The Russian Packaging Market Gathers Momentum

In the biggest country on earth, the packaging industry has been showing signs of growth again for a while now, following some tough ^TM times and a much-needed reorientation of the local economy.

Consumers are demanding attractive high-quality packaging for their wares; legal regulations on counterfeit prevention and recyclable packaging mean that innovative technology and expertise must be put to use in modern packaging machines.

Russia’s influence on the packaging market is increasing. Despite the fact that around two-thirds of the total European market is currently generated by packaging goods from Western Europe, above-average growth and the growing influence that comes with it have been seen in the Eastern European countries over the past few years (comparison between 2017-2018: Western Europe: 1.3%, Eastern Europe: 3.7%). This boom should continue until at least 2023, according to predictions. Russia is proving to be a trailblazer here.

Despite a relatively weak economy, the major consumer industries still managed to increase their production. This ensures that Russia is also set to remain an attractive market for packaging into the future. According to the prognoses from NK Pak, the industry association, demand is growing by between three and four percent annually. Currently, two percent of the global demand for packaging is being met by Russia. The market volume for packaging material for Russia in 2017 was estimated at almost 13 billion US dollars. The Russian government is sponsoring the construction of processing facilities for packaging.

The Russian trading volume for packaged food came to around 27.5 million tons in 2018 and is set to increase to 29 million tons by next year. This, in combination with the beverage market, puts the country at 8th place worldwide currently. The importation figures for equipment for processing and packaging food have doubled since 2009; in 2018, the market for these imported systems had a value of around two million US Dollars.

In 2018, the turnover for Russian online trade made a huge leap forward. With a total of 290 million orders, this leap amounted to a 20% rise in the total for the previous year, calculated at 15.5 billion Euros according to Insight, a Russian research agency for e-commerce data. The sum of the packages dispatched also increased by a third, to 350 million, to reflect this.

The forecasts from the renowned Gaidar Institute predict an increase in online trade which will soar to 2.7 billion Rubles (around 37.8 billion Euro) by 2024. Morgan Stanley goes a step further, forecasting a turnover increase of 3.5 billion Rubles. One of the most dynamic segments is food delivery.

Retail is being modernized; supermarkets are coming out on top against specialist stores with unpackaged wares. In addition, the increasing number of single-person households means that packaging sizes need to be smaller and practical designs for take-aways are needed.

The packaging manufacturers will find it easy to adjust to these changes in consumer behaviour because there are no standard regulations on packaging sizes. A carton of milk could retail in bottles measuring just under a litre or 0.83 litre bottles.

In addition, a pilot project for labelling milk and dairy products has been running since December 2018. If they so wish, manufacturers can print information detailing the entire supply chain, from the cowshed to the point of sale, on their packaging. This means that end consumers don’t have to put in hours of research to track their produce, circulation of poor quality goods is reduced and logistics becomes more efficient for transportation and retail.

Manufacturers can also choose to label their food packaging with the traffic light system. Here, a colour code is used (red, yellow and green) to show the proportions of sugar, salt and fat in 100g of the product. The colours show the consumer how healthy the product is at a glance.

Due to the increase in demand for food, the need for packaging, specifically corrugated paper and hard plastic, is also experiencing growth. In 2018, cardboard and paper made up the largest group across all the packaging materials that had been used, followed by soft and/or hard plastics and then glass and metal.

More and more Russian households are having take-away meals delivered to their homes by delivery services, which has also increased the need for packaging to achieve this. Together with the inherent growth in online trade, more packaging materials such as sturdy paper and cardboard are also needed.

Packaged medicines constituted the biggest sector of the Russian import market for packaging in 2017, totalling 221 billion US Dollars. The forecasts state that demand for pharmaceutical packaging will continue to rise. The government has planned to increase the export volumes by 2030 and to use more internally-produced preparations in Russia itself. To put an end to the black market for counterfeit medications, all medication packaging must be labelled with a crypto code and a data matrix code or RFID tag for each saleable unit from January 2020.

Manufacturers throughout Russia want to boost their production capacities. When they do this, they must abide by the legal regulations for recycling. There is a set quota for recycling for certain types of packaging. In 2020, 45 percent of corrugated cardboard will have to be recycled, for wood, cork, cardboard, paper and aluminium, this rate will be 20 percent and will amount to 30 percent for both glass and metal. The planned environmental taxes for paper and cardboard packaging amount to 3055 Rubles (almost 40 Euro) per ton, but these have been delayed due to constant protesting against them. Consumers are also increasingly refusing to buy single-use packaging made of plastic. One customer in four takes their own bag to the supermarket, for example.