Indonesia Paper Packaging Market - Growth, Trends, COVID-19 Impact, and Forecasts (2022 - 2027)

Indonesia Paper Packaging Market - Growth, Trends, COVID-19 Impact, and Forecasts (2022 - 2027)

The Indonesia Paper Packaging Market is expected to register a CAGR of approximately 4.6% during the forecast period (2020 - 2025). Paper and paperboard packages are significantly used in the packaging of multiple products such as food products, healthcare products, personal care products, among others. Paper packaging is gaining traction in the Indonesian market as they are perceived to be environmentally-friendly and are also easy to manufacture. In addition, paper is also increasingly being used as an outer material to hold the products together in a multi/bundle pack.

Key Highlights

• According to the International Corrugated Case Associations, the Asia-Pacific region represents the one of the most significant and fast-growing corrugated packaging market in the world, accounting for 53.7% of production and shipments in 2018. The countries, such as Indonesia, Thailand, Vietnam, Philippines, others contribute to more than 30% of the total contribution of corrugated packaging.
• Moreover, the rising penetration of the e-commerce sector in the Southeast Asian countries, such as Indonesia, Thailand, and Singapore, is paving the way for paper packaging in the region. For instance, according to CLSA, the number of online shoppers in Indonesia will increase from 20 million in 2017 to 65 million in 2021.
• Another trend observed in the market studied is the efforts to avoid drug anti-counterfeiting. According to the Indonesian Pharmacists Association, the country remains an easy target for the distribution of fake medicine sold through the Internet and pharmacies. The circulation of fake drugs has reached pharmacies in the Jakarta, Tangerang, Bogor, and Bekasi areas.
• Moreover, various governmental regulations are also expected to drive the demand for recyclable product, which is expected to drive the demand for paper packaging in the country. For instance, in Sep 2019, Indonesia’s National Agency of Drug and Food Control (BPOM) published some new regulations for the food packaging. The regulations covers both the new and recycled materials, and includes plastics, paper and paperboard, inks and dyes, resins and polymer coatings, metals, ceramics, and glass. Food producers in the country are required under the regulations to ensure that the packaging they use does not endanger human health.
• With the outbreak of COVID-19, the demand for paper packaging in the country is witnessing significant growth due to the transport packaging flowing of essentials products, such as packaging for food and other consumer products, medical and pharmaceutical products, and tissue and hygiene products.

Key Market TrendsCorrugated Boxes Expected to Show Significant Adoption

• The corrugated packaging market in the overall Asia-Pacific region is growing exponentially primarily because the local markets in different countries are experiencing massive growth in the industry and companies are formulating new strategic partnerships in the region.
• Several other factors accelerating the growth of the corrugated packaging market in major countries like Indonesia are the growing environmental awareness by urban populations, proliferation in demand for sustainable packaging solutions in the country, increasing demand for convenient packaging, and growth in e-commerce activity.
• According to J.P. Morgan's study, the e-commerce industry in Indonesia is expected to grow by an approximately 34.6% by 2021,majorly driven by increasing internet penetration and an ongoing trend of steady gross domestic product growth. Hence, with the growth in e-commerce industry in the country, the demand for the corrugated board packaging is expected to increase, hence, acting as a catalyst for the growth of paper packaging in the country.
• For instance, PT Purinusa Ekapersada, an Asia Pulp & Paper company, and Oji Holdings Corporation, agreed to enter into a USD 35 million joint venture to set up a new converting factory in Indonesia. The new venture PT Oji Sinar Mas Packaging, would see corrugated cardboard and container being produced to meet growing domestic demand in Indonesia.

Food and Beverage Industry Expected to Exhibit Maximum Growth

• The increase in the growth of the food and beverage industry in Indonesia is anticipated to aid the country's paper packing industry. In May 2019, the Indonesian Ministry of Industry had predicted a growth of at least 9% for the country's food and beverage sector, attributed to the industry's additional investment. According to the Ministry, the food & beverage sector, in particular, will receive investments worth USD 4.4 billion, which is an increase of some 11% from 2018.
• The paper packaging has been gaining significant traction in recent years. In February 2019, Indomilk brought convenience to the next level with the new condensed milk in milk carton packaging. The company claims the latest innovation is the first of its kind in the world. Such launches are anticipated to aid the market studied.
• The increasing government regulations and excise against plastics are creating opportunities for the paper packaging market in the food & beverage industry. For instance, Indonesia is planning to impose an excise on plastics and sweet drinks to reduce their adverse environmental and health effects. The country's Finance Ministry's Customs and Excise Directorate General plans to induce a plastic duty of Rp 30,000 per kilogram on plastic producers and importers. This is anticipated to affect the market for plastic packaging, thereby offering opportunities for its alternatives, such as paper packaging in the country.
• Further, a few of the country's companies have been focusing on expanding their products in other regions. For instance, in July 2020, Asia Pulp & Paper today announced the expansion of its Enza Specialty papers portfolio with Enza HS Flexpack for both the North & Latin American markets. This new unbleached, natural brown Kraft paper provides quick-service restaurants with a sustainable packaging solution for lightweight take-a-way food wrappers, box liners, and carry-out-bags.
• The increasing focus of the country to export its food products is expected to increase demand for secondary packaging. For instance, in June 2020, the Indonesian Trade Ministry has adopted strategic measures to intensify the exports of the processed food products to improve Indonesia's trade balance, in the second quarter of 2020, amid the COVID-19 pandemic. The ministry has proposed incentives in the form of insurance export loans or other bank fundings for exporters bearing the brunt of the COVID-19 pandemic.

Competitive Landscape

The competitve landscape of the paper packaging industry in Indonesia is moderately fragmented due to the presence of several market players in the country holding a majority share. There is no dominance of a single player in the country. Also, the entry barriers are low in the market, hence, the market is also viewing new entrants in the market. The market players are considering startegic partnerships and collaborations to expand their market share.

• February 2020 - SCG Packaging allocated THB 7.6 billion in its 2020 budget, mainly to expand its manufacturing in the Philippines, Indonesia, and Vietnam. Of the total budget, THB 5.2 billion will be allocated for operations in the Philippines, mainly to expand production of container boards to 220,000 metric ton per year. Indonesian operations have been given THB 1.8 billion to expand the capacity of container boards to 400,000 metric ton per year.
• October 2019 - Nestlé Indonesia plans to roll out the paper straws on the Nescafé packaged drinks. Nestlé will be the first food and beverage company in the country to use paper straws for packaged drinks on a massive scale. This initiative, which replaces the plastic straws with paper ones, is in line with the government’s target to reduce plastic waste by 70% by 2025.

Additional Benefits:

• The market estimate (ME) sheet in Excel format
• 3 months of analyst support

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