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The growth of flexible packaging in India has only just started. Chantal Borciani discovers why
In the last 10 years analysts have started to look at India differently. Gone is the image of a poor nation with limited prospects, and in its place a vibrant and increasingly profitable global economy has emerged.
Forecasts have been right so far - the growing economy has encouraged large investments from overseas companies and a changing social climate has meant the Indian market is now supporting tastes and demands seen more in Western cultures.
Indian consumers now expect a certain level of packaging with their goods, and as foreign investors take advantage of the cheap material and labour costs, Indian exports in flexible packaging are on the up.
The Indian packaging market grew by around 9 per cent in 2004, after a slight slow-down in growth in comparison to 2003. For the remainder of the decade, growth of 14 per cent is predicted in packaging sales, with the less developed plastic packaging sectors set to be the fastest-growing areas of the market with annual growth set for around 20 per cent year-on-year.
Food markets will drive consumption growth, with the food processing industry keen to double capacity in the medium-term - along with other consumer markets - as India becomes an increasingly attractive option for finished goods suppliers exporting to neighbouring countries.
Other key flexible plastics segments include HDPE-based flexible bulk bags, consumption of which amounts to around 44,000 tonnes, with around 75 per cent of total usage accounted for by sugar, with the remainder attributable to salt, rice and atta (6,500 tonnes), onions and potatoes (3,500 tonnes) and tea (1,000 tonnes). Traditional woven fabrics, however, continue to dominate in areas such as cement, pesticides and fertilisers.
 Table 1. India packaging market: key facts 2003-04.
As a consequence of the low purchasing power of the majority of Indian consumers, most consumer goods come in small, affordable packages. The rapid expansion of the Indian flexible packaging market has accelerated because of the conversion of the more traditional rigid packaging into flexible forms and a favourable government tax structure - the excise duty, which was 24 per cent, was reduced in 2001 to 16 per cent. A liberalisation of the Indian economy, coupled with globalisation and the influx of the multinationals, has improved the quality of all packaging, particularly flexible packaging.
It is estimated there are 600-800 flexible packaging converters in India, and most are small operations with capacities of less than 250 tonnes per annum. However, at least 10 converters have capacities of more than 4,000 tonnes per annum and are on a par with the leading foreign operations.These larger converters include: - Flex Industries, Nodia;
- Packaging India, Pondicherry;
- Paper Products Ltd, Mumbai;
- Positive Packaging Ltd, Mumbai;
- Supreme Industries, Mumbai;
- VFC Ltd, Mumbai.
There is a developing middle income group in India that demands more Western-style convenience foods, and has an improved level of disposable income to purchase them.
This demand is further supported by more women entering the workplace, leaving less time for them to prepare traditional home-cooked foods. In turn, this has led to a growing market for convenience products, both in the food and non-food sectors, requiring light convenient packaging compatible with microwave cooking.
Other major drivers in the use of flexible packaging include: Table 2. Flexible packaging sales in India 2003-04 (€ million).
- Increasing health consciousness - with a move away from traditional unpackaged formats to packaged, branded goods.
- The Indian economy is experiencing high levels of growth; Indian GDP growth was 7 per cent in 2004 to 2005 - higher than for developed regions, and only marginally below that of China.
- Overall economic growth has stimulated the salary levels of the huge middle income group providing higher levels of disposable income proving beneficial for the consumer goods market.
- There have been escalating growth rates in agriculture, industry and the tertiary sectors.
- Increasing affluence and less time available for home cooking has increased the levels of eating at fast food outlets and restaurants. This has cultivated a taste for non-Indian foods - Italian, Chinese and European varieties - which in turn has caused an interest in the development of a range of packaged products such as pasta, soups and noodles for use in the home.
Market sectorsFlexible packaging dominates food packaging, being used for a variety of food items including milk, biscuits, vegetable oil and rice. Fresh/pasteurised milk is one of the main end-use applications for flexible packaging and accounted for almost 30 per cent of total units in 2002. Bakery products were another sector of note using flexible packaging, mainly paper-based.
As consumer tastes develop further and conventional flexible packaging begins to be commonplace in India, more innovative designs are likely to take shape, as has been the way in the US and European markets.
However, cost is a major influence on pack types in India and lower-priced plastic pouches allow manufacturers to keep down the retail price of their products. The demand from rural areas has increased the use of sachets in many consumer goods markets where their low unit price has proved popular in smaller towns and villages where households cannot afford to buy larger packs.
Non-food sectors that have seen the wide-scale use of sachets are personal care and hygiene products such as shampoo, powder detergents, hair oil, toothpaste, hair colourings and fairness creams - a unique Indian preparation intended to lighten skin tones. Sachets are helping to improve the lifestyle of lower income classes by reducing the use of unpackaged, lower-quality products in favour of higher-quality branded items.
In the beverage sector, sachets were introduced to broaden the market for powder concentrates, with a variety of branded goods produced by multinationals such as Coca-Cola India and Kraft Foods.
Despite some good movement, markets such as the food and beverage industries still have more to offer. In a country with such a large population, both the markets and the demand is large. With this in mind, only some of the potential has so far been tapped.
FoodA thriving industry with a large untapped potential:
- Indian food industry is worth over $400 billion (€304 billion);
- Second largest producer of fruits and vegetables - but only 2 per cent processed;
- Largest livestock population but only 1 per cent of meat production is converted to value-added products;
- Largest milk producer with about 15 per cent of milk production processed in the organised sector;
- Over 8,000km of coastline makes it potentially, one of the largest seafood producing and processing countries;
- Around 30 per cent of the world's trade in spices originates in India;
- A rapidly growing bakery, soft drinks, confectionery and beer and alcoholic drinks market;
- Size of the semi-processed and ready-to-eat packaged food industry is over $1 billion and growing at over 20 per cent per annum;
- Lifting of quantitative restrictions in accordance with the World Trade Organization (WTO) regulations from April 2001 means freer import and export.
PharmaceuticalOpportunities for growth in the post WTO regime:
- Indian pharmaceutical industry value: more than $5 billion;
- Average growth rate: 8-10 per cent;
- Share of global sales: value 1 per cent, volume 8 per cent;
- Global ranking: 4th in volume, 13th in value;
- Production costs: lowest in the world - 40-50 per cent compared to developed countries;
- A fragmented industry with over 20,000 registered units looking at consolidation;
- Top 250 companies control 70 per cent of the market and top 10 companies cover over 30 per cent of the market;
- An industry that possesses excellent chemistry and process reengineering skills;
- Per capita, expenditure on healthcare in India is $93 where penetration of modern medicine is less than 30 per cent, making it a huge untapped market;
- A growing affluent class has opened up the market for lifestyle drugs, virtually untapped so far;
- Indian Pharmaceutical Policy 2002 limits price controls and encourages foreign investment;
- Well placed to seize the opportunity in generic drugs going off-patent in Europe and in the US between 2005 and 2009;
- Being the lowest cost producer combined with FDA-approved plants, Indian companies can become a global outsourcing hub for pharmaceutical products.
On the factory floorIndia makes the majority of the equipment needed by the flexible packaging converting industry including rotogravure printing presses, laminators, slitters and pouching machines. Often based on European designs, these machines are often not as sophisticated as European equivalents, but in most cases represent value for money. The majority of the small-scale flexible sector runs these machines.
Typical of this use of sophisticated European technology has been the growth of the Indian film and vacuum coating industries. Originally based on second-hand equipment, there has been a major investment programme by vacuum coaters and film producers in state-of-the-art, modern vacuum coaters sourced from Europe, and in many cases complementing investments in modern film manufacturing operations. In addition, several companies have bought top-of-the line, sophisticated laminating and printing machines since the early 2000s, and are now in a position to supply converted flexible packaging laminates meeting international standards.
 Table 3. International expansion plans of leading suppliers of flexible packaging.
Leading names include Samarpan, Nichrome, Rollatainers, Wraptech, Mico-Bosch and AMP Rose. These machines are of high quality and are very competitively priced compared to imported European machines. Hence, Indian FFS machines have become a major export opportunity to developed countries.
In terms of raw materials, India is almost self-sufficient for almost all the raw materials required in the manufacture of flexible packaging.
BOPP, PET, PE granule and films are widely manufactured in India. These materials are of international quality and are exported to Europe and the US.
Unlike European and North American markets, the Indian market is not founded on BOPP films but on PET materials. In addition, while the use of films is steadily increasing, there is a considerable market outside the packaging sector - principally in textile threads.
BOPP manufacturers include Cosmo Films, Gujarat Propack, Biax, Max and Supreme Oriented Films. Between them, Cosmo Films and Gujarat Propack have almost 50 per cent of the market share. Exxon Mobil is also exporting OPP into India from Europe and is making inroads in the market. Jindal Polyester Ltd also invested in BOPP film manufacturing capabilities in 2003 with the commissioning of a 15,000 tonnes per year line.
Garware, Ester, Polyplex, Jindal, MTZ and SRF are some of the manufacturers of polyester film, with the first four having more than 60 per cent of the market share. PET is widely used in India for many applications and is also exported to Europe and the US.
There are also ongoing investments at the major Indian film manufacturers:
- Jindal Polyester Limited commissioned an additional 25,000 tonnes per annum PET line in March 2004;
- Polyplex has expanded its ambitions outside India with Polyplex Thailand announcing an investment to double output at Rayong to 30,000 tonnes per annum by April 2004, and the announcement of the formation of Polyplex Europa AS (Polyplex Turkey) to construct a 24,000 tonnes per annum PET film line at a greenfield site in Corlu, Turkey.
In addition to film manufacture the leading film producers of BOPP and PET also include metallised variants in their product offerings providing a source of added-value product complementing their clear film offerings.
Takeaways- The Indian packaging market is predicted to grow year on year by between 14 per cent and 20 per cent until the end of the decade
- Traditional rigid packaging industries are migrating to flexible packaging
- Changing consumer tastes across a range of areas are placing new demands on the packaging industry but are also providing new opportunities for growth
- Laminated products including form-fill-seal pouches, laminated tubes and Tetra Packs are growing at around 30 per cent per annum
- The large growing middle class, liberalisation and organised retail sector are the catalysts to growth in packaging
- Fast-changing food habits are likely to spur on the flexible packaging market, especially the pouch and microwave packaging areas
- Unlike in past years, Indian packaging manufacturers are now embracing state-of- the-art technology, which helps Indian packaging reach western quality
- Sachets are proving popular in some rural and poorer communities as foods can be packaged in smaller, and cheaper, quantities making them more affordable
- Milk, both fresh and pasteurised, is one of the principal end-uses for flexible packaging, accounting for nearly 30 per cent of total units in 2002
- Cost is a big factor on Indian pack types, with lower cost plastic pouches allowing manufacturers to keep down the price of products
- Even with some good movements elsewhere, the food and beverage industries still have more to offer flexible packaging than others
- India makes the majority of the equipment that is required by the flexible packaging converting industry
- Unlike European and North American markets, the Indian market is not founded on BOPP films but on PET materials
- PET is widely used in India for many applications and is also exported to Europe and the US.
Chantal Borciani is Managing Editor of Pira's newsletters and journals. |
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