Box and Carton’ turning Profitable - A report

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‘Box and Carton’ turning Profitable:

The ecommerce giants in India pushing more demands to packaging box makers and its look sustainable in nature. Online shopping is creating a place in consumers’ habit to buy from website in order to save time. Industry estimates suggest Amazon and Flipkart — top two players in the $17-billion ecommerce sector — consume 1,200-1,400 tonnes of paper that goes into making boxes and printing bills.

There are 250 carton makers with automatic machines and 10,000 with semi-automatic presses. Ecommerce comprises 12-15% of demand, which was practically non-existent five years ago—according to kraft paper maker  Driven by ecommerce growth of around 15% a year, India is the only market where paper consumption is increasing — 6-7% annually.
For Amazon and Flipkart, the demand for paper has almost doubled in the past three years and will see similar growth in the next three to five years. Flipkart works with 40 carton suppliers and, despite a focus on going paperless, it expects demand for boxes to keep growing. According to “We procure cartons from the closest point possible, which helps minimise transport time and costs and grow ancillary industries around our place of business”. Paytm, Myntra, Jabong, FreshMenu, BigBasket, Grofers and the innumerable other such firms have seen significant demand uptick for brown bags, boxes, paper. 

Packaging, which it shares with carton and paper suppliers to improve quality. Besides, it supports vendors with data analysis, which helps them design for multiple SKUs across 1.6 million products on its marketplace. The customer is not charged for packaging; neither does the marketplace pay. It’s the seller who bears the cost. So a laptop’s packaging could be Rs 35-40 and a power bank’s around Rs 10. Even for bills, white paper is bought by ecommerce companies via resellers.
The Indian Corrugated Box manufacturing industry is presently worth INR 15,000 crore. The growing Indian middle class and changing lifestyles have witnessed the corrugated box industry increasing by 12-14% annually in the past five years.

Indian paper companies have reported double-digit earnings growth over the past two years; and their stocks have been bullish. Profits at these paper manufacturers had surpassed the 2016-17 numbers in the first nine months of 2017-18, with improved efficiency, a favourable pricing environment and reduction in interest expense.
According to IIFL research, the Indian paper market will outpace the global industry. It notes that over FY17-21, industrial paper, recycled fibre-based packaging boards and copier paper segments are expected to witness healthy performance. The packaging boards segment, especially, is expected to post robust volumes on account of increasing demand from ecommerce and FMCG. Kraft paper or cardboard volumes are expected to increase from 4.8 million tonnes in FY17 to 6.7 million tonnes by FY21. 

There’s plenty of headroom for paper growth, as ecommerce is less than 4% of the $500-billion retail and more shoppers are coming online. New, ecofriendly packing of online orders may not be far way. As consumption increases (like in the US or Europe), people end up discarding their own weight in packaging every 30-40 days, notes to a Stanford University study. That’s a great outlook for paper box makers — at least till the environmentalists come knocking. 

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