Ecommerce plays a major role in making India the only market of growing paper consumption

Come New Year, MNM Triplewall Containers, maker of packaging boxes, will set up the third of its series of unique warehouses. The USP — catering to a single customer in a single industry, ecommerce. 

This dedicated warehouse is located next to one belonging to an ecommerce giant, though Manish Gupta, director of the 25-year-old Bengaluru-based firm, shies away from sharing client identity. 

Triplewall’s 10,000-sq feet Hyderabad store opened six months ago — again next to the warehouse of the same ecommerce major — and ships 5 lakh boxes a month. The boxes come in all shapes and sizes — to fit mobile phones, laptops, microwaves, large screen TVs, cricket bats, quilts, pen drives…you name it. “Every product that is shipped by ecommerce has to be repacked, both with paper bills and boxes. We make the boxes,” says Gupta. 

His company supplies 2 million boxes a month to online marketplaces. Another company, Oji India, part of Oji Holdings Corp, a $13-billion Japanese maker of paper products, started operations in India in 2012. From January 2018, Oji India will start making boxes for the ecommerce sector.Major suppliers aside, there are hundreds of smaller players too making boxes for ecommerce. 

Industry estimates suggest Amazon and Flipkart — top two players in the $17-billion ecommerce sector — consume 1,200-1,400 tonnes of paper that goes into making boxes and printing bills. And the future looks bright — “Demand for paper and boxes will grow in tandem with growth of ecommerce,” points out AS Mehta, president, JK Paper. 

Sanjay Singh, divisional chief executive, paperboards and specialty papers, ITC, says, “Even though ecommerce is transacted electronically, it cannot be envisaged without use of paper and paperboard for actual delivery.” Singh affirms that demand is growing rapidly but says it’s difficult to put a figure to it. 

LET’S BOX IT Large suppliers such as ITC and JK Paper do not directly cater to end customers as corrugated boxes need to be customised and sold, a process undertaken by firms such as MNM Triplewall, Coropex (near Jaipur), Shailaja Papers and Oji India. 

For customised boxes, smaller firms buy raw material, kraft paper, from large suppliers such as Ruchira Papers or Astron Paper and Board Mill. (Astron’s public issue closed on December 20). These suppliers, in turn, get imported scrap from Europe and the US and mix it with the locally procured version — crushed and converted to pulp — to make paper board. 

According to Kirti Patel, CMD, Astron, there are 250 carton makers with automatic machines and 10,000 with semi-automatic presses. “Ecommerce comprises 12-15% of demand, which was practically non-existent five years ago,” says Patel. Driven by ecommerce growth of around 15% a year, India is the only market where paper consumption is increasing — 6-7% annually. “This is not seen in any other large economy on a sustained basis,” says ITC’s Singh. Paper and carton demand will expand as etailers multiply, concurs Jatinder Singh, chairman, Ruchira. 

For Amazon and Flipkart, the demand for paper has almost doubled in the past three years and will see similar growth in the next three to five years. Flipkart works with 40 carton suppliers and, despite a focus on going paperless, it expects demand for boxes to keep growing. Amazon declined to share supplier details, but its spokesperson says, “We procure cartons from the closest point possible, which helps minimise transport time and costs and grow ancillary industries around our place of business.” 

Paytm, Myntra, Jabong, FreshMenu, BigBasket, Grofers and the innumerable other such firms have seen significant demand uptick for brown bags, boxes, paper. 

packaging, which it shares with carton and paper suppliers to improve quality. Besides, it supports vendors with data analysis, which helps them design for multiple SKUs across 1.6 million products on its marketplace. The customer is not charged for packaging; neither does the marketplace pay. It’s the seller who bears the cost. So, a laptop’s packaging could be Rs 35-40 and a power bank’s around Rs 10. 

Even for bills, white paper is bought by ecommerce companies via resellers. “Ecommerce companies buy separately so we can’t pinpoint demand. But they have contributed significantly to growth. In fact, to cater to billing needs, we introduced A5 paper (half of A4 size) about six months ago,” says Mehta. 

PACK IT UP Proximity to ecommerce warehouses is a key to tap this growing opportunity. Ergo, not all carton suppliers are able to benefit from online shopping. For instance, Delhi-based Shailaja Papers didn’t find it viable due to logistics issues — there’s no ecommerce warehouse close by. On the other hand, for Neemrana-based Coropex, run by Ashok Chaudhary, about one-fourth of box demand comes from ecommerce, doubling from a year ago. Other paper and carton buyers include FMCG, automobiles and electronics companies. For Triplewall, online marketplaces are its second-largest customers after FMCG companies. 

According to IIFL research, the Indian paper market will outpace the global industry. It notes that over FY17-21, industrial paper, recycled fibre-based packaging boards and copier paper segments are expected to witness healthy performance. The packaging boards segment, especially, is expected to post robust volumes on account of increasing demand from ecommerce and FMCG. Kraft paper or cardboard volumes are expected to increase from 4.8 million tonnes in FY17 to 6.7 million tonnes by FY21. 

ITC’s Singh also sees India’s per capita consumption of paper increase from 13 kg to 17 kg in the next few years, though it’s still far below the US and Europe average of 56 kg or Asian average of 22 kg. “Increasing demand for packaging materials such as cartons and envelopes will enhance sectoral prospects,” adds Singh of Ruchira Papers. 

There’s plenty of headroom for paper growth, as ecommerce is less than 4% of the $500-billion retail and more shoppers are coming online. New, ecofriendly packing of online orders may not be far way. As consumption increases (like in the US or Europe), people end up discarding their own weight in packaging every 30-40 days, notes to a Stanford University study. That’s a great outlook for paper box makers — at least till the environmentalists come knocking.