Country Focus
India’s packaging sector to take off; challenges looming Forecasted to be the world’s fifth largest consumer economy by 2025, by consultancy McKinsey & Co, India’s growing consumption power is driving its retailready packaging sector, which is also adopting new technologies, says Angelica Buan in this report. But all is not rosy on the domestic front, with the country's new government, led by Prime Minister Narendra Modi, facing challenges such as power and skilled labour shortages, to improve India’s appeal as an investment destination.
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JUNE / JULY 2014
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growing retail ready packaging (RRP) market is earmarked for the Asia Pacific region, attributed to emerging trends such as ease of product replenishment, a progressive organised retail sector and its use as a marketing tool or branding, according to a study by Research and Markets. The UK-headquartered analyst group says that globally, RRP is positioned for a CAGR of 3.57% over the period from 2013-2018. In the region, China and India will top the RRP sales growth over the next five years, growing at annual rates of 9% and 8% respectively, according to Smithers Rapra in its Future of Retail Ready Packaging to 2017 report. India’s middle classes to drive packaging growth India’s growing middle class and increased consumerism are driving the growth of RRP. The food and beverage (F&B) industry, as well as the fast moving consumer goods (FMCG) sectors, are pushing the demand for both rigid and flexible plastics packaging, with the preference being flexible packaging. In-mould labelling is also gaining popularity as are technologies using bioplastics and nanoparticle layered plastic packaging, according to market intelligence firm Netscribes Inc. The domestic plastic packaging market is clearly segmented into the organised and unorganised sectors wherein the organised sector caters to the larger industry base that requires plastic packaging. Large number of industry players There are a number of players in the country’s retail plastic packaging sector, says the British Plastics Federation (BPF) that indicates India’s processing sector is comprised of some 25,000 companies, engaging an estimated 3 million workers. Gujarat state in Western India leads in plastics processing, with over 5,000 plastics firms. In line with the BPF study, it projects that plastics consumption could reach 16 kg/head by 2015. In addition, Plastindia Foundation’s (Plastindia is the apex body of major associations in the country) assessment is that India will be among the top ten packaging consumers by 2016, with demand surging to US$24 billion, while the country’s Union Minister for State for Commerce and Industry forecasts that the Indian packaging industry will be valued at US$32 billion by 2025. Packaging accounts for 48% of all commodity polymer consumption in the country and is growing at 15% annually, gargantuan by all standards. The main application areas include multi-layer films, BOPP films, shrink and stretch wraps as well as thinwall, thermoformed and blow moulded containers. Unravelling the issues But the upbeat packaging industry is also peppered with downsides. In its report titled Plastic Packaging Market in India 2014, Netscribes says the industry has to contend with several bottlenecks. For instance, non-governmental groups are trying to get the government to ban PET in pharmaceutical packaging. Meanwhile, the domestic market is being flooded with cheaper Chinese imports. Feeling the strain in the competition, and also due to the Free Trade Agreements (FTAs), AIPMA (All India Plastics Manufacturers Association) is urging the government to hike the custom duty on finished imported goods to 20%. AIPMA also says the increase in the import duty on raw materials from 5% to 7.5% is not helping the small/medium-size players in the plastics sector. Plus, this has had a cascading effect on polymer raw material prices that have seen unprecedented rises, to the tune of 30%.