RISI seminar highlights Indian pulp and paper industry

Innovative packaging is the key
One of most repeated aphorisms at the RISI conference was: FMCG companies and brand owners utilise innovative packaging as a tool to attract consumer attention and highlight product differentiation. This was observed quite frequently in packaging industry where innovation is driven by cost reduction, globalisation, sales revenue, change in consumer behaviour and other such factors. 

Usman Shaik and Divya Kumar, senior research analyst, Paper Packaging, Beroe Consulting, cited few examples to illustrate that innovative packaging can drive market growth. One such instance is when the chewing gum manufacturer, Wrigley, discarded the paper sleeve around its gum brands such as Orbit, Spearmint etc and used a slim pack; it was able to save 745 metric tonne of paper per year in India, Europe and Russia. India witnessed a similar development when Parle G biscuits were packed in a wax paper pack. Today it is available in a contemporary, premium BOPP pack with attractive side fins. The airtight pack helps to keep the biscuits fresh and tastier for a longer period.

The innovations may not be just to reduce spend of the company but can also be used to capture new market by improving aesthetics or incorporating functionalities and user convenience into the pack. The computer manufacturer, Dell’s 3C packaging strategy resulted in 40 % increased usage of recycled content in corrugated boxes and reduced packaging volume by 12.1% making packaging more sustainable.

“With a strong potential for retail growth, there is a tremendous opportunity to increase packaging consumption in the country,” observes Divya Kumar, senior research analyst, Paper Packaging, Beore Consulting.

Realising the importance of innovations in packaging Paper Products Limited (PPL), which partnered with Finland-based packaging major Huhtamaki Oyj, has initiated a New Application Structure and Products (NASP), to develop new packaging products.  

The structure of the Indian paper industry
According to Ajay Srinivasan, director, Industry Research, Crisil, the 11.5 million tonne Indian paper industry comprises of 5.3 million tonnes paperboard. This contributes to 22% of the $17.3 billion Indian packaging industry which is clocking at 14-15% growth. Srinivasan stated, FDI in retail will add to this growth. Moreover, the per capita packaging consumption in India is 1kg, which appears to be meagre when compared to 14kg of Australia and 15kg of Japan. The numbers suggest immense opportunities for Indian paper industry. 

The paperboard demand growth is strongly linked to industrial production and is driven by growth in organised retail, pharmaceuticals, textiles, food and FMCG products. Srinivasan says, “The product mix is shifting from tertiary packaging towards consumer packaging using recycled and virgin boards.”

While writing and printing (W&P) paper in India contributes to 3.7 million tonnes, 85% of this is uncoated paper and 15% being coated paper. “The W&P paper demand growth is expected to be 7% in next five years owing to improvement in economic growth in long term perspective,” adds Srinivasan.

Li Meng, Asian Graphic Paper Economist, says, “India will remain a modest net importer of coated grades of paper

The Indian newsprint segment is 2.1 million tonnes. In India, the demand for newsprint is large, which according to Meng is predicted to rise by 4% per year in 2013-14. But as compared to demand the production of newsprint is low and hence India does not export newsprint. 

Among the 800 paper mills in India, the 600 operational mills can be classified categorically as 40 wood-based, 397 agricultural residue based and 155 recycled fibres and market pulp based as of 2010-11. Rajiv Gupta, chief executive officer of Blue Apple Tradelinks estimates that paper industry would be growing at the present rate of 7-8%.

As per a Crisil report, Indian paper industry has seen capacity upgradation of two million tonnes in last five years majority of which has been in W&P segment. This includes one lakh tonnes by ITC, 2.15 tonnes by Rainbow Papers, 1.7 lakh tonnes by TNPL and 1.4 lakh tonnes by West Coast. In next two years, 1.8 million tonnes capacity addition is proposed. “Capacity additions coupled with subdued demands will bring down the operating rates in 2012-13 which will be lowest since last five years and then it will improve from 2013-14 due to improvement in demand driven by economic growth,” adds Srinivasan.

Pressing concerns
The focus of the discussion at the conference was challenges faced by Indian paper industry which as Sunil Sood, director, April Fine Paper Trading, describes have lead to a tsunami in the industry. The increasing cost of basic inputs, non-availability of good quality fibrous raw materials, environmental issues, poor brand image, lack of skilled manpower and infrastructure are the major concerns that are affecting the industry adversely.

All the speakers resonated over the point that Indian pulp and in a way print industry has tarnished its image to become a sunset industry over the years and has thereby failed to attract young generation to choose a career in this industry.

Gupta observes that very few academic institutions focus on forest industry and there is a lack of transparent talent management process in the companies. According to Gupta these are some of the reasons for this. According to Sood, Indian industry requires more than 3,000 technical personnel. “We need to take efforts to attract and retain talent.”

It has to be noted that paper and pulp industry is always blamed for environmental pollution and deterioration of ecology. This is the partial truth; it has to be considered that this industry contributes to farm forestry and agro forestry to source its raw material requirement.

According to Gupta, papermaking was invented from non-wood materials in China almost 2,000 years ago and we must re-invent the wheel and get back to use agro residues and other non conventional raw materials for paper making.

Today, when the supply of preferred raw materials is limited and diminishing, the non-conventional raw materials will become prominent in years to come. “Opportunities do exist for further increasing the use of non wood fibres- all that is required is courage, imagination and creativity,” says Gupta.