Consumption upgrade, rush for fine goods brighten growth prospects of rich-paper firms

As China's top legislature prepares to meet for its annual session beginning Tuesday, nearly 3,000 deputies, or lawmakers, will note with interest that consumption upgrade, which they had endorsed last year as key to economic growth in the new era, has borne fruit in the form of Chinese consumers' growing demand for high-quality goods, including luxury products.

This year, they will likely note that luxury packaging, which is key to the success of the luxury goods market, is much sought after in China, thanks to consumers such as Hu Min, 35, a Beijing-based media professional.

Hu saves enough to afford luxury goods occasionally because the way such stuff is packaged fascinates her. "Attractive luxury packaging can be a real turn-on. Lipstick in gorgeous packaging - who can resist that? I, for one, can't. I won't hesitate to buy it, even if it's not the perfect color."

Luxury packaging helps make products look appealing and desirable indeed, prompting consumers such as Hu to spend more.

As a business segment, specialty packaging has spawned a few iconic firms, and is fast evolving into an exacting science, boosting sales of luxury goods - cosmetics, fragrances, confectionery, gourmet food and drinks, watches, jewellery, premium alcoholic drinks, tobacco - in China. It is also promising to attract big investments, thus helping deepen the ongoing consumption upgrade in the country.

Over to Hu: "I spend roughly 30,000 yuan ($4,479) on luxuries every year. Sometimes, I buy luxury gifts for my friends. And when I do, I pay particular attention to packaging. Good packaging can make a great first impression on people. It, of course, adds luster to the gift. I think packaging is very important for luxury goods. A luxury product without beautiful packaging is incomplete."

It's not just females who are impressed. Wang Peng, 25, a software engineer in Shanghai, said: "When I buy a pair of expensive earrings to give as a gift to my girlfriend, I select the product that comes with a good-looking box, so that she can put the earrings into it when she's not wearing them. Packaging is part of the luxury."

The luxury packaging business worldwide is hoping to ride the preferences of consumers such as Hu and Wang to reach a market value of $17.6 billion by this year-end, up 4.4 percent over 2018, with Asia driving growth, a latest industry report said.

Published by Smithers Pira, a provider of market intelligence to the packaging, paper and print industry supply chains, the report showed that as early as 2014, the Asian share of the global luxury packaging market was 28 percent.

The figure is constantly growing. China, as the second-largest consumer of luxury goods, and also the second-largest manufacturer of luxury packaging materials, is driving the luxury packaging business.

Market insiders said luxury packaging takes up a relatively small percentage of the whole packaging market. But, with enterprises' increasing need to build global brands, and given their use of technologies like functional materials, anti-counterfeiting, and digital printing, luxury packaging will have new growth potential in the future.

A report by Research and Markets said the reasons for the rapid growth of China's packaging market are the growth of personalized packaging and increasing awareness of sustainability.

"This is a profitable opportunity for the packaging industry. Some renowned packaging brands are looking for new packaging technologies and innovations so that their products can stand out. In addition, consumers' growing demand for luxuries promotes the development of the packaging industry."

The report also noted that the rapid growth of e-commerce is the main driving force of the luxury packaging market in China. The fact that packaging and display can add to the competitiveness of a product is another big factor. Also, consumers of luxury goods play an important role in the development of luxury packaging.

Whether or not a brand can follow the trend has significant impact over its market share. So, enterprises are enhancing their product advantage through packaging, marketing strategy and social contact, the report stated.

Stephane Truchi, executive president of market research firm Ifop, said during the 2018 Luxe Pack, an industry event in Shanghai: "In China, the upcoming largest luxury consuming market, luxury packaging brands should also adjust their strategies to follow the trend."

Luxury packaging brands in China are indeed following the trend. An intelligent package developed by Guangdong province-headquartered Shenzhen Yuto Packaging Technology Co Ltd enables customers to store their voice, greetings or messages online. When they gift a luxury product, the recipient can scan a QR code on the package and receive greetings from the sender on his/her phone.

This strategy helps the packaging company to not only add value to its product but collect information such as user distribution and product usage, which can inform its research and development of future products.

Apart from digitalization, personalization is another trend. Konica Minolta, a Tokyo-headquartered packaging company, developed a luxury package for champagne that emblazons the consumer's name and fingerprint on it.

Given their rapid growth in recent years, and high use of specialty paper, luxury packaging brands are embracing environmentally friendly practices in their trade. For, when the price and quality of the products are identical, whether or not the packaging is environmentally friendly becomes a determinant factor.

Finnish paper and pulp company Metsa Board's fiber cardboard packaging won the ecological packaging award during the 2018 Luxe Pack.

Hong Kong-based luxury packaging solutions provider Nationalpak Ltd produces natural packaging products made of starch, vegetable fiber and shells, while Solna, Sweden-headquartered packaging firm BillerudKorsnas AB offers bio-based packaging.