Trend 3: Single-use plastic ban in India
On August 12, 2021, the Indian Government's Ministry of Environment, Forest, and Climate Change (MoEFCC) issued the Plastic Waste Management Amendment Rules, 2021 to reduce plastic waste and promote eco-friendliness.
The ban on single-use plastic came into effect in July 2022 and has led to good traction in demand for paper-based alternatives such as paper bags and cups, presenting attractive growth prospects for the paperboard and packaging paper segment. Paper manufacturers have responded to this trend by increasing the production of these products and investing in new technology to enhance their quality and durability.
While the current ban covers items with low utility and high littering potential, a potential extension to cover other things, such as sachets, pouches, and wrappers, will significantly impact the demand for paper-based alternatives in the medium term.
Trend 4: A behavioural shift towards sustainability and eco-friendliness
Consumer preferences are also undergoing a significant transformation, as 60% of consumers indicate that socially responsible or sustainable products constituted at least half of their most recent purchases. Moreover, almost 50% of global consumers have acknowledged paying a premium, averaging 59%, for sustainable or socially responsible products.
The market shift towards sustainable and environmentally friendly products, combined with the upsurge in e-commerce and rising income levels, has created a favourable environment for paper manufacturers to invest in paperboard and packaging paper.
While the packaging segment is growing much faster than other segments, its contours of growth are essential to watch out for the paper manufacturers. According to recent Kanvic's analysis, the capacity of the paperboard and packaging segment in India will increase by almost 1 million tonnes over the next three years.
To stay competitive in the changing paper industry landscape, paper manufacturers must answer critical strategic questions to seize the opportunity for higher growth and improved profitability:
- How does the changing industry landscape create new opportunities and threats for us?
- What are our strategic goals for the packaging paper segment?
- Should we prioritise growth over profitability to drive market share?
- Which are the most attractive product and customer segments?
- How do we understand our customers' needs effectively?
- Are our channel partners equipped to drive future growth?
- How do we transform our organisation structure, people and processes for the new reality?
As the paper industry moves towards packaging amidst the evolving market trends, paper manufacturers need to reorient their strategies to benefit from the potential boom in the packaging paper segment.