The packaging market in India is valued at around Rs 1,400 billion and has grown well in recent years. Consumer packaging accounts for a share of around 54 per cent of the demand while the rest is accounted for by tertiary/ bulk packaging.
Domestic consumption of packaging has shown resilience against economic slowdown, backed by deep penetration into rural markets and enhanced consumerism across urban centres.
Over the years, domestic packaging market has moved up the value chain. From traditional focus on merely product protection and cost reduction, consumer packaging in India now reflects aspirations of the modern consumer and is extensively used for product promotion.
In a related development of global significance, sustainability aspects of packaging materials have come under the radar in several countries worldwide and the trend is expected to gain ground in India. FMCG and other product companies across Europe and in Japan are revamping packaging strategies to align with extended producer responsibility rules that are being increasingly implemented to improve the 3Rs of packaging - reduce, reuse and recycle. Packaging industry in India is now in an exciting phase of growth, catering to the growing demand for innovative and better quality material.
The high action in the Indian packaging industry has attracted global packaging majors and converters to enter the market either through direct subsidiaries or through inorganic acquisition route. Apart from catering to the domestic market, India is also emerging as a sourcing hub for state-of-the-art packaging products. Domestic packaging converters across all formats - flexibles, rigid, paper board, glass, metal, closures as well as lamitubes are also expanding their reach and setting up new facilities.
The developments in the packaging industry bode well for packaging machinery sector in India. The market for packaging machinery in India has expanded spurred by the rapid growth in consumer markets. Processed food and staples are the large end-use applications for packaging machinery followed by personal care and pharmaceuticals. Per capita consumption of packaging in India is low reflecting a high potential for advanced packaging technologies and packaging machinery.
The Indian packaging machinery industry is fragmented with a small number of large players and several smaller regional players. Western India remains the hub for packaging machinery manufacturing sector in India. Domestic packaging machinery manufacturers have developed capabilities to manufacture a wide range of packaging machinery such as package conversion/ processing, filling, sealing, handling, testing equipment. Packaging machinery for automatic form-filling and sealing, retort pouches, stand-up pouches, laminated tubes and aseptic packaging of beverages are witnessing growth.
With intense competition for consumer attention and shelf space, several FMCG and other consumer product companies are developing strategies to differentiate their offerings. To this effect, product companies are increasingly seeking innovative packaging technology and high performance standards even while emphasising on lower capital and running costs.
Packaging machinery sector caters to varied segments of end-users each of which accentuates a different set of parameters in the decision-making process to invest in equipment. Turnkey project implementation is the hallmark of large FMCG/ product companies and as such the segment prefers custom-made packaging machinery. Captive units of MNCs are more often than not bound by the decisions taken by the parent company including choice of technology and brand of equipment. Large-scale packaging companies adhere to stringent quality standards and also show a greater preference for wide range of packaging formats to address a diverse market. The small-scale sector has emerged as a lucrative segment for packaging machinery. Many unorganised players are seeking to upgrade technology to cater to increasingly discerning consumer palates. After-sales service is also a key differentiator that influences packaging machinery buying decision among end-users in India.
Among the various types of machinery, Form Fill Seal is the leading category of packaging machinery and has grown with the expansion of flexible packaging markets. Domestic manufacturers have capability to manufacture FFS machinery for most applications. The recent advancements in flexible packaging such as stand-up pouches, re-closable pouches and pouches with spouts have opened the market for newer types of flexible packaging machinery. In recent years, there has been an increasing trend towards high speed lines and automation especially among FMCG product companies and other end-user segments. The focus is to improve productivity and reduce operation costs. User industries also indicate a preference for customised machines. Medium- and small-scale players prefer semi-automatic machines.
Trade in packaging machinery has registered strong growth over the last decade. Imports account for around 18-20 per cent of the packaging machinery market in India. Import of packaging machinery have expanded at 7.7 per cent since 2011-12; total imports under key categories were valued at around Rs 25 billion in 2016-17. Germany, Italy and Switzerland are leading European sources; imports from China and Taiwan have grown at a fast clip.
Key categories of imports include high speed packaging machinery for filling and wrapping, aseptic packaging machines, cartoning machines, bagging machines and sterilisation machines. Advanced packaging machinery that have low downtime for high volume production is another category that is imported. Exporters of packaged goods have also indicated higher inclination towards imported machinery in order to maintain product quality to adhere to export standards.
Total export of packaging machinery stood at Rs 8.4 billion in 2016-17 and has grown moderately in the recent years. Established domestic players are exploring opportunities in overseas markets across Africa and South-East Asia.
Leading domestic manufacturers of packaging machinery include Nichrome India, Samarpan Fabricators, Mamata Machinery and IPN India. Multinational players such as Bosch, Omori, ITW, Hassia and Mespack have set up facilities to target domestic market as well as export potential.
Packaging machinery sector is on an expansion path in India. The domestic market is gaining ground supported by increasing thrust and growing investments in food processing. The existing low levels of processing of fruits and vegetables present a lucrative opportunity for value addition and witness significant investments. The government has also outlined several initiatives to encourage greater processing of perishable foods. The demand for packaging machinery is well set to expand backed by expansion of domestic market as well as greater opportunities in international markets.
(The author is senior consultant, Madras Consultancy Group)