Source – https://pixabay.com/en/eggs-hens-kitchen-egg-carton-664848/
The demand for pulp molded products such as egg trays, food plates, serving bowls, and fruit trays has gone up as the packaging industry continues to move away from plastic and Styrofoam-based packaging. In fact, there is no greener packaging solution than pulp molded products.
Not only governments, but everyday consumers are also taking a firm stand against plastic packaging. Global sales of molded fiber pulp packaging were valued at more than $6000 million in 2015, and are projected to reach nearly $11500 million by 2026. One of the most noted offerings of this industry is the pulp molded egg tray. This product has revolutionized the process of egg packaging, storage and transportation. Due to the ever increasing demand for eggs, egg tray machine has become a profitable business.
Although successful, this business does come with certain risks for investors. This post discusses a few features of pulp molded products and the risks associated with investing in an egg tray production line.
1. Features of Pulp Molded Products
Pulp molded products come with several beneficial features that can be classified into three types including environmental, performance-related, and economic.
1) Environmental Features
- Pulp molded products are manufactured using post-industrial raw materials such as virgin pulp, water paper, news paper, carton box, and cardboard. Thus, they significantly reduce biodegradable and compostable waste, decreasing the load on dumping grounds and waste recycling plants.
- Most pulp production plants have a chemical-free pulping process that generates minimal or no pollution. Hence, the plant itself is essentially environment-friendly.
- As the leftovers and scraps are repurposed in the pulping process, most plants also generate zero manufacturing waste.
- Similarly, the water either evaporates or is reused in the pulping process.
- Final packaging is 100% recyclable and hence, completely environment-friendly.
2) Performance-Related Features
- Pulp molded products have optimal rigidity, flexibility, and stiffness, providing the shockproof performance required for delicate packaging applications.
- Air-permeability and hygroscopic ability are the most important benefits of pulp molded trays, making them suitable for fruit, vegetable, and egg packaging.
- They are excellent for packaging of electronic spare parts as they are water-and-oil-proof and anti-static.
3) Economic Features
- The stable source of raw material is the biggest financial benefit of pulp molded products. As long as people continue to produce biodegradable waste such as cardboard and newspaper, you don’t have to worry about raw material supply.
- The cost of producing pulp molded products is competent with plastic or Styrofoam products.
- The market for pulped paper products has increased over the years, and it will continue to grow in the future.
2. Risks of Investing in Egg Tray Production Line
Don’t let the above benefits fool you into thinking that investing money in an egg tray-making machine comes without any risks. In fact, just like any other manufacturing business, pulp product manufacturing also comes with inherent risks that you need to take into account before setting up the plant. This should be done primarily to mitigate them from the very start.
Let’s take a closer look at the major risks involved in pulp molded egg tray production.
1) Growing Competition
Stringent regulations and the increasing emphasis on sustainable development are driving the growth of global molded pulp packaging market. However, with growth, competition is also increasing rapidly. Not only local vendors, but well-established industry leaders also face intense competition now.
The increasing automation and centralization of egg carton-making process are also responsible for the cutthroat competition for a larger market share. As a result, poorly managed manufacturing plants can quickly go out of business. Further, there is no room for price reduction due to the highly automated process.
Some of the global molded pulp product manufacturers are signing mergers or acquiring the local vendors to increase their market share. So, unless you have a plan to take on the big shots in the industry, setting up an egg tray production business can be a risky venture.
2) Water and Electricity Supply
Water is an essential element in the egg tray production process. In fact, after cutting the raw material into pieces, it is immediately transferred into a hydraulic pulper, which contains high quantities of water. So, you will need a constant supply of water for the pulp-making process. The water must be as clean as possible, if not drinkable. Using water contaminated with soil, mud, and dirt particles will increase the risk of damaging not only the production process, but also the end product.
The next critical element of the egg box production supply is the power source. Though potential fuel options for operating the egg tray-making machine may include petrol, diesel, and natural gas, most automated machines operate on electricity. Besides, in most regions, electricity is probably the cheapest source of energy for industrial applications. Frequent power cuts or even voltage spikes can lead to irreversible production losses. So, when choosing your plant location, make sure it receives a steady supply of electricity.
3) Raw Material-Related Risks
Though the raw materials (water, waste paper, and additives) for egg box manufacturing are readily available, they take away a big chunk of your operating cost. That’s why poor raw material management and sourcing can lead to significant losses. Raw materials comprise different types of paper waste including newspaper, water paper, and cardboard.
These raw materials not only have varied properties, they also give rise to different costs. In short, your profit margin depends on the careful sourcing and management of raw materials. Using cheap-quality or contaminated waste paper will result in the production of poor-quality egg boxes.
Raw material cost is also a major risk factor that manufacturers need to consider. As mentioned earlier, the cost of the raw material will depend on its components. However, market fluctuations (demand and supply) can also influence the raw material cost. Depending on market predictions, you may have to consider warehousing the raw material. As there is little or no room for cost reduction in the manufacturing process, you will need to come up with a plan to save as much as possible on raw material sourcing and storage.
4) Technology-Related Risks
The cost of an egg tray making machine can range from a few thousand dollars to a few millions. It usually depends on the production capacity and functionality. There are three basic variants available from pulp molding machine manufacturer including manual, semi-automatic, and fully automatic egg tray machine. Obviously, automatic egg tray machine is expensive compared to manual and semi-automatic machines.
However, don’t be tempted to go for the cheapest alternative. Instead, choose the machine according to your estimated production capacity. Manual and semi-automatic machines may be cheap, but they may not provide consistent output due to manual interference.
For example, the machine having ‘reverse suction’ technology may be slightly expensive, but it can adapt to higher production demand and larger products such as fruit trays, electronic packaging, and dinner plates. On the other hand, an egg tray machine having ‘upper suction’ technology may be cheaper, but it can cause uneven thickness in large molding products.
In short, to compete with the leading manufacturers, you will need to invest in the latest technology. In the beginning, you may even have to spend a little more than your budget may permit. However, this will save you money in the long term.
5) Packaging and Shipping-Related Risks
The purpose of a pulp molded egg box is to protect the eggs from possible contamination and avoid moisture loss. The egg cartons must reach your consumers in excellent shape and quality. It is, therefore, necessary to pay attention to the packaging and shipping of the egg cartons. You will need to consider various factors including quality maintenance, storage facilities, type of transport, distance to be traveled, weather conditions, and costs.
You can recycle damaged egg cartons. However, more damage means higher recycling costs and lower production output, resulting in considerable losses. Besides, irreversible damage during packaging and shipping may make the egg trays unfit for recycling. These unfit products not only increase production costs, but also contribute to the ever-growing pollution.
6) Registration and Licensing
Just like in any other business, you will need to complete a variety of registration and licensing formalities with the respective government departments in this business too. The requirements for registration and licensing may change depending on your state and local laws. For example, you may have to obtain environmental clearances from both, the local as well as the state authorities. Your local government may provide you with electricity at a discounted rate if you have a valid Small and Medium Enterprise (SME) registration.
Some of the basic registration and licensing requirements may include the following:
- Business or company registration with relevant local and state authorities
- Registration as Pvt. Ltd. or LLP Company or an SME
- Trade license from relevant authority
- Tax registration with relevant local and state authorities
- Export and import licenses if you plan to export your product or import raw materials and spare parts
- No Objection Certificate (NOC) from local and state Pollution Control Boards
In addition to the aforementioned registration and licensing requirements, you may also have to follow preset quality standards for pulp molded products set by the respective governmental authority. Not following these guidelines or failure to obtain any of the registrations, licenses or certifications may land you in hot water.
The demand for pulp molded products continues to rise as people become increasingly concerned about the environment. Because they’re eco-friendly and cost-competent with their plastic counterparts, pulp molded egg trays have become popular in the recent years. The above-mentioned fabulous features and the market potential have turned egg tray-making into a lucrative business. However, it comes with a few inherent risks as well. Learning about these five risks will help you avoid the potential pitfalls in this business. Do let us know about the risks factors you faced and how you overcame those in the comments section below.