Paper Cup Industry in India By Ayush Goyal and Chaitanya Shangloo - IIFT Delhi Ever since the former railway minister Lalu Prasad Yadav introduced the Kulhads into the Indian railway catering systems, there has been an ensuing debate over the cost and benefits of the non plastic option. Though what started as a surprising move, not because Kulhads were new to the system, but because they were being used at a commercial level prompted many entrepreneurs to take the ecofriendly business route. But replacing plastic variants has been a challenge of sorts, mostly because of their ease of carrying, ease of transportation, weightlessness and odor free nature. This has led to extensive usage of plastic cups for not only beverages, but also for serving ice- creams, sweet corn, sweet delicacies and packaged food items. So any decomposable and eco-friendly substitute for the plastic cups can only be viable for commercial usage if it can offer additional advantages of plastic cups. Paper cups, with their inherent advantage of being easily decomposable, come in all sizes and shapes and share the ease of use, temperature variations and odorless characteristics of their plastic counterparts. The growing demand in the urban and semi urban markets, opening up of international food chains and the acceptability of quality and eco-friendly products has made the production and distribution of paper cups viable as never before in a country like India. This has led us to evaluate a primary report on the industry and its potential in India. Though the survey and the primary research have all been done with the NCR region in perspective, the implications and projections are applicable on a pan India basis.
Usage and market potential Paper cups are currently being used in all sorts of ready to eat products. The sizes available range from 60 ml to 550 ml variants. Paper cups, in the past decade as commercial commodity, have been used primarily for beverage serving, especially coffee and tea. Since paper cups are made out of food grade papers, which are fast expanding substitute to plastic and it families, they are being used now for nearly all catering purposes: corns, sweets, ice creams and yogurts. And this is an ongoing trend as paper cups are expected to be used in increasing quantities since they do not have the drawbacks drawbacks inherent in plastic products. products. Traditionally also, paper paper packaging has been used consistently in our country. It is only with the increased Chemically Inert &
consumption and regular demand pattern that the future of paper cup Decomposable
industry looks promising.
Odorless
A recent survey done in the NCR region puts in the supply at the wholesale level at around 2 lacs per month. Seasonal demand stimulated by the wedding and the festivities season puts another 1 lac Light-Weight
to 1.5 lac cups per month to this figure. And this is only for the consumption at the small retailer shops and personal home users. The table below shows the findings of the survey done and cross-checked in
the three retail markets of South Delhi. This shows the demand side picture of the market potential:\
Paper Cup Demand Analysis By Type of Outlet Retail Outlets Dominos Nirulas
Demand per Month 4500 2400
2500
Sizes stocked 150 ml 60ml, 150 ml, 330 ml, 450 ml, 550 ml 150 ml, 250 ml
Usage Soft drinks, Water Ice-Cream, Soft drinks, Sundaes, Shakes Coffee, Tea
Café Coffee Day Pizza Hut
1500
330 ml, 450 ml
Soft drinks
60ml, 150 ml, 330 ml, 450 ml, 550 ml 250 ml, 330 ml
Ice-Creams, yogurts, Sweets Lemon Soda, Soft drinks, Coffee Take away for home Parties
2000 Gianis (Premium Ice Cream and Shake Parlour) 4500 Pan Shop General Retailer Shop
300 - 1000
250 ml
The supply side and the demand side data suggest two interesting patterns in the usage pattern of the paper cups. Firstly, the consumption and stocking of paper cups has seen a drastic increase over the years. Though plastic cups sell nearly one and a half times as much as paper cups, the percentage of market that paper cup commands is a close second with a higher growth rate, significantly different from a virtually nonexistent one nearly a decade ago. To add to it, paper cups have also replaced the plastic and thermocol variants for temperature sensitive food items like ice-creams, yogurts, tea, coffee and soft drinks. Secondly, the demand for designer and printed cups has been on the rise. According to Mr Koli, the biggest wholesaler of paper cups in Sadar Bazaar market, designer cups sell more easily and give better margins than their plain counterparts. Whereas the standard 330 ml paper cup costs Rs. 70 / 100 pieces in the wholesale market, a same size designer Mickey & Mini cups sells for Rs 60 / 48 pieces. Though the designer Chinese cups are currently rare in the market, they sell for nearly 2 times the corresponding non designer variant. Another boost for the usage of paper cup comes from the growing green concern. Indian railways and several government institutions have banned the usage of plastic cup in entirety. The Northern zone of the Indian railways alone uses nearly 2.5 lac cups on a daily basis. The ease of decomposability, recycle and reuse has prompted many governments to promote the use of paper cups in the state, especially the hilly tourist destinations. Since the process of manufacturing is also eco-friendly for paper cups, the market offers huge potential for a budding entrepreneur in this country. Not only can he benefit from the carbon credits being earned from such an industry, the increasing acceptance assures him of a long pattern of sustained demand.
Financial Viability The following table describes the calculated financial details for a specific paper cup manufacturing facility that might be setup:
Sl
1st year
Particulars
1to 3
2nd year
3rd year
4th year
1,50,00,000
1,50,00,000
1,50,00,000
4 to 12
Month Month
1
Installed
1,50,00,000
Capacity /annum 2
No.Of.working
75
225
300
75
450
900
300
300
Days 3
No.of.shifts
4
Estimated
16,800 33,600
900
50,000
900
50,000
50,000
Prod/ day 5
Estimated Annual
88,20,000
1,50,00,000
1,50,00,000
1,50,00,000
Production 6
Value of sales
35.28
60
60
60
(In lacks)
PARTICULARS
1ST Yr
2ND YR
3RD YR
55.44
55.99
4TH YR
5TH YR
56.55
57.12
-
-
Income
Sales
Other income
32.34
-
-
-
Increase in stock
Total
2.79
2.00
0.05
35.13
57.44
56.04
0.10
56.65
0.15
57.27
Expenses:
Raw material
18.62
31.92
32.24
32.56
32.89
Packing Materials
0.88
1.51
1.53
1.56
1.58
Transportation 0.76 1.30
0.60 1.36
1.21 1.43
1.33 1.50
1.33
1.61
Direct Labor
1.47
2.52
2.65
2.78
2.92
Partner Salary
3.00
3.00
3.00
3.00
3.00
Salary
0. 60
0.66
0.73
0.80
0.88
Repair & main
0.25
0.28
0.28
0.29
0.29
Security Charges
0.33
0.06
0.03
0.01
-
Admn. Expenses
1.38
1.52
1.59
1.67
1.76
Selling Expenses
0.65
1.11
1.12
1.13
1.14
Deprecations
2.45
1.85
1.40
1.06
0.80
30.99
46.93
47.26
47.75
48.37
Total
Profit before
4.14
10.51
8.78
8.90
8.90
1.81
1.40
1.04
0.75
0.43
Interest and Taxes
Finance Charges
Power & Fuel
Profit before Interest And Taxes
2.33
9.11
7.74
8.15
8.47
Tax on Income
0.82
3.19
2.71
2.85
2.97
Profit after Tax
1.52
5.92
5.03
5.30
5.51
Distribution and Manufacturing The distribution channel for this industry is split up into two kinds, one follows the clichéd distribution network as that of any consumer goods industry from the manufacturers to the distributors to the wholesalers to the retailers and then to the end consumer. The other part is for the institutional buyers such as fast food chains and restaurants who have central purchasing units who make their purchases for all the outlets at one single point and then as per the demand at various outlets and then is supplied via their own vehicles or through specific logistics service providers. Manufacturers (China, Mumbai & Ahmedabad)
Central Purchasing Units
Distributors
Wholesalers
Retailers and General shops
Outlets (Company owned/
Franchisees)
End Users
