2.1 Market scale of China’s paper packaging industry
According to Sullivan data, in 2017, the demand for paper packaging of consumer products such as food, beverages (alcoholic beverages) and daily chemicals in China has accounted for more than 60% of the total demand for paper packaging. As an important downstream industry in the paper packaging industry, the demand for paper packaging boxes, cushioning corrugated printed boxes, cartons, printed paper box and other paper packaging products in beverages, food, daily chemical industries and other industries has injected continuous development momentum into the paper packaging industry. The stable development of the market will greatly promote the growth of the paper packaging industry market.
With the growth of China’s gross domestic product and the disposable income of Chinese consumers, China’s food manufacturing and wine, beverage and refined tea manufacturing industries have developed rapidly in recent years. According to data from the National Bureau of Statistics, China’s food manufacturing increased from 1,816.50 billion yuan in 2013 to 2,341.48 billion yuan in 2017, with a compound annual growth rate of 6.6%. At the same time,
from 2013 to 2017, China’s main operating income of the wine, beverage and refined tea manufacturing industry had a compound annual growth rate of 4.1%. China is still the world’s most populous country and its residents’ income continues to increase. It is expected that China’s food and beverage industry will continue to grow. In addition, the daily chemicals, pharmaceuticals, electronic appliances and other industries also have different degrees of growth in 2017. The packaging industry is showing a trend of steady growth driven by consumer spending. As a relatively large sub-industry in the packaging industry, the paper packaging industry will also become a beneficiary of this trend.
Thanks to the good development of downstream industries and the continuous growth of demand for paper packaging, China’s paper packaging industry has maintained a steady upward trend in recent years. According to data from the Sullivan Data Center, the scale of China’s paper packaging market increased from 253.99 billion yuan to 331.09 billion yuan in 2017, with a compound annual growth rate of 6.9%. With the rapid economic development, China is paying more and more attention to green development and sustainable development. In the paper packaging industry, from raw materials to packaging design, manufacturing to product use and recycling, each link can maximize resource saving and high efficiency ,harmless. With the further deepening of the concept of sustainable development, it is estimated that by 2022, the market size of China’s paper packaging industry will reach RMB 542.26 billion.
2.3 Development status of China’s paper packaging industry
China is one of the world’s important producers, consumers and exporters of packaging products. Since 2009, the total output value of China’s packaging industry has surpassed Japan, becoming the world’s second largest packaging industry country after the United States. According to the forecast of the Leopard Research Institute , By 2020, China’s packaging industry may become the world’s largest packaging market.
In the past, China’s paper packaging industry had a problem of uneven regional development. According to Sullivan data, nearly 55% of China’s paper packaging industry was concentrated in the Pearl River Delta, Yangtze River Delta, and Bohai Bay Economic Zone before 2010, with severe overcapacity. This situation has undergone major changes in the past two years. As China has shifted from an export-oriented development strategy to a domestic demand-driven development strategy, industries in the southeast coastal areas have accelerated to transfer to the central and western regions, providing paper printed boxes and corrugated printed cartons, boxes for the central and western regions of China. The industry provides a huge market space.
At present, China has formed five major paper packaging industry regions in the Pearl River Delta, the Yangtze River Delta, the Bohai Bay Economic Zone, the Central Plains Economic Zone and the Middle Yangtze River Economic Belt. These five major paper packaging industry regions account for more than 60% of the national paper packaging industry market scale. At the same time, with the development of the paper packaging industry, environmental protection laws and regulations have become increasingly stringent, and increasingly fierce market competition has gradually reduced the profitability of enterprises, resulting in the gradual elimination of small and medium-sized enterprises, and the number of enterprises in the industry has been decreasing year by year, which has promoted the rationalization of the industrial layout.
According to Sullivan data, the number of enterprises above designated size in the paper and cardboard container manufacturing industry has decreased from 2,696 in 2013 to 2,312 in 2017. There is a clear trend of industry integration, and the proportion of large and medium-sized enterprises has gradually increased. Driven by a number of dominant enterprises, listed companies and enterprise groups with strong international competitiveness, China’s paper packaging industry is led by leading enterprises, and the organizational structure of small and medium-sized enterprises is gradually taking shape. However, compared with the top five paper packaging companies in the United States with a market share of more than 70% and the top two paper packaging box companies in Australia with a market share of more than 90%, the top five paper packaging companies in China have a market share of less than 10%, and the market is concentrated There is still a lot of room for improvement.
With the transition of China’s industrialization from the early and middle stages to the middle and late stages, the ability of China’s paper packaging industry to adapt to market changes has continued to increase, the industry’s growth rate has entered a new period of steady growth, and the ability to adapt to changes in market demand has also been continuously enhanced. China’s paper box industry has gradually formed the industry commonality of overall development, division of labor and cooperation, resource sharing, and common profit. Many companies have cooperated with upstream and downstream in varying degrees to establish good relationships. Through joint ventures, joint stocks, integration and mergers, acquisitions, etc., the scale is expanded, and some work closely with users to evolve a single product packaging service into an integrated packaging service. A group of enterprises have made China’s carton box industry more internationally competitive through forms such as strong alliances, shareholding cooperation, industrial chain extension, foreign acquisitions, cooperation between Chinese and foreign enterprises, and upstream and downstream integration. For example, on June 5, 2018, Hexing Packaging, a listed paper packaging company, paid RMB 718 million yuan to purchase 100% of the shares of Hezhong Creative Packaging Services (Asia) Co., Ltd. Through this acquisition, Hexing Packaging will expand, regional layout, and increase production capacity, so as to better serve customers and achieve horizontal integration of the industry.
2.4 Industry Chain of China’s Paper Packaging Industry
From top to bottom, the industrial chain of China’s paper packaging industry can be divided into upstream raw material suppliers, midstream paper packaging manufacturers, and downstream application industries (see Figure 2-). The upstream raw material suppliers include paper, ink and mechanical equipment providers, the midstream paper packaging manufacturers include design and manufacturing service providers, and the downstream application areas include the food and beverage industry, daily chemical industry, tobacco industry, electronic and electrical industry, pharmaceutical industry and Express delivery industry, etc.
2.4.1 Upstream analysis
The upstream of the paper printing and packaging industry is mainly the papermaking industry that provides base paper products such as ivory paperboard, SBS paperboard, SUS kraft paperboard, double offset paper, art paper, and corrugated paperboard, as well as the chemical industry and packaging machinery that provide printing auxiliary materials such as ink, ink, and glue for the industry. Equipment manufacturing industry. (See Figure 2-).
The paper industry is an important upstream industry in the packaging industry. In the paper printing and packaging industry, depending on the product, the cost of paper raw materials for printing and packaging products ranges from 30% to 80%. Therefore, the development status of the upstream industry, especially the paper industry, and The price of raw paper will have a direct impact on the profit level of the paper packaging industry.
According to Sullivan data, from the fourth quarter of 2016 to the fourth quarter of 2017, the price of corrugated paperboard, an important raw material for paper packaging, continued to rise, from 2,967 yuan/ton to 5,764 yuan/ton (see Figure 2-). It is relatively difficult for companies to adjust prices, leading to a decline in the overall profitability of the industry. In the first half of 2018, the industry’s net profit was 2.41 billion yuan, a year-on-year decrease of 8.6%. In the past two decades, China, as the world’s factory, has exported a large number of overseas textiles and daily-use light industrial products to drive the growth of paper packaging box demand. A large number of paper packaging followed the outflow of these commodities abroad, resulting in a continuous decline in domestic paper packaging holdings. Therefore, China must import a large amount of waste paper from the United States, the European Union, Japan, and even South Korea every year to maintain the balance of supply and demand of paper-making raw materials. Affected by the Sino-US trade war, on August 8, 2018, the Tariff Commission of the State Council of China decided to impose an additional 25% tariff on US imports of approximately US$16 billion, including all types of waste paper. This will impose a 25% tariff on midstream paper. The development of packaging enterprises has brought about undesirable effects such as rising raw material prices and supply shortages, which has caused the profit margin of paper packaging enterprises to decline.
In terms of paper packaging machinery and equipment, the technical level of China’s carton packaging machinery is relatively behind that of Western developed countries, and it is also at a disadvantage in the competition of product development, performance, quality, reliability, and services. The degree of specialization of paper packaging machinery and equipment is relatively high, and there are high technical barriers. The international mainstream equipment has developed in the direction of digitization, networking, high speed and low consumption, environmental protection and humanization. . The machinery and equipment of China’s paper packaging industry are still mostly dependent on imports due to technological backwardness. Therefore, upstream paper packaging machinery and equipment companies have relatively high bargaining power.
2.4.2 Midstream analysis
In the midstream paper packaging industry, due to the low capital and technical thresholds of the paper packaging industry, small paper packaging companies at the bottom of the industry chain have a large number of low-grade products, serious product homogeneity, fierce competition, and profit The level and bargaining power are relatively low. Due to their scale advantages and stronger technical strength, large enterprises in the industry have higher resilience to the impact of tightening environmental protection policies and rising raw material prices. Yutong Technology, Hexing Packaging, Donggang Co., Ltd., And other leading companies gradually stand out in the industry, and the market concentration is further improved. , These high-end paper packaging box companies have the advantages of large scale, low raw material procurement costs, high technological level, short supply of products and high added value, etc., so they have higher profit levels and bargaining power in the industry. In the long run, with the strengthening of the cost control ability of enterprises in the industry, the improvement of product and service quality, the application and continuous optimization of informatization and automation technology, the transformation of business models, as well as the increasing improvement of the industry structure and the increasing concentration of the industry With gradual improvement, the overall profit level of the paper packaging industry will become increasingly stable.
2.4.3 Downstream analysis
The downstream of China’s paper packaging industry chain are mainly food, beverage, daily chemicals, medicine, stationery, electronic appliances and express delivery industries. Among them, the consumer electronics industry, food, tobacco and alcohol industries have relatively large demand for paper packaging boxes. On the one hand, the rapid growth of downstream industries directly drives the demand for paper-based packaging products, thereby promoting the development of the paper-based printing and packaging industry; on the other hand, the continuous changes in downstream industry demand will promote continuous technological innovation of paper-based printing and packaging companies. At the same time, with China’s economic development and the growth of per capita disposable income, the tobacco and alcohol industry has a huge demand for paper packaging products, which will also provide strong support for the demand for paper printed boxes.
With the substantial improvement of Chinese people’s living standards, the demand structure of consumers is transforming and upgrading, and the demand for packaging products has also been upgraded from the original simple packaging protection function requirements to reflect product quality and consumer grade requirements. The downstream customers of large paper packaging companies are mostly large high-quality customers. Such customers have high brand awareness and strong profitability, and have high requirements for paper packaging quality and supply stability. Under the new consumption trend, downstream customers will inevitably put forward higher product requirements for paper box suppliers, not only requiring paper packaging companies to provide a full range of custom paper boxes, but also requiring paper packaging companies to have product design capabilities and provide printing and packaging services. The ability to advance to the development and design stage of packaging products, through creative design and R&D innovation, to more closely integrate packaging products and end products, improve the quality, functionality and exquisiteness of packaging products, thereby continuously improving downstream end customers The brand image and added value of the product. From this point of view, customer demand in downstream application industries has an important development-oriented role for midstream paper packaging companies, and therefore has a higher bargaining power in the industry chain.