E-commerce aids packaging sector
The estimated market size of the global packaging industry stood at $917 billion in 2019, with expected increase of 10% during the pandemic. Photo: file
The thriving e-commerce industry in Pakistan has simultaneously proved to be a blessing for the packaging sector, which is recording a phenomenal growth in recent months.
Topline Securities Research Analyst Mehroz Khan underlined that the sector, which included flexible packaging, film packaging, paper and paperboard, etc was likely to be a major beneficiary of Pakistan’s improving economic activity driven by consumer demand and e-commerce boom.
“Increasing young population, urbanisation, per-capita income, consumer consciousness and e-commerce revolution are driving the demand for the packaging sector,” he said.
Businesses from the pharmaceutical and home appliances sectors were the main customers of the packaging industry, he added.
In a report, the analyst projected that the flexible packaging industry would grow at a five-year compound annual growth rate (CAGR) of 15%, which was in line with the previous five-year CAGR.
“We also anticipate the paper and paperboard sector to grow at a five-year (FY22-FY26) CAGR of 5%, against the previous five-year CAGR of -2%,” the report added.
Flexible packaging, due to its specific characteristics, was growing at a much better pace than the rest of the industry, Khan pointed out.
“It also offers superior margins compared to the rest of the industry as a major proportion of raw material used by the flexible packaging segment is procured locally.”
He mentioned that the paper and paperboard sector’s volumetric growth remained subdued, but the reduction in raw material (waste paper) prices during FY15-FY21 helped lift its margins.
Furthermore, the imposition of anti-dumping duty in FY18 in the range of 2-36% for five years helped contain import of paper and paperboard products (finished and semi-finished).
“Currently, waste paper prices are hovering around $300 per ton due to the global increase in commodity prices, which poses a key risk to the sector,” Khan underlined.
Regarding film packaging, the analyst mentioned that “Biaxially-oriented Polypropylene (BOPP) film and Cast Polypropylene (CPP) film are two key products used in the manufacturing of packaging industry”.
BOPP films are used in food packaging, whereas CPP films are used in both food and non-food packaging.
“In Pakistan, the use of BOPP films on a per-capita basis remains much lower at 0.28 kg against 1.38 kg in the world,” he said, adding that BOPP films’ domestic market had been growing at a CAGR of 6% over the past five years (2015-20).
Arif Habib Commodities CEO and Managing Director Ahsan Mehanti was of the view that the packaging industry grew as consumption thrived following the third wave of Covid-19 in the country.
Moreover, recent Pakistani rupee depreciation boosted export orders for the packaging sector, he said, adding that the surge in container freight cost, however, could impact its exports.
Citing recent studies, Employers Federation of Pakistan (EFP) President Ismail Suttar underlined that the e-commerce sector in Pakistan had witnessed a massive surge, “depicting a year-on-year growth of 33.3% in fiscal year 2019-20 alone”.
In that context, he recalled that only 3% respondents had preferred online shopping back in 2014, when a survey was conducted in which around 2,681 people were questioned.
However, recent surveys depicted a handsome rise in that percentage, showing a growing inclination towards online retail systems.
“Due to the change in trends, environment and climate, many people are moving towards a simpler and more convenient way of shopping,” he remarked.
He was of the view that the rise in e-commerce had given the necessary boost to many industries including the packaging sector in the region.
The estimated market size of the global packaging industry stood at $917 billion in 2019, with expected increase of 10% during the pandemic, Suttar mentioned.
The industry had experienced a significant growth in food packaging, delivery and takeaway, particularly due to global urbanisation, fast-paced consumer lifestyles and adoption of e-commerce, he maintained.
Suttar underlined that convenience, competition and trust factor in the sector had made it more sensitive to customer reviews and negativity. The packaging element of the e-commerce industry not only expanded in quantity but also in quality, he noted.
“It is safe to say that the sector is foreseeing further growth in the region, particularly due to government’s support, availability of low-cost labour and the increasing trend of urbanisation, consumerism and e-commerce,” Suttar highlighted.
He suggested that the local packaging industry, in spite of its strengths, should learn, analyse and adapt according to the consumer needs, in order to compete with the international packaging industry.
Published in The Express Tribune, March 19th, 2022.
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