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Trends in the Packaging Market

Research by “Credinform” Information Agency
“Credinform” information agency presents a review of trends for business activities in the field of packaging production. For this analysis, we selected the largest (top 10 and top 1000) Russian packaging companies in terms of annual revenue in the last reporting periods available in state statistical data (2014, 2015 and 2016). The top 1000 rating included companies in accordance with their OKVED 2 code of primary activity, namely: manufacture of wooden containers; manufacture of corrugated paper and paperboard, paper and cardboard packaging; production of plastic products for packaging of goods. Selection in the top 1000 was made based on revenue; the top 10 included companies with highest revenue in 2016. The analysis was carried out with the use of data from the information and analytical system Globas
Since 2010, highest growth in packaging production can be observed in the segment of coated paperboard for production of consumer packaging, plastic boxes and plastic crates. At the same time, output has been declining in the categories of glass bottles; sets for wooden crates and folding non-corrugated cardboard boxes; and metal cans. Stable growth was demonstrated by plastic bottles, coated and non-coated paperboard for consumer packaging, and corrugated paperboard packages. Output of folding non-corrugated cardboard boxes dropped the most.
Said dynamics in the packaging market are primarily connected with relevant conditions in the end user market, namely the market of manufacturers of food products, drinks and other goods requiring packaging. The emergence or disappearance of certain goods in the market will continue to determine the dynamics of packaging production development.
In monetary terms, more than half of the total volume of packaging output in 2016 fell on plastic products for packaging – 53% in total revenue in the market. Production of corrugated paper and paperboard as well as paper and cardboard packaging formed 43% of the revenue, whereas production of wooden containers accounted for 4% thereof. At the same time, the highest profit was recorded in manufacturers of paper packaging – this is caused by different levels of production costs. 
Regarding foreign trade activities in the packaging market, in 2017, the largest volumes of imports fell on polymer bags, paperboard packages, and bottles. Paperboard packaging, corrugated paper and paperboard boxes, as well as polymer bags were exported the most in volume terms. The total volume of packaging imports into Russia was more than 2 times higher than the volume of exports.
In 2017, just like in the previous two years, Belarus was leading in volumes of both imports and exports of packaging goods.  China was second in volumes of imports, whereas Kazakhstan occupied the second position in exports.
Aggregate revenue of the 10 leaders of the packaging industry in 2017 amounted to 29% of the total revenue of companies in the top 1000. This indicates a relatively high level of competition in the industry. Seven companies in the top 10 operate in the sector of paper and paperboard packaging: “Tetra Pak”, “Naberezhnochelninsky KBK (Naberezhnye Chelny Cardboard and Paper Mill)”, “Stora Enso Packaging”, “Arkhbum”, “Gotek”, “Smurfit Kappa Saint Petersburg”, and “AR Karton”. All in all, a trend towards an increase in revenue among manufacturers of paperboard packaging can be observed.
Rapid, almost 13-fold growth in output of paperboard packaging in 2014 may be connected with the following coincidental factors: 
1) Low base effect. In 2013, average revenue in paperboard packaging manufacturers was significantly lower than in manufacturers of plastic packaging and wooden containers.
2) Inflationary processes, which intensified precisely in 2014 due to anti-Russian sanctions and the weakening of the Russian ruble.
Regarding the market on a larger scale, in terms of total revenue among the top 1000 companies, manufacturers specializing in production of plastic products for packaging and manufacturers of paper and paperboard packaging form almost equal volumes with minimal lead by the former – 48.9 and 48.1% of total revenue respectively. Manufacturers in the segment of wooden containers account for 2.9%.
Companies in the top 1000 are registered in 70 regions of Russia and are spread across its territory unevenly. Regional differences across segments of the packaging market depend on the rate of overall economic development of a given region as well as the availability of raw material sources for packaging production in it, the latter implying the presence of companies of the chemical and woodworking industries in the region. The largest share of manufacturers is located in close proximity to Russia’s capital – 11% of companies in the packaging sector from the top 1000 ranking are in Moscow, whereas 9% are located in Moscow region. 9% of companies in the top 1000 are located in Saint Petersburg; Nizhny Novgorod, Novosibirsk and Sverdlovsk regions account for 4% each; whereas the Republic of Tatarstan, Rostov region and Chelyabinsk region account for 3% each. 50% of manufacturers are spread across the other Russian regions.
A comprehensive assessment of business activities in the field of packaging production, taking into account the main indices, financial indicators and ratios, suggests that multidirectional trends are present in the market and depend on production specialization. 
Alarming general trends include the increasing size of net losses, declining return on investment and lower level of business activity.
Since packaging in general does not constitute a final good – that is, it accompanies sales of other products, development of its production will largely depend upon the overall economic situation in the country and, in particular, on external economic factors affecting its economy; trade dynamics; and the level of effective demand among local consumers. 
Undoubtedly, the market for packaging will be growing due to overall economic trends, although it is difficult to give an estimate on its future growth rates at the moment.
In particular, following already apparent trends, production of plastic packaging in the Russian market will be growing at accelerating rates.

Andrei Litov,
Senior Expert of the Analytical Group
of Information Agency “Credinform”