The packaging industry is a typical light industry sector characterized by high gross profit, fast turnover, low inventory, and a high degree of non-standardization. However, the Chinese packaging industry has long been squeezed by the profits of upstream and downstream enterprises. Particularly, with the implementation of various restrictive domestic policies, the profit levels of the industry have been further compressed. In order to survive amidst these challenges, packaging companies must transform and upgrade, strengthening market capture, cost control, and technological advancement to ensure healthy development. This article analyzes the current development status and pain points of the packaging industry from the perspective of the industrial chain, offering three points of reflection based on the current situation and the author's understanding of the packaging industry.
1. Development of the Packaging Industry Chain
From the perspective of the packaging industry chain, the upstream industries mainly consist of packaging materials and packaging equipment. Currently, the limitations in materials and equipment are the primary factors restricting the development of China's packaging industry towards high-end production. The midstream industry involves the packaging production stage, which is subdivided into various packaging industries. Due to cost pressures, the packaging production sector has transitioned from fragmented industry distribution to more centralized and scaled operations. The downstream segment primarily involves packaging application and design, with packaging applications spanning numerous industries with different standards and systems. Packaging design has developed rapidly in recent years, driven by the accelerating changes in consumer demand, and has become one of the primary methods of enhancing brand competitiveness.
Figure 1: Packaging Industry Chain Diagram
2. Pain Points in the Chinese Packaging Industry
The packaging industry is a typical light industry, characterized by high gross profits, fast turnover, and low inventory, but with significant non-standardization. As the industry has grown, the "pain points" for businesses have become increasingly prominent, including overcapacity, long customer payment terms, market irregularities, low profits, and weak information technology. The midstream packaging industry, due to its low concentration, has been under pressure from increasing downstream application demands. This has led to the need for companies to continually purchase new equipment and materials to meet these demands. The industry has long been squeezed by upstream and downstream pressures, and with rising raw material and labor costs, packaging companies are facing growing operational difficulties.
Figure 2: Packaging Industry Supply System Diagram
(1) Limited Industry Linkages, Low Technological Content, and Low Bargaining Power
Currently, the packaging industry remains in a "large industry, many small companies" market structure, with relatively few connections between different industries. As a result, the industry struggles to form a collaborative, multi-factory, multi-party communication system that enables capacity sharing, joint innovation, and the like. This lack of synergy results in weak bargaining power, low profit margins, and weak industry competitiveness, which in turn reduces the willingness to develop new technologies and equipment. The overall industry faces challenges in self-innovation, leading to low industry competitiveness.
(2) Unstable Supply Chain, Low Level of Digitization
From the market side, most small and medium-sized enterprises (SMEs) acquire orders through traders, brokers, or subcontracting. These packaging companies generally lack business capabilities, and their information systems are underdeveloped, leading to long management chains. These companies' orders are often subcontracted through layers of intermediaries, resulting in unstable order volumes, low product profits, and a lack of production equipment. The imbalance in order distribution leads to overcapacity.
From the supply side, SMEs usually only cover a single link in the overall industrial chain, which is long and slow to respond to changes in the upstream and downstream sectors. This results in slow industry turnover, low production efficiency, a low level of digitization, and information isolation, making it easy for these companies to be squeezed by competitors, further compressing their profits.
(3) Incomplete Packaging Waste Recycling System, Increasing Raw Material Costs
With the rise of e-commerce, packaging waste has become a major environmental concern. However, the green recycling system in the packaging industry is still underdeveloped. According to data from the Qingdao Research Institute of Beijing Printing College, China's overall recycling rate of packaging waste is less than 20%. The low recycling rate provides relatively cheap raw materials for the packaging industry, resulting in slow progress towards greener and biodegradable materials. Particularly under policies like the "Plastic Ban," this has further squeezed the profit margins of the packaging industry, pushing many small and medium-sized enterprises (SMEs) out of the market.
3. Reflections on the Development of the Packaging Industry
The packaging industry has entered a period of structural adjustment. For a regional packaging industry, it is essential to understand the necessity and sustainability of the packaging sector. A well-developed industrial chain with strong competitiveness and flexibility can drive the entire industry toward a branding and high-quality development path.
(1) Accelerating Industry Resource Integration
As the packaging industry develops rapidly, the cost and profit pressures will continuously push SMEs out of the market. The industry will quickly undergo resource integration, with automation or semi-automation in production and manufacturing becoming more widespread. In this spontaneous market behavior, local governments should actively guide large regional enterprises to grow stronger, enhance environmental supervision, and accelerate the exit and restructuring of small, scattered enterprises, making effective use of industry resources. Additionally, efforts should be made to promote vertical integration in the upstream and downstream sectors, as companies' willingness for spontaneous joint innovation and project innovation is relatively low. The government can facilitate innovation-driven projects to accelerate the integration of industrial chain segments, boost regional industrial development, cultivate leading enterprises, and enhance industry competitiveness.
(2) Guiding the Digitization of the Supply Chain
With the globalization and localization of businesses, the supply chains of companies have lengthened. To compete in the market, companies must establish an agile and responsive supply chain system between internal departments and partners. For packaging enterprises, to achieve digital transformation, a comprehensive supply chain platform is essential to coordinate and integrate all activities in the supply chain, covering production optimization and connecting information flow, capital flow, and product flow.
For SMEs in the packaging industry, which often acquire business through intermediaries or subcontracting, there is insufficient focus on the market side. Governments can guide the market by introducing third-party internet platforms, promoting the "cloud adoption" of regional packaging industries, improving information flow, and helping manufacturers engage with downstream markets. At the same time, the government should leverage industrial funds, attract social funds, and accelerate the development of financial leasing, supply chain finance, and other sectors to help solve financing issues.
(3) Building a Healthy Innovation Environment in the Industry
With policies like the "Plastic Ban," "Plastic Restriction Orders," and "Waste Bans," the packaging industry is undergoing a significant transformation towards sustainability. The sector faces challenges in the use of biodegradable materials, functional materials, and high-end equipment, much of which relies on imports. Moreover, the industry is highly vulnerable to upstream pressures, accelerating the process of domestic substitution of critical materials and equipment.
Innovation in Key Technological Areas: Governments should enhance cooperation with domestic research institutes, provide policy support and subsidies for critical technological innovations, focus on attracting key talent and experts, and hold regular industry innovation competitions to boost regional innovation and improve overall capabilities.
Development of Green Recycling Systems in Cities: Local governments should gradually open up the urban waste recycling market, focus on the use of biodegradable materials, and work with packaging companies to explore new recycling models and sustainable development practices.
Encouraging the Integration of Packaging with Other Sectors: Governments should actively encourage the integration of the packaging industry with electronics, culture, design, and other sectors. This will accelerate communication and collaboration between industries, fostering the development of new types of packaging enterprises and improving the value level of regional packaging industries.
