How to Start a Paper Cup and Paper Plate Business? [Investment, Profit]

Business profitability is often the subject of discussion at various forums, professional, official, and casual. We generally talk about the profitability of an X-product or a Y-company, or maybe a product category. Informal discussions end many a time with a judgemental yes or no remark.

There are many facets to the profitability of a company or business. Is the disposable products business, mainly cups and plates, profitable?

To find out the answer, we must first understand the nuances of this business. What are the nature of India's disposable plates and cups business? How much investment is required to set up a unit, and what are the primary requirements? How are these products sold; is it a labour-intensive industry? And several other issues that are essential for reviewing an industry.

Let us look at some of these factors to understand whether the disposable item business (cups and plates primarily) in India is profitable. But, before that, a quick recap of profit and profitability.

Based on the values of the cost (including overheads) and the sale price of a product, we calculate profit gained or loss incurred in the business of that particular product. Profitability is a business's ability to generate a return on investment while selling products or services. Different financial ratios calculate the profitability as a measure of the efficiency of that company or business.

Paper cup and paper plate business in India: A review

The paper cup and paper plate making business in India are relatively unorganised compared to several other sectors and mainly consists of small and fragmented players. Quality and product standardisation are primary issues.

Reliable market demand figures are not available easily for study and analysis, resulting in a lower focus of investors on this sector. But for the existing business owners and future entrepreneurs, the industry is large enough with a record of good growth in the past few years.

1. Product characteristics

Size and variety (texture and thickness) vary across markets in different regions, but in general, the disposable plate business can be classified as below.

The preferred plate sizes are:

1) 10 to 12 inches, or, 25 to 30 cm;

2) 9 “or, 23 cm;

3) 11 to 14 “or, 28 to 36 cm

4) half- size , 6 “or, 16 cm

The average weight is in the range of 8.5 to 10 gm.

The paper cup segment can be divided into:

1) Hot & Cold paper cups based on the usage type;

2) as per the wall type of the cup, Single wall, Double wall and Triple wall;

3) by size, Small / Medium / Large, offering a fill-in volume of 50 ml to 200 ml.

The average weight of cups is in the range of 4 to 5 gm.

2. Paper types

The typical paper used is 180 to 200 GSM (grams per square meter – a measurement index for paper thickness).

Some local operators use 140 GSM papers which are cheaper;

The texture of the paper usually is Silver plain, Printed sunmica, or simple white.

Also read: Kraft Paper Manufacturers in India

3. Investment requirement

Setting up a proper manufacturing setup for paper cups and paper plates (combined) will require an investment of Rs. 20 to 25 Lakhs. Separate units may require around Rs.10-12Lakhs for paper plates and Rs.15 to 18 Lakhs for paper cups.

Also Read: Paper Manufacturers in India

4. Other business Issues

The unit (new) location should be an industrial land/ area; a backyard manufacturing arrangement will not be permitted now.

Multiple permissions, licenses, registrations will be necessary. The manufacturing area should be ideally around 2500 /4000 sq. ft. but you may consider more for future growth.

Purchasing machinery is easy, and you only have to get in touch with the companies (there are several available) in the paper cup and paper plate machine business. They will organise the rest based on your business plan. The automatic machines for both products come with a rated capacity of 2000 / 2500 units per hour.

5. Marketing

The viability of a company depends on the quality of its marketing; the disposable paper cup and paper plate making business have a high dependence (on marketing) being a mass- usage item.

The market for disposable products in India is fast growing. While the Covid pandemic is responsible for creating a sudden spurt in demand, rising disposable income, increasing hygiene awareness, and convenience are the main drivers of consumption. Growing public opinion against the evils of single-use plastic and the restrictions imposed (by the government) on the category is further fuelling the demand for disposable paper items.

User-wise, paper cups have a top-end segment comprising food chains and outlets in shopping malls. This segment demands quality items, mostly with product branding or decorative prints. Then we have the Home segment – for birthday parties, meetings, social gatherings, and more; The corporate-use segment is the next one. MNC's, large Indian companies, and the new generation startups prefer paper cups in their offices for convenience and better hygiene. The other category comprises food stalls and street vendors. Price (of the cups) plays a significant role in this segment (the largest one).

Also read: Paper Cup Manufacturers in India

Paper plates, too, have similar segmentation but with different segment-wise demand metrics.

Three different channels (of distribution) can form an effective strategy for selling these paper disposables.

• A distributor–retailer network to cover the food stalls/vendors, home and small offices segment;
• Direct sales to large consumer (food chains, large offices) through a combination of online /offline methods;
• Sales through e-commerce platforms.

The pricing strategy should follow the competition. The aim of the company's promotion should be to create and highlight differentiating factors.

Quality standard certifications, food safety, ISO, and the like should be considered as this helps build customers' confidence. Besides, the standards act as guidelines for the operational process of the company. Quality is one area a new entrant or a growing company must give adequate focus to. Consumer expectations on quality and convenience are increasing fast in cities. Quality consciousness (of the market) indicates that many small players may find it tough to sell their products unless they improve the quality.

Is this business profitable?

We have got a fair idea of the requirements of how to start a paper plate (and paper cup) business and of the industry in general. Let us consider profitability now. Ballpark figures indicate good profitability for both the items, paper cups, and plates.

• The Printed PE paper (primary raw material) costs around Rs. 60 to 80 per kg (landed price);
• Cups with a weight ranging from 4 to 5.5 gm will give recovery of Rs. 140 to Rs. 200 per kg (assuming net unit selling price at 0.75 to 0.80P).

Similarly, Plates will bring in a net recovery of Rs. 110 to150 per kg. Unique varieties, however, will give higher profits.

Conclusion

The paper cup and paper plate business are undergoing a bottom-push development process. Consumer expectation is forcing many players of the industry to deliver better quality products. The growth of the sector is driven by hygiene, convenience, and environmental concerns. These factors point only in one direction—good times ahead for the industry!

Stay updated with new business ideas & business tips with OkCredit blogs in English, Hindi, Malayalam, Marathi & more!
Download OkCredit now & get rid of your bookkeeping hassles.
OkCredit is 100% Made in India.

FAQs

Q. What is the capacity of automatic paper cup machines? Is it possible to start a business with local semi-automatic machines?

Ans. Standard automatic machines will have a production capacity of 2000 to 3000 cups per hour. Local machines will have quality issues. The market is expanding faster at the value- plus-end; therefore, products from local machines may give you quick sales in the short term, but gradually, you may start losing business, particularly in cities/urban areas.

Q. As a business choice, which is better, paper cup or paper plate?  

Ans. Both are good options and are more or less similar in investment requirements. The primary issue for success in either of these product lines is your marketing capabilities. Cups have a broader consumer base; therefore, you need an extensive network of retailers/distributors. Dedicated efforts can bring success to both product lines.

Q. Is the paper cup and plate manufacturing labour intensive?

Ans. Both the items are simple to manufacture and require only 3 to 4 persons to manage production. By using accounting and other business improvement software, you can keep staffing at a minimum, and you can get a high level of daily monitoring of data. You can find several online companies offering software. You may try Ok credit, which has a popular product for managing accounts, including creditors.