Present scenario
In 2022, Indian stocks in the paper and paper products manufacturing sector outperformed the overall broader market indices in line with the country’s move to phase out several single-use plastics to reduce plastic pollution.
The Centre has issued guidelines to states asking them to ban the use of select single-use plastics effective July 1, 2022, which was widely appreciated by various industries and the international community.
Single-use plastics are typically items that are discarded after being used only once and do not go through the recycling process.
Though the ban on such items took effect on July 1, shares in paper and paper products began to rise earlier this year.
So far in 2022, shares of West Coast Paper rose 46 per cent, JK Paper 44 per cent, Andhra Paper 51 per cent, Ruchira Paper 44 per cent, Star Paper Mills 25 per cent, Rama Paper 14 per cent, Genus Paper and Boards 27 per cent, Yash Pakka 21 per cent, and Balkrishna Paper Mills 18 per cent, data revealed.
Earbuds with plastic sticks; plastic sticks for balloons; plastic flags; candy sticks; ice-cream sticks; polystyrene (thermocol) for decoration; plates, cups, glasses; cutlery such as forks, spoons, knives; straws; trays; wrapping or packing films around sweet boxes, invitation cards, and cigarette packets; plastic or PVC banners less than 100 microns and stirrers. These are some of the biggest contributors to plastic pollution.
Experts believe paper can be a major alternative as bamboo as a raw material is produced in abundance in the country and it’s a highly biodegradable item. Through business expansion, there are many small and big enterprises and entrepreneurs in the country who can meet the rising demand for such alternatives in the country.
In order to properly monitor the process of phasing out of such plastic articles, a National Control Room has been established in the Central Pollution Control Board to monitor the enforcement of the ban, besides asking the state boards to undertake comprehensive awareness activities, including a social media campaign, interactive meetings with industries, colleges, schools, and other institutions.
The state boards have further been directed to intensify inspections of industrial and commercial establishments for effective implementation of the ban. On the demand side, directions have been issued to e-commerce companies, the leading users of single-use plastics, as well as plastic raw material manufacturers, to phase out such items.
Several industries have previously argued that India has a limited production capacity for alternative solutions to such banned items, and that any shortage of such articles would raise manufacturing costs and reduce profit margins.
To ramp up the production, capacity-building workshops are being organized for industrial units to provide them with technical assistance for the manufacturing of alternatives to banned single-use plastic items with the involvement of various government agencies.
Provisions have also been made to support several enterprises in transitioning away from single-use plastics.
So, paper packaging is set to revolutionize the food sectorDuring the pandemic, everyone has learned the importance of putting their health and safety first. In turn, this led to the move towards a more sustainable approach to living. In any industry, the manufacturers, as well as the customers, have started looking for options that have minimal impact on the environment and their health. Keeping this in mind, the packaging sector has started to opt for more sustainable options like paper to reduce any adverse environmental impact.
And now, with the Indian government banning single-use plastic, paper packaging is gaining momentum in the food industry.
Paper-based packaging materials are made from renewable resources that are replanted to ensure a sustainable supply. Along with being kind to the environment, paper packaging has proven to be cost-efficient, convenient, and flexible.
“Paper packaging is both lightweight and strong, making it an incredibly versatile material. Consider the brown paper bag—you can carry groceries, collect lawn clippings, use it as a book cover for kids, compost it, or store it to be used again and again as a paper bag. The possibilities are endless!The surge of online shopping amid the ban on SUP has also fuelled the usage of paper bags.
The packaging industry has been well known for adding value to almost every sector. The paper packaging market contributes over 30% of the overall packaging market share and dominates other packaging categories. Growing consumer awareness of sustainable packaging as well as strict environmental protection regulations has increased consumer awareness and influence, which justifies the future of the paper packaging industry.
Over time, the packaging industry has faced countless challenges as consumer preferences change, but by utilizing upgraded technologies, such as aseptic packaging, paper packaging, and biodegradable packaging, among others, to enhance the shelf life of food products, the industry is on the runway. Additionally, with the rapid growth of the Indian e-commerce sector, this industry will continue to flourish.
Is Paper a More Sustainable Flexible Packaging Material Than Plastic?
There is a need to be more paper and less plastic and that the call for eco-friendly food packaging made from renewable sources is becoming more and more relevant.
The standards that food packaging must meet today are extremely diverse and demanding, and the use of plastics and non-recyclable composite materials should be minimized.
Modern paper packaging offers more protection than necessary to individual products. A complete replacement of plastic with paper is a complex process, but one that has already begun.
The rising consumer demand for eco-friendlier products is fuelling the research and development of new packaging options, and until there are cost-effective packaging options that can replace what’s mainly being used today, the industry may benefit by offering consumers alternatives.
Plastics use in flexible packaging, like many other major plastics applications, has come under intense scrutiny in recent years as sustainability concerns have grown and spread globally.
Paper is often lauded as a far more environmentally friendly alternative, and historically, papers have been used in flexible packaging for many applications, including confectionery and dried food.
By the early-2000s, however, paper’s demand as a flexible packaging substrate began to decline due to competition from down-gauging and the rise of plastic alternatives.
Paper vs. plastic: comparing green credentials
After many years of declining demand, paper-based flexible packaging is growing in popularity with the ban on single-use plastics and as end-consumers demand more sustainable packaging solutions.
“Paper is far more biodegradable than plastic and can be very easily recycled. But it often ends up in landfills, where its degradation rate slows while it takes up more space than the same weight of plastic. Additionally, paper-based flexible packaging is often laminated with plastic or aluminium or coated with resin, rendering it non-recyclable.
Plastic’s properties make plastic packaging ideally suited for efficiently containing and protecting products during shipment and delivery to customers. However, despite its advantages, plastic is made of a non-renewable resource, whereas paper is made of trees. Furthermore, plastic can be recycled, but it is currently difficult to achieve high levels of post-consumer recycled content in plastics due to post-consumer waste contamination.
Conversely, paper is relatively easy to recycle as it can be re-pulped. This means it does not rely on chemical reactions and is less sensitive to contamination. As such, there are some environmental advantages to using paper as a substrate for flexible packaging if it does not increase food waste and/or compromise other properties essential to the packaged product.
This has led to some brands replacing plastic packaging with paper.
Paper is a sustainable alternative
Food companies searching for more responsible choices are turning to paper. As food packaging, paper is a cost-competitive alternative to plastic and other fossil-fuel derived materials that are both sustainable and recyclable.
Paper also performs consistently as well as or better than plastic at ensuring that food and beverages arrive intact, at the right temperature, and remain safe for consumption. Already, paper is widely used as an insulator for applications ranging from the sleeve on a cup of coffee to the high-voltage power cables on submarines.
It is found that paper can be competitive with expanded polystyrene (sometimes known as Styrofoam) and a plastic bubble pouch at keeping products cool. Companies needn’t compromise since it’s possible to develop industrial and consumer-facing cold chain solutions composed of 100% sustainable, biodegradable paper.
Paper packaging also mitigates some of the lesser-known ways plastic contributes to climate change.
The waste associated with packaging shows how putting thought into food logistics can have a meaningful impact. Both paper and plastic can serve as void fillers, cradling boxed foods and protecting them from damage. But, in addition to being made with renewable resources that are also curb-side recyclable, paper is available as an on-demand solution.
The difference between paper and bubble wrap is similarly clear. While both can be used as protective packaging, bubble wrap’s volume is mostly air. As a result, rolls of bubble wrap used in factories are less efficient to transport than tightly wrapped rolls of paper, resulting in a higher emissions profile. Not only is bubble wrap more environmentally damaging than paper to manufacture and dispose of, it’s more damaging to move across the supply chain.
Packaging is one aspect of how the food business – and most other industries – needs to reassess its efficiency and environmental impact. Applying this kind of thinking across the food supply chain will go a long way to reducing emissions and waste while saving money. Amid consumer expectations that food brands reflect their environmental values, paper fulfils the three Ps of successful food packaging—protection, preservation, and presentation.
Indian paper industry at an inflection point, sees healthy demand for packaging papers
The paper industry is witnessing a paradigm shift from the demand perspective, with demand for the packaging paper (PP) segment witnessing a rise, with growing demand for packaging from e-commerce, food and food products, FMCG, and the pharmaceutical sector.
The domestic paper manufacturing industry is currently at a juncture where the newsprint papers (NP) and printing and writing papers (PWP) segments are gradually losing out to the packaging paper segment. The installed capacity levels in packaging paper are seen picking up progressively, aided by the capex incurred in the recent past over FY2017 to FY2022, along with the capex planned over the next two fiscals till FY2024.
For the sample set of entities understudy, the installed capacity in the packaging paper division is expected to be largely on par with non-packaging paper (NP+PWP) capacity by FY2023 and notably surpass the installed capacity by FY2024. On the earnings front, rising raw material prices, largely driven by rising wastepaper prices and elevated fuel prices (primarily coal), may keep the margin under check in the near term.
The year-on-year revenue growth for the paper industry plummeted in FY2021 owing to pandemic-induced disruptions in the form of factory lockdowns and curtailed demand for the NP/PWP segment due to the closing of schools and colleges and offices working in hybrid modes.
However, with continued demand from the food, FMCG, pharma, and e-commerce sectors, especially for packaging paper, the sector is expected to grow by nearly 30-31 percent in FY2022, albeit from a lower base than in FY2021.Growth in the next two fiscal years is expected to be in the 8-10 percent range, driven by demand from the packaging segment.
One major near-term concern for the paper industry has been rising wood pulp and wastepaper prices and elevated fuel costs, given that the industry also relies largely on imported coal, wherein prices have risen substantially over the last year.
Even though the industry is managing these challenges by passing on such rises to the final customer as well as absorbing, wherever possible, on an aggregate basis, the long-term demand potential for the Indian paper industry remains intact, given the rising penetration of different forms of paper in daily livelihood and is tilting towards the packaging paper segment.
Types of paper used in food industry
The various types of paper that are used in food packaging include:
Unbleached Kraft paper is formed by a sulphate treatment process and looks light brown in terms of appearance. It is the strongest paper when compared to the rest of the papers. It is basically used as an outer packaging layer to prevent dust, moisture, and shock. It is used in the packaging of sugar, flour, vegetables, and dry fruits.
Bleached Kraft paper is also formed by the sulphate treatment process, but is bleached to make it whiter and brighter. It is the strongest when we talk about white papers. It is generally used where appearance, printability, and strength are important. It is used in envelopes, labels, and flour and sugar packaging.
Sulphite paper is lighter and softer than Kraft paper, and the polished surface makes it water and oil-resistant. It can be coated for better printing and is also used for lamination with plastic or aluminium foil. The wrappers of biscuits and confectionery are made up of these laminated papers.
Greaseproof paper is produced by the hydration of paper, due to which cellulose fibres break and make it more gelatinous to provide resistance to oil, fat, and grease. This paper looks translucent in appearance. It is used to wrap snack foods like butter, cheese, and cookies, as well as a few oilier foods.
Glassine paper formation is the result of an improved version of greaseproof paper. It has a very smooth, transparent and shiny texture. It is resistant to air and water. To separate the pieces, glassine is used as a liner/barrier between meat, fast foods, baked foods, etc.
Waxed paper prevents the entry of any type of liquid or vapour. The greater the wax amount, the greater the barrier strength. It is used in the packaging of milk, milk cream, cakes, etc.
Parchment paper is formed by acid-treating pulp, which makes cellulose more impervious to oil and moisture. It is used in baking due to its heat-resistant and non-sticky nature and is therefore also known as bakery paper.
Offset paper has a surface that is white and smooth, but the whiteness, tightness, and smoothness are lower than the coated paper. It is suitable for printing monochromatic or multi-colour book covers, texts, inserts, pictorials, maps, posters, and colour trademarks. And various packaging products, in recent years, are also used to produce dry fruit packaging bags such as chestnuts that are not demanding.
Due to its low heat sealability, less barrier property, and low strength, only plain paper would not be sufficient to preserve food for a longer time period. Therefore, paper is laminated with polyethylene or aluminium to enhance its barrier properties and heat-sealability. Sometimes, paper laminates are also used to pack spices, soups, and herbs.
Editors’ insight
Paper-based packaging materials are becoming increasingly popular as food producers—including leading FMCG brands—have set ambitious targets to reduce the use of plastics in food packaging and embrace eco-friendlier materials.
All in all, the food industry is experiencing a period of extreme change when it comes to food packaging. Consumers are increasingly looking to their favourite brands to present eco-friendlier alternatives to traditional packaging materials, but for brands it’s not so straightforward: testing the capabilities of new materials for food packaging—even sustainable ones—is a complex and time-consuming process.
For many multinational food companies, making the switch to paper-based food packaging is the next logical step in meeting their sustainability goals and reducing the amount of single-use plastics used in their packaging. Easily recycled across much of the world, paper presents an eco-friendly material that also offers surprising technical benefits and features that give many benefits, and we therefore expect to see significant uptake in paper-based packaging materials going forward.
While theoretically, paper companies should benefit from this ban, most paper companies do not manufacture any of these items and may not want to venture into them in the near term.
“ With the ban on plastic straws, large FMCG and agro-food companies have removed integrated plastic straws from small tetra packs of fruit juices as well as dairy products, and are shifting to paper-based straws and other alternative, sustainable solutions.
Leading companies, including Parle Agro, Dabur, Amul, and Mother Dairy, have replaced integrated plastic straws in the Tetra Pak with alternative, sustainable solutions.
Amul has a daily requirement of around 1 million small straws for its bestselling tetra pack sweet lassi, Masti Chaas and Tru flavoured milks alone. Admittedly, paper straws are at least six to seven times more expensive than plastic straws, but Amul plans not to pass on the increased cost to customers in the short-term.
Sodhi revealed that to ensure that long-term costs stay under control, the brand has plans to create biodegradable straw manufacturing units within Amul’s facilities soon. Moves are also afoot to redesign the spouts of small tetra packs to eliminate the use of straws.
Other FMCG giants like Dabur, Emami, Vadilal, Rasna, etc., are also set to meet the challenge.
Consumer goods major Dabur, which has a huge market share in the health drinks market with its Real brand of fruit juices, is also a major user of straws. Dabur has already commenced production of Real juice packs with integrated paper straws.
Dabur India is committed to meeting the regulations and will ensure that all packs come with integrated paper straws. And even though the paper straws are being imported and cost more, the company is currently absorbing the cost and not passing them on to consumers.
As per industry estimates, the cost per unit of a paper straw is 30-40 paisa, while that of plastic is 10-20 paisa.
Kolkata-headquartered FMCG major Emami, too, is all set to ban single-use plastics. It claims that in the past few years, they have gradually reduced the use of single-use plastics. There are some cost implications involved in transforming to a total ban, but the likelihood of a rise in product costs is not on the cards for the time being.
Several brands have already been in the transition process for some time now. Ahmedabad-based Rasna, the country’s largest soft drink concentrate manufacturer, is totally prepared for the plastic ban. The ban on single-use plastics will not affect Rasna as it claims that they are not using inferior quality plastic for even packaging purposes. For the past five years, they have already been using permissible grade plastics and none of their products require straws or plastic cutlery items currently.
Similarly, Vadilal Industries, a leading ice-cream maker in the country, said the ban on single-use plastics would not have any impact on Vadilal’s business as they do not use single-use plastic. Hence, the notification will not make any difference to them.
Finally, the ban on single-use plastic has fructified now. Although the benefit of this move on listed paper stocks is limited, it is pertinent to note that leading paper producers are seeing good traction in demand.
The paper industry is witnessing a paradigm shift from the demand perspective as the packaging paper (PP) segment is witnessing a rise, with growing demand for packaging from e-commerce, food and food products, FMCG, and the pharmaceutical sector
A recent ULS report comparing plastic and paper bags concluded that:
Plastic bags generate 39% fewer greenhouse gas emissions than uncomposted paper bags and 68% fewer greenhouse gas emissions than composted paper bags.Plastic bags consume less than 6% of the water needed to make paper bags. It takes 1,004 gallons of water to produce 1,000 paper bags and 58 gallons of water to produce 1,500 plastic bags.Plastic grocery bags consume 71% less energy during production than paper bags. Using paper bags generates five times more solid waste than using plastic bags.