Folding Carton Trends in India and Southeast Asia

Increasing per capita income, growing urbanization, and a young population will drive the growth of the packaged food and beverage (F&B) segment in both India and Southeast Asia (see Figure 1). This will support the growth of folding carton packaging applications in food retail and foodservice – for example, paper packaging for burgers, wraps, and breakfast cereals. Also, growing concerns around the sustainability of plastic packaging will benefit paper packaging.

In the next five years, the folding carton segment is expected to grow at a 4.3% and 0.6% CAGR in India and Southeast Asia [1], respectively, according to GlobalData (see Figure 2). In 2019, the F&B segment represent 54% of folding carton applications for India and Southeast Asia combined, compared to 44% in 2014. This percentage of F&B applications is expected to further increase to 59% by 2024 – an indication that F&B paper packaging is growing at a faster rate than non-F&B packaging.

[1] Excludes Vietnam as numbers are not available.

A Few Large Players, Along With Many Small Companies

Folding carton milling capacity has grown at a 5.6% CAGR for India and 1% CAGR for Southeast Asia over the last ten years (see Figure 3). India’s high growth rate has been driven by investments in greenfield projects by JK Paper, Emami Paper Mills, Krishna Tissues, Mehali Papers, and Rainbow Papers. Within Southeast Asia, Indonesia has the lion’s share of capacity (55%), followed by Thailand (19%), Vietnam (16%), and Malaysia (8%).

Recycled grades have grown at a 3.1% CAGR over the last ten years, and dominate the segment with an 80% share in capacity (see Figure 4). The region is observing significant growth in the packaged food segment, primarily in non-contact categories like breakfast cereals and tea, which is driving the growth of recycled-grade paper packaging.

Over the last ten years, virgin grade (ivory board) has grown at a comparatively higher 6.8% CAGR, on growing demand from F&B and non-F&B categories. Substitution of plastics (e.g. single-use) with paper will offer further growth opportunities for virgin-grade paper packaging. However, the lack of access to fiber/pulp is a limiting factor.

Both India’s and Southeast Asia’s folding carton market is characterized by the presence of a few large and many small players, primarily domestic companies. The market share of the top 10 players in India has increased from 38% to 44% over the last five years (see Figure 5). This increase in market presence was mainly driven by greenfield projects, as mentioned above. In contrast, in Southeast Asia, the market is much more consolidated, and the market share of the top 10 players has stayed flat at around 67% over the last five years (2015-2020) (see Figure 6).

Consolidation Will Continue in the Milling and Converting Segments, but Strategies Will Be Different

In India and Southeast Asia, consolidation in the folding carton production (capacity) segment is expected to continue and be largely driven by domestic companies through greenfield investments. At the same time, closures of small, stressed, and inefficient mills will be another driver. Many of these mills are old and run on old technologies, and they are not attractive from an acquisition perspective.

In contrast, the region has seen quite a few acquisitions in the highly fragmented converter segment (see Table 1). Consolidation of this segment through M&A is expected to continue in the next five years, as global players who have been active in acquiring companies in this region are expected to remain interested. The growing foodservice paper packaging segment is an attractive business opportunity, which also provides opportunities on the back of the sustainability trend.

In both India and Southeast Asia, growing demand for folding carton packaging offers growth opportunities for players along the chain. Both the folding carton production segment (primarily in India) and the conversion segment are expected to consolidate further in the next five years. Folding carton production (mills) is expected to consolidate through greenfield investments by local players. In the converting segment, M&A is expected to be the key consolidation driver, with a growing interest among global players.