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Plastic Packaging Industry: striving for niche amidst growing environmental scrutiny

Plastic is gradually losing the market share in the packaging industry

Internationally, every year around 4-5 billion units of material is used for packaging. The usage of packaging material has grown approx. 2.5 per cent CAGR between 2006-14. This is composed of 4.5 per cent CAGR for non-plastic units’ growth against 1.8 per cent CAGR for plastic units. A higher growth in non-plastic based packaging units has led to an increase in their market share by 4-5 per cent during 2006-14.  

Composition of World Packaging Industry (bn units)

(Source: Bloomberg, Televisory’s Research)

(A unit here is defined as a bottle, container, pouch, tube or any small container vessel used for packaging)

It is interesting to note that adoption of non-plastic packaging has grown at a much higher rate between 2010 to 2014 as compared to plastic packaging. This was a combined effect of lower base (number of units used previously) of non-plastic units, in addition to progressive stringent measures adopted to restrict and curtail the use of plastic. Globally, national committees and international environmental agencies are pressing for the plastic ban due to the pollution caused by the material as plastic does not decay naturally.

High Increase in Adoption of Non-plastic Packaging  

(Source: Bloomberg, Televisory’s Research)

There has been an overall slowdown in the growth of plastic packaging market between 2010-14 (0.5%) as compared to 2006-10 (3.2%). This is because of the aggressive campaigns by environmental agencies and governments across the globe, such as:  

  • British Retail Consortium spearheaded the plastic bag cut down in retails shops
  • Countries like Rwanda, Eritrea, Kenya, Mauritania, Tanzania, China, Taiwan and Macedonia have completely banned the plastic bags
  • India banned the usage of plastic sachets for tobacco
  • There is a ban on plastic cigarettes filter in many countries

In addition to the above, there are many legislations that either have been passed or are under consideration to curb the use of plastic in different parts of the world.

Food and beverages gain share in the plastic packaging market, whereas tobacco tapers

The demand for plastic packaging has grown by about 380 bn units from 2006 to 2014. However, this increase was not uniform in the constituent sub-markets. As cited above, the ban on the plastic used in tobacco sachets and cigarette butts have had a tremendous impact and resulted in the reduction of plastic in this end user segment. On the other hand, food packaging gained market share due to increased commercialisation of packed food products.  

Mostly, food products and beverages, lack alternatives in the form of packaging material since protection and preservation is a concern. Thus, any external regulatory intervention in this market has been minimal. ‘Food packaging and soft drinks packaging’ cumulatively gained around 8-10 per cent of the market share between 2006-14 and currently account for over two-third of the plastic packaging market. Televisory expect ‘food and beverage segment’ to continue to capture the market share in the future.

Healthcare segment, which is a part of ‘other goods’, is also expected to continue to capture the market share. 

Plastic Packaging Demand by End-User Segment (bn units)

(Source: Bloomberg, Televisory’s Research)

Soft drinks packaging: a driver for growth in the future

In the past, glass bottles have been widely used to pack soft drinks. But nowadays glass bottles are replaced by plastic bottles because of the ease of usage. Although the use of plastic over glass is more harmful to the environment, soft drinks packaging segment is yet to receive a substantial environmental warning which may hamper the growth in this segment. 

Market Analysis of Plastic Packaging Industry

(Source: Bloomberg, Televisory’s Research)

The key points which can be drawn from the above table are:

  • Food and soft drinks packaging market are expanding at a higher rate, though food packaging has lost a negligible part of its market share
  • Soft drinks segment is most likely to drive the growth for plastic packaging industry with the highest rate of growth in the market size as well as high rate of gain in the market share
  • Tobacco segment is expected to be a major dampener with declining market size and reducing share of plastic packaging
  • Given the above market conditions, Televisory’s estimate is that the demand for plastic packaging industry will grow at 8-10% CAGR by the end of 2016 to ~3 bn units, accommodating the shift from plastic to non-plastic packaging materials

(Note: Televiosry has not incorporated any provision of loss of market due to regulations against the plastic bottles being materialised.)

 

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