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India: the world’s fifth-largest packaging industry

November 1, 2017
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Why this is important to Wisconsin businesses: The industry continues to grow rapidly, driven primarily by pharmaceuticals, foods and beverages, and provides opportunities for Wisconsin companies.

The packaging industry in India is very dynamic, and influences all other industries directly or indirectly. The packaging industry, which stood at $32 billion in 2015, had grown at a compound annualized growth rate (CAGR) of 15 percent for the last five years, and  is expected to continue growing at a CAGR of 13 to 15 percent in the coming years. According to the Packaging Industry Association of India, the Indian packaging industry was the fifth-largest in the world in 2016.

The rise of the Indian middle class, the growth of organized retail, the rapid growth of exports and India’s e-commerce boom are all fueling industry growth. Thus, adopting better packaging methods, materials and machinery to ensure quality has become very important for Indian businesses.

The Indian packaging industry constitutes about 4 percent of the global packaging industry. The industry is underpenetrated, and thus offers significant business opportunities, since India’s per capita packaging consumption is only 10.5 kg per year, as compared to 109 kg in the U.S., 65 kg in Europe, 45 kg in China and 32 kg in Brazil.

Manufacturers of packaging machinery and materials in India find demand for their products mostly in the food processing and pharmaceuticals sectors. About 45 percent of the packaging machinery and materials produced is absorbed by the food processing sector alone, 25 percent by the pharmaceuticals sector, and 10 percent each by the personal products, tea and coffee, and industrial products industries. India’s imports of packaging equipment currently stand at over $130 million a year. India’s imports of packaging equipment for food processing are mainly automated machines and systems.

Flexible packaging is the fastest growing subsector of India’s packaging industry. Plastics dominate the Indian flexible packaging industry, as plastic is aesthetically attractive, cost-effective and sturdy. Furthermore, plastics improve the hygiene quotient and shelf life of products, especially foods and beverages. The flexible packaging segment is estimated to be growing at a rate of over 35 percent annually. The food processing sector is one of the biggest users of flexible packaging, accounting for more than 50 percent of total demand.

The challenges the industry is facing today include a lack of clarity in food packaging regulations, consumers’ opinions on sustainable packaging, and stress on eco-friendly packaging materials.

There are between 600 and 700 packaging machinery manufacturers in India, of which 85 to 90 percent are from small and midsize companies. Due to growing demand for packaging, the industry is gearing itself to adopt scientific and functional packaging. Three specific segments can be identified for opportunities in the packaging equipment market in India:

  • First, the unorganized sector, which represents the largest opportunity, given increasing quality consciousness among consumers. The cost of equipment and upgrades hold the key to success in this segment.
  • Second, large companies, primarily multinational corporations, which are guided in the choice of such equipment by the global policies and standardization of their parent companies.
  • Third, the organized segment, which caters to the major food and pharmaceutical companies, and is conscious of quality and the ability to produce various packaging products, thereby enabling them to tap a larger market.

Due to increasing domestic consumption and high potential, India is emerging as one of the prime destinations for plastics companies and downstream players worldwide. Huge investments in the Indian food processing, personal care and pharmaceuticals industries create significant scope for expansion and development of the Indian packaging industry. Wisconsin firms should bear these points in mind, while continuing to take advantage of their reputation for innovative technology and a close U.S.-India trade relationship.

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