Across the world, countries have prohibited using single-use plastic bags on the grounds of environmental concern. This trend has created substantial demand for the alternative – paper bags.
Some countries have put in place regulations that stipulate a minimum content level regarding post-consumer recycled paper because paper bags are recyclable and biodegradable. As a result, owners of paper manufacturing businesses can make good topline and bottom-line growth, given the current trend.
Did you know?
The Indian paper bag industry is projected to grow at a CAGR of 6.5% between 2021 and 2026.
How to Start a Paper Bag Manufacturing Business
Identify Your Customers
Paper bags find use with the following customers, therefore being a replacement for single-use plastic bags:
- General-purpose packaging
- Kirana stores
- Jewellery outlets
- Gift and novelty outlets
- Shopping malls
This list is not exhaustive as countless other customers are looking to use paper bags.
Also Read: How to Start A Business Of Jute Bag Making
Financial Investment Required
Now that the business context of such an opportunity has been examined, it is time to turn attention to the finances required to get such a business up and running. The paper bags business is a small-scale enterprise, and the amount of investment that an owner is willing to part with will dictate the size of the business in terms of labour, machinery and land.
There are two alternatives to explore in the manufacturing of paper bags:
- Automatic machinery
- Semi-automatic machinery
An automatic machine for paper bag production will cost the business owner in the range of ₹5,00,000 to ₹8,00,000, with the production capacity of the equipment dictating its price. Such a machine can manufacture 15,000 units in an hour.
A semi-automatic machine will cost approximately ₹3,00,000. It will require an additional budget for manual labourers, with production capacity via this alternative not as high as that of automatic equipment.
Here is a list of the key machines to shop for:
- Roll-slitter motorised machinery
- Eyelet-fitting machinery
- Stereo grinder
- Creasing machinery
- Stereo press
- Printing machinery
- Punching machinery
- Lace-fitting machinery
- Bag-cutting machinery
- Testing scale machine
Whether automatic or semi-automatic, the business owner has to maintain the equipment. Show a preference for preventive maintenance rather than costly repairs. Ill-functioning equipment can lead to lower-quality bags/output. Additionally, replacing machinery is a costly expense.
Note: The business owner will have to purchase a paper-bag-manufacturing machine with a built-in printing function or will have to altogether invest in a separate printing machine for such purposes.
Location and Labour
Select a location in a semi-urban area to enjoy the best of both worlds – rural and urban. The business owner has to keep track of many factors – the size of space for manufacturing, rent, transport, electricity supply, water supply, and labour/workforce.
The proposed size of the business in financial terms will play a role in deciding how large a facility the business owner needs to build to house production. Locating the facility in a semi-urban area will bring down the cost of the rent. Ensure the facility is well connected to routes or highways to allow quick access to the market.
Find a location where staffing, water, and electricity costs are lower, thereby increasing margins. Shortlist locations in the vicinity of areas where a business owner can source a good and cost-effective workforce/labour.
Invest in training and orientation initiatives to ensure employees do their jobs well and achieve their potential. As this is a small-scale enterprise, you will need only 10 to 20 employees working in the manufacturing facility. You can increase the number of employees in line with an increase in the size of business requirements. Employ a graphic designer who can aid with designing and other requirements.
A business owner must procure high-quality raw materials to help manufacture bags with great texture, thereby ensuring a competitive advantage. Additionally, the business owner has to ride a fine line on stocking raw materials – stock too much, and they pay more for storage, stock too less, and you could face a shortage in output. Implement stocking activity in line with business projections for the year.
Here is a list of the raw materials required to manufacture paper bags:
- Kraft paper sheets
- Offset paper
- Coated paper
- Cardboard paper
- Chemicals utilised in the printing process
- Paper laces
- Paper rolls
- Adhesive (industrial-grade)
- Polyester stereo
- Flexo colour
Promotion and Marketing
Keep in mind that presentation is as critical as production. Ignoring promotional activities will hurt long-term growth. A business owner must seek to position the firm uniquely. As mentioned earlier, employ a designer who can also help craft a company logo. Here are the different ways in which a business owner can market and promote a paper bag manufacturing business:
- Advertise in newspapers and magazines.
- Create a website for marketing purposes and to tap online orders.
- Conduct surveys of the market – online and local – to gain insights.
- Start a WhatsApp account for marketing and to get orders.
- Utilise Facebook Marketplace to tap local markets.
- Pay for Instagram advertisements for marketing purposes.
- Start selling paper bags on e-commerce portals.
- Take part in trade shows, exhibitions, and fairs celebrating arts and crafts.
- Offer customers the option of printing custom logos.
- Expand the reach of marketing from cities to towns as well.
- Try to get business with street vendors and small merchants.
- After securing deals with clients, offer a business card for networking purposes.
- Put up stalls near supermarkets and in gated communities.
- Working towards winning big clients such as electronic stores, clothing retailers and jewellery outlets.
Company Registration and Business Licence
To establish a small-scale enterprise, the prospective owner of such a business will have to register the enterprise with the Registrar of Companies (ROC). Following this, put in an application for a trade licence with the respective municipal authority and register the manufacturing unit as a Small Scale Enterprise (SSI). The prospective owner will also need a certificate from the Bureau of Indian Standards (BIS) to produce bags. The documents required for the functioning of a business are PAN, GST Number, Udhyog Aadhar and Current Account Number.
Getting business from large shops is tough as they already procure this product from bigger paper bag manufacturers. A small business owner can manufacture cost-effective paper bags for hotels, pharmacies and small retailers. This strategy will yield lower ROI but will build a customer base.
Target striking agreements with 60 to 70 customers in the early phases of the business to supply different types of paper bags for customers. Getting nine out of ten of them to place an order again should yield success over the long term. Over the long term, given the current trends in the market, a paper bag manufacturing business is a really good opportunity.
Excellent execution should yield profits as it is currently the material of choice given the current milieu regarding beneficial environmental practices. Technical advancements have ensured that paper bags can store goods for long periods and be utilised to carry goods efficiently.
Follow Khatabook for the latest updates, news blogs, and articles related to micro, small and medium businesses (MSMEs), business tips, income tax, GST, salary, and accounting.