Four factors driving growth in India’s packaging paper industry
India’s packaging paper segment has grown strongly in recent years, and today the segment makes up 63% of total paper demand in India, up from 52% six years ago. Shiv Sharma, a Principal at Kanvic Consulting, outlines four factors that are driving packaging paper’s growth.
Between 2017 and 2022, the Indian paper industry has experienced a compound annual growth rate (CAGR) of 3.27%. However, at a segment level, the picture is mixed.
While packaging paper has grown 7% during this period, and speciality paper even by 16% (albeit from a smaller base), the segments of newsprint and printing paper both saw declines.
So what is leading to the growing demand for packaging paper? Based on research from Kanvic Consulting and our experiences in the sector, we see four main drivers:
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. According to one estimate, India’s e-commerce business is expected to grow from $29 billion in 2020 to just over $100 billion by 2025.
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.
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 the 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.
Single-use plastic ban in India
On August 12, 2021, the Indian Government's Ministry of Environment, Forest, and Climate Change 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.
A sustainability and eco-friendliness shift
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.
