High packaging cost increase product prices

Mahfuz Emran: Packaging is very important for any branded product. Good packaging creates brand value to the consumer. The cost of packaging is increasing due to the continuous increase in the price of raw materials in the global market. Dollar price is also creating additional pressure. Brands struggle to maintain packaging standards. Consumers are also indirectly suffering from the pressure of this additional cost.
Commodity marketing firms say that since 2021, their product packaging costs have increased abnormally, which is now 35 to 40 percent higher than that period. Consumers bear the burden of this cost indirectly, but in many cases the company also has to bear this burden. This is because the sales of many brands have decreased while adjusting the cost with the price of the product. The competitiveness of domestic and export-oriented industries is also declining.
In this situation, the businessmen of the product packaging-printing sector say that during the corona virus, the business of their sector suffers a lot. Since that time, the price of imported raw materials also started to rise in the world market, which has almost doubled in a span of one year. After that, due to the Russia-Ukraine war in the post-corona period, the raw material market did not return to that comfortable place. Although prices have come down slightly, prices of almost all raw materials in the packaging sector remain abnormal. It is the highest compared to any other period before Corona.
The dollar-crisis in the country has become evident since March last year after the start of the Russia-Ukraine war. This increases the crisis. Among these, the import duty of imported paper, paper board, art card and art paper has been increased from 15 percent to 25 percent in the 2022 budget. Besides, the import duty of printing plate, one of the raw materials of the printing industry, has been increased from 1 percent to 10 percent. The import duty on printing ink has been increased from 10 percent to 15 percent. The country’s printing and packaging sector is also reeling due to increased taxes and duties.
In this situation, the packaging cost of their products has increased by more than 30 percent than before, said the food manufacturing and exporting company Bonful and Kiswan Group. Almost 100% of the products of this group are packaging. Group General Manager Shah Kamal Mustafa told Daily Industry that the cost of product packaging has increased rapidly since 2021. Which we are struggling to coordinate.
He said, we use more foil packs. Earlier, we could get these packets with printing between Tk 310 to Tk 320 per kg, which is now Tk 450 to Tk 460. Besides, the cost of packaging in their own factories has also increased. Everything including workers’ salaries, service sector costs, transportation has increased.
Wahidul Islam, Director of Kiswan Group and Executive Partner of Bonful & Company Limited, told Daily Industry that our products are being exported to 35 countries. Due to which the competitiveness of domestic and export-oriented industries is decreasing. Exports are lagging behind to adjust packaging costs. Not only us, but the overall food product export in the country has also decreased in the last two years due to the increased cost of packaging.
Talked about this with Unilever Bangladesh, the country’s largest consumer goods manufacturing company. Shamima Akhter, director of the company’s corporate affairs, partnerships and communications department told Daily Industry, “The price of our products was increased last year, a major reason for which was the abnormal increase in the cost of packaging.” At that time the price of plastic material, which was the main ingredient of our packaging, went up a lot. This required us to revise payments to each of our packaging accessory suppliers.
There are several trade associations in the country’s packaging industry. Among them, Bangladesh Flexible Packaging Industries Association is the organization of the owners of consumer food and consumer goods packaging industry. According to the information of this organization, the overall market of the packaging industry in Bangladesh is about six thousand crore rupees. The annual demand for packaging products is two lakh tonnes. About 70-75 percent of which is dependent on imports. The rest of the demand is met by domestic companies.
The president of the organization, Safius Sami Alamgir said Daily Industry that due to the high exchange rate of the dollar in the country along with the increase in the price of raw materials, the opening of LCs by the businessmen of this sector has decreased. The arrival of raw materials has decreased. There was also a dollar crisis for some time when LC was opened. Also, the packaging industry has been going through a tough time for several years due to the increase in gas and electricity prices in the last few years. In this situation, we are unable to provide the supply compared to the demand. Product manufacturers are under increased pressure.
He said, currently the growth of this sector has stopped. However, from 2000 to 2010, the annual growth rate of this industry was 10 to 12 percent. Even in the decade before the corona epidemic, the growth of this industry was about 20 percent with the economic growth of Bangladesh. Now less than half.
The commercial packaging industry in the country was started in 1978 by Safius Sami Alamgir’s Tampaco Foils Limited. Currently there are more than 100 packaging factories in Bangladesh. Big companies like Akiz Group, Pran-RFL Group are now investing in this sector. Setting up of each medium-sized packaging factory costs Tk 100 crores. Big industrial groups have invested thousands of rupees in this sector.
These entrepreneurs also say that there are some inconsistencies in this sector. Some importers are bringing in raw materials for packaging under bonded warehouse facilities, which are sold in the local market. Although they are only for use in export-oriented products. They are falling behind.
Traders in the packaging-printing sector do not see the packaging industry recovering from the crisis until the economy returns to normal. On the other hand, FBCCI’s former member secretary of the Standing Committee on Printing, Packaging and Publications, Amin said, the combined market of the global packaging, printing and publishing sector is about $1,545 billion. Even if the one percent target is achieved, the potential exports will be $15.45 billion. There is an opportunity here to earn foreign exchange through public-private investment support as well as create huge employment opportunities.
Entrepreneurs say that the use of packaging is increasing with the increase in the per capita income of the people of Bangladesh and will increase further in the future. About 80 percent of food in developed countries is processed. Its amount is close to 20 percent in the country. To expand this market with huge potential, along with government support, export diversification, industrial compliance, and international quality packaging products should be made.