6 Billion Straw Business Opportunities in India? China's "straw king": no plan to develop the Indian market

Editor's Note: India recently announced a major move to completely ban the use of single-use plastic products from July 1. Indian Prime Minister Narendra Modi promised in 2019 to eliminate single-use plastic products by the end of 2022, "which is the most ambitious goal in the Asia-Pacific region." But the reality is that the Indian market is not ready for the "ban on plastic bags", and many companies are even trapped in a small straw, paper straw and other alternative products in short supply. In this context, is there a lot of business opportunities in the Indian straw market? Can China's straw industry go to India to explore opportunities? What experience can we learn from in other countries' environmentally friendly straw products? The Global Times reporter conducted an investigative interview on this.

The production capacity of Indian enterprises is almost zero

It has been more than a month since the Indian government announced the "ban on the use of disposable plastic products", Bloomberg recently reported with the title of "Modi's plastic straw ban makes Indian consumers thirsty", including plastic straws, 19 kinds of disposable plastic products, including plastic straws, were officially listed as "prohibited" by The Indian government, but the Indian beverage, straw industry, etc. are obviously not prepared for this. Due to the lack of alternatives to plastic straws, coupled with the disruption of supply chains by the epidemic, many beverage companies in India are currently facing paper straw dilemmas.

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Indian beverage manufacturers use about 6 billion straws a year, but India's domestic paper straw production capacity is almost zero. Recently, some large straw users such as Coca-Cola and other beverage companies are still lobbying the Indian government, saying that there is no suitable straw replacement for the product, and asking the government to withdraw the straw from the banned list, but it has not been adopted. The straw producers were also not prepared. Sampat, a representative of manufacturers and president of the All India Plastics Manufacturers Association, believes that for many plastic product manufacturers, changing products, modifying equipment, and training workers to adapt to the requirements of new technologies and new products are very difficult tasks that cannot be completed in one year. He estimates the ban will have a huge impact on more than 80,000 companies in India that produce single-use plastic products and result in billions of dollars in losses.

In particular, some local media and netizens in India have commented that as a key party in the formulation and implementation of the "plastic ban" policy, the Indian government is not fully prepared. The government stipulates that violators of the ban will be fined up to 100,000 Indian rupees (about 8,480 yuan), and serious violators can face up to 5 years in prison. At present, the bans issued by the government lack supporting measures and the practicality and coherence of policy implementation. Based on past lessons, the lack of central-local coherence and prevarication in India is one of the reasons why many similar policies have "died out of nowhere".

In fact, as early as 2009, the Indian government implemented a "plastic ban order". I was shopping at a small shop in New Delhi at the time, and after paying the money, I found that the store did not provide plastic bags, only gave 2 small paper bags, and the author had to carry a bunch of things back. But then Indian businessmen "soft" but effectively countered the ban, with Indian producers, sellers and plastics backers forming a coalition that produced ads that ran on media loops to promote "plastic bags are not enemies, but friends." In the end, the ban was not lifted. Local analysts in India told this writer that India's seemingly strict laws were formulated quickly, but it is difficult to implement them immediately, "This feeling is a bit like a mother beating a child, holding her hand high and falling lightly."

For the implementation of the "plastic ban", this year, the Indian media broke the news that the relevant government inspection team had completed a fine of 150,000 US dollars. Some large supermarkets and international chains such as KFC and McDonald's have begun to use paper straws. But small shops throughout the towns and villages, which account for more than 90 percent of India's sales channels, are mostly complaining, watching or "fighting guerrillas" with law enforcement inspectors. At the production level, orders from a handful of companies in India that can produce alternative products such as paper straws have recently skyrocketed, but it is estimated that even if they are fully loaded, the production capacity is not enough to meet 10% of the market demand.

In the face of such a huge supply and demand contradiction and market prospects, the capital of all parties has not yet entered the plastic alternative industry as expected, and perhaps they are also continuing to wait and see whether the plastic ban in 2022 will become another "wordless ending" as it was in that year.

Some analysts familiar with India's local business environment said that for foreign investors to set up factories in India, it is difficult to obtain land, the process of issuing certificates is far away, corruption and other issues are still problems that cannot be avoided. On the whole, the prospects for foreign investment in Indian paper straw and other industries are still unclear.

China's "Straw King": I don't want to invest in India

[Global Times reporter Yang Shasha] Since January 1 last year, the so-called "strongest plastic restriction order in history" has come into effect, and China's catering industry has banned the use of non-degradable disposable plastic straws. As a result, paper straws and PLA (polylactic acid) degradable straws have landed on the market. In the straw market, Zhejiang Yiwu Shuangtong Daily Necessities Co., Ltd. is the "hidden champion" of the industry (small and medium-sized enterprises that are not well known to the public but occupy a leading position in a certain segment of the industry or market - Editor's Note). Herman Simon, the father of the "hidden champion", said in his book "The Hidden Champion" that a small straw may only be worth a few cents, but such a niche market can also give birth to world-class enterprises. Lou Zhongping, the founder of TwinTon Straw, is also known as the "Straw King", and he said in an exclusive interview with the Global Times reporter that as a Chinese local company, Twin Children does not plan to develop the Indian market.

Founded in the 1990s, the products have been exported to more than 70 countries and regions, with an average output of 170 million straws a day and an annual production and sales of more than 7,000 tons. The book "Hidden Champions" said that although the straws used by Europeans when drinking Coke or orange juice could not see the brand, they were likely to be double children from Yiwu. Lou Zhongping told reporters that at present, the company also has considerable capacity to provide paper straws, PLA straws and so on for the domestic market. "Paper straws can not talk about how high the threshold, the industrial chain is mainly paper, and there is no very high scientific and technological content", Lou Zhongping told reporters, in general, a straw needs three layers of paper, the innermost layer of the highest requirements, because direct contact with drinks and people, the key to paper is to meet the requirements of food paper. The coiling machine rolls the paper into a straw, and then after cutting, printing, etc., a straw is produced, and the whole process is not complicated.

"Doing straws looks very simple, but the difficult places are also quite difficult," Lou Zhongping believes, the current pain point of the industry is mainly the straw material problem. After the implementation of paper straws in China's milk tea shops, many consumers complained that "the drink is still there, the straw is gone" and "drinking and drinking, the straw becomes a paste". Lou Zhongping said that in 2018 and 2019, a batch of inferior paper straws appeared in the Chinese market, but they were quickly eliminated, "double children's paper straws soaked in water for two hours, there is no problem." But Lou Zhongping admits that the user experience of paper straws is really bad, so Twins has been exploring other degradable and environmentally friendly straw materials for many years.

Lou Zhongping recalled that the company began to study the use of macaroni (starch) as a straw in 2013, and the research and development took 6 years, but he believed that the project as a whole failed, "Although we solved the problem of materials and also made products, unfortunately the country did not have this category, starch straws are neither food nor tools." In the use of other degradable materials, materials such as polylactic acid also have their own defects.

To this end, Lou Zhongping has always advocated "recyclable straws", and his reason is "chopsticks can, why can't straws". In recent years, twin children have introduced reusable straws such as bamboo, wood, and even stainless steel and glass. The company has produced stainless steel and other straws for Taiwan, "Taiwan's general milk tea bags are equipped with straws and cleaning brushes, after washing and disinfection cabinets, straws can also be recycled," Lou Zhongping believes, this is actually a habitual problem.

Why are there no companies like TwinTon in India? Lou Zhongping believes that the development of individuals benefited from the environment at that time, "just like we Yiwu people in the 1970s and 1980s picked up goods and shouldered the burden, walked the streets and alleys to exchange chicken feathers for sugar, did a lot of trade but did not succeed, in fact, it was related to the environment at that time."

Lou Zhongping has visited India many times. He believes that India's development is not like China's 1980s and 1990s, whether it is building parks or purchasing land, it is affected by private rights, and the progress is not as good as China. But Lou Zhongping believes that India is a country that cannot be underestimated, "such a large population base, when the real core is released, it is a challenge that Chinese manufacturing has to face." He said there will be companies like TwinTon in India in the future, but not yet.

Twins also has no plans to enter the Indian market for the time being. Lou Zhongping told reporters that the positioning of Twins is a local enterprise, China's population of 1.4 billion, there is a large enough base to support the development of Twins. In addition, in recent years, India's xenophobia, nationalism is rampant, and the business environment is not friendly to Chinese enterprises, "in recent years, don't say to invest in India, even our products dare not go in."

Straw companies in Ningbo, Zhejiang and other places have also invested in Vietnam, Indonesia and other countries, but according to Lou Zhongping, the overall feedback of these enterprises is not ideal: on the one hand, the cost of factory construction in these countries has increased year by year. Taking Vietnam as an example, the land price in 2017 is still relatively cheap, but the land cost has increased significantly in the past two years, which is close to the land price of China's third- and fourth-tier cities, and the land price of Vietnam's industrial zones near China, and even much higher than that of Guangxi; Labor costs, on the other hand, are soaring. In 2017, the wages of Vietnamese employees were only equivalent to 1/4 of that of China, and now the monthly wages of an employee in Vietnam are 3000 to 4000 yuan, equivalent to 60% and 70% of China's. Especially in the past two years, Japanese and South Korean enterprises have invested heavily in Vietnam, land prices have been speculated, labor costs have also increased, and Vietnam no longer has an advantage.

Lou Zhongping believes that it will take 10 years for the manufacturing industry to gain a foothold in a new area, but the digital environment will change dramatically in 10 years, and the environment that was friendly to Chinese manufacturing enterprises may no longer be, "If you want to toss like this, I will not do it!" ”

South Korea launches log straws

South Korea recently announced that after November 24 this year, it will ban the use of disposable appliances such as plastic straws. Although the ban has not yet been implemented, Korean companies have prepared early, and many restaurants have begun to replace single-use plastic straws with environmentally friendly straws. Many straw manufacturers also see business opportunities and continue to develop straw products that are both environmentally friendly and have a better user experience.

A special global times correspondent from South Korea recently visited a Starbucks coffee shop in Myeongdong, Seoul, where all paper straws have been used. Judging from the reporter's own experience, the paper straw did not appear to be soft and collapsed, and the straw itself did not have the taste of pulp, and there was no obvious impact on the taste of the drink. Jin Mou, an office worker who lives in Yongsan-gu, Seoul, told the Global Times special reporter that he is very supportive of restricting the use of plastic products, including straws, and he and his friends are willing to use paper products, thinking that it is more environmentally friendly. But at the same time, she is also worried that some paper straws may contain additives that are harmful to the human body, and hopes that the government can strengthen relevant quality supervision.

Aiming at the business opportunity of straw replacement, the subsidiary of "Minying Paper" in Busan recently launched the "MY STRAW" brand paper straw, which is used by many chain cafes and food companies in South Korea, and consumers can also purchase them through online shopping malls. It is reported that the paper straw is made of natural pulp, does not add substances harmful to the human body, and can be 100% natural decomposition in nature. In order to overcome the problem of softening at the moment of soaking in the water, the straw has been improved in quality and production process to maintain its shape for a long time at a water temperature of 80 degrees Celsius. The plant plans to increase the annual production of paper straws to more than 1 billion.

A company in South Korea's Jeju region launched barley straws made from barley straw late last year. In order to reduce costs, barley straws are produced on an automated production line, and the system can automatically identify and cut off barley straws, and a barley straw can be produced as soon as 5 seconds. Straw safety has also been certified by the relevant authorities and a patent is planned.

In March this year, an eco-friendly products company based in Seoul launched the "world's first" log straw made of logs. The company has set up nine sales outlets throughout Korea and plans to expand to 15 by the end of this year, selling in department stores and shopping websites.

In addition, Korean companies have also developed green straws made of raw materials such as rice and silicone, so that Korean consumers have ample choice opportunities.

Source: Global Times