The Indian flexible packaging market stands at $5 billion (Rs. 3.36 thousand Crores) and is growing at little over 15 per cent per annum. Rapid development of personal care, pharmaceuticals, and food and beverages industries is contributing to this demand. Considering this growth opportunity, many international players are entering the Indian market through mergers and acquisitions route. In FY 2014, Finnish company Huhtamaki acquired India based Positive Packaging Ltd, in 2015 Australia based Amcor purchased Packaging India Private Limited (a subsidiary of Mumbai based Essel Propack Limited), and more recently in 2016,Essentra Plc, a UK based packaging acquired pharmaceutical packaging business of India’s Kamsri Printing & Packaging Pvt. Ltd.
Flexible packaging is an interesting business opportunity for Small and medium enterprises (SME), as it allow them to do business with other SMEs. Majority of flexible packaging demand is from food related industry, an industry largely made of small and medium enterprises. Since the clientele are small businesses requiring customized services, they often need a service provider that is also a small business and is willing to devote time and effort to meet their specific requirements.
Flexible packaging is far lighter and can therefore contain more material per pack, flexible packaging’s pack to product ratio is much lower (1:40 vis-à-vis 1:10 in case of PET packs) as compared to that of rigid packaging. Flexible packaging also allowsmanufacturers to produce packs in functional and complex shapes facilitating user convenience such as squeeze ability and reclose ability. Advance technology in printing provides aesthetic features, thus making products attractive to the final consumers.
India’s annual manufacturing capacity is 30 Million Metric Tonnes.The overall flexible packaging end-user industry can be divided in Food and Non-food sector. The food sector comprises 48% of the packaging market at 14.4 MMT/annum; the rest goes to non-food such as Pharmaceuticals, Personal care, Tobacco and others.
1.1 Figure 1:
In the food sector, the highest share is with Milk and dairy segment. India is the largest producer of milk in the world, at an estimated 40 Crores liters per day and a market size of around Rs. 80,000 CroresGiven the large opportunity, many international players such as Nestle, Lactalis SA, Arla foods Savera, Danone, etc. have entered the Indian market. Since cold food supply chain is a challenge in India and dairy products are highly perishable, the demand for high quality packaging that extends the shelf life of the product is evident.
Other than dairy, food sector also comprises packaging needs of confectionery and chocolates, processed fruits and vegetables, etc.
The non-food sector is ruled by the Pharmaceuticals. Indian pharmaceutical industry (Valued at Rs. 9.07 thousand crores) is growing at a CAGR 15%. India ranks third in terms volume and 14th in terms of value, in the world. Pharmaceuticals can further be sub-divided into; Bulk/ drug, Formulations and Devices. While bulk drugs market is dominated by rigid packaging such as PET containers, glass bottles, metals containers and cans etc, It is formulations and devices that drive the demand for the flexible packaging. Packaging market for pharmaceuticals is difficult to crack due to its inherent challenges in Indian scenario. The two major challenges are:
- Strict regulations: Pharmaceutical industry requires a superior level of safety to that of food packaging and therefore the packaging provider needs to meet stringent guidelines as per Drugs and Cosmetics Act 1940.
- Counterfeiting threats: Due to lack of patent protection, manufacturers in pharmaceutical industry are reluctant to share the constituents of pharmaceuticals they produce. The knowledge of constituents is required in deciding the composite of the plastic types and grades to be used in the pack.
2. Flexible Consumer Industry in AP and Telangana:
The table below enlists typical consumer industries and major brands under these industries based in Andhra Pradesh and Telangana.
3. Raw material requirements and technical specifications:
A flexible packaging material is a combination of many films that are laminated together. Most commonly used raw material includes; BoPP (Bi-axially oriented Polypropylene), Bo PET (Bi-axially oriented Polyethylene terephthalate), Nylon, Polyester, Poly propylene etc.
4. Cost of project for starting a flexible packaging unit:
To start a flexible packaging unit producing a little over 200MT of laminates monthly, the minimum capital requirement would be upwards of Rs. 6 crores including machines, infrastructure and working capital. The budget would also depend on the market you would like to target and therefore the quality of machines. The quality of printing machine is critical, as bad printing quality can lead of rejection of the material and adds to the cost.
5. Steps to consider before starting a flexible packaging unit:
First step would be to assess demand and supply of the packaging industry in your area, and identify the niche that you would like to serve. You may want to identify key clients that you would target and accordingly choose your marketing strategy. You would also need to build a strong technical team that can meet client’s quality expectations, create innovative products and minimize wastage. As such, the following aspects need to be analysed before starting a flexible packaging industry
- Market opportunity: Number and types of various flexible packaging consumer companies in the market such as FMCG, Personal care, Food and Beverages manufacturers, etc, their current vendors, requirements and pain points.
- Competitive landscape: Number of players in the targeted market, their product profile, their clientele, number of years in business etc.
- Production process: Raw material, man power & machinery required
- Fixed and operational costs and profitability: Estimation on total initial capital required, working capital assessment, projected revenues, earnings and profitability.
 As per UflexLtd. investor presentation
Source: FPA flexible packaging association
Source: Business Standard article – January 15, 2016
Source: Business today article – June 5, 2016
Source: Wiki, BDMAI, Ministry of Pharmaceuticals.