As a supporting industry with all walks of life, the paper packaging industry has been affected by the macro economy for a long time. Because of the relatively weak position in the industrial chain, the paper packaging industry not only faces the risk of raw material price fluctuation but also faces great market competition pressure. In recent years, with the increase of all kinds of uncertainty factors, the business risks faced by enterprises will be significantly aggravated.
I. Macroeconomic risks
The paper packaging industry and downstream household appliances, food and beverage, consumer electronics, and other retail consumption industries are closely related. Although most of these industries are weak cyclical industries, they are still affected by macroeconomic fluctuations. If the domestic economic growth rate decreases, consumer demand decreases, and retail consumption industry prosperity decline, will greatly affect the development of the paper packaging industry.
At present, the COVID-19 epidemic is still spreading around the world, and the impact on the world may continue. Problems such as slowing global growth, rising geopolitical risks, and the return of structural pressures in the domestic economy will persist for some time to come. International and domestic economic instability, and uncertainty factors, will be very adverse to the development of the paper packaging industry environment.
2, the risk of market competition
The market share of the top 10 enterprises in the paper packaging industry is less than 10% in total, the market concentration is low, the competition is fierce, the overall development capacity is insufficient, the transformation speed is slow, and the product homogenization is serious. For many paper packaging enterprises to seize the market, disorderly competition, let the industry in a state of low gross profit.
At the same time, with the rapid development of the domestic paper packaging industry, some paper enterprises extend downstream, and have built packaging plants;
3, the risk of raw material price fluctuation
In the cost composition of paper packaging enterprises, the cost of raw materials such as corrugated paper and box board paper accounts for about 70% of the total operating cost. Therefore, raw material expenditure is an important factor affecting the overall cost and profit of paper packaging enterprises, and the change in base paper price will have a great impact on the business performance of enterprises.
Compared with paper packaging enterprises, paper enterprises have a stronger voice in the industrial chain, and the phenomenon of paper price fluctuation occurs from time to time. If the selling price of the paper packaging enterprise cannot be synchronized with the change range of the raw material price, it is easy to hurt the production, operation, and cash flow.
4, the risk of rapid expansion
For a large paper enterprise, as the development and expansion of the company, the company’s assets scale, scale, management agencies will rapidly expand, organization structure and management system will also tend to be complex, making the company greatly increase the difficulty of management decision-making and risk control, the company’s operating efficiency is also likely to decline.
Therefore, if the management level and talent reserve of these large enterprises cannot meet the needs of the rapid expansion of the company scale, and the organizational model and management system fail to adjust and improve in time with the expansion of the company scale, their competitiveness will be weakened moreover, if the industry economic downturn, severe overcapacity, investment in the construction of projects will be prolonged return period.
5, the risk of too concentrated large customers
Many paper packaging enterprises, especially small and medium-sized enterprises, are extremely dependent on big customers, and some enterprises even 70% of orders come from their top five customers. Although having big customers can bring stable and large-scale income, once losing big customers or big customers have a strong voice, the development of enterprises will face a big blow.
A very common example. 30% of the revenue of a packaging company comes from a big customer. In the process of cooperation, the carton processing fee given by this customer is low. If we give up this customer, the annual output value of the enterprise will decline significantly. If you insist, but don’t make enough profit, sometimes don’t even make money, so you are in a dilemma.
Macroeconomic risk, market competition risk, raw material price fluctuation risk, rapid expansion risk, and the risk of large customers too concentrated, are all common risks in the paper packaging industry, almost every enterprise will face a variety of risks.
However, when the industry prosperity is high and enterprises enter the rising period, these risks usually do not occur. Even if they do, most enterprises have enough ability to resist. However, the industry prosperity decreases, especially in the present when the macro uncertainty factors increase, the anti-risk ability of enterprises will become worse, and the business dilemma will become more prominent.