Bioplastics Indian and Global Opportunity
With increasing concerns over the use of plastics, sustainable alternatives to plastics are increasingly in demand. Biopolymers in general and bioplastics in particular, present one such sustainable alternative.
Products and solutions based on bioplastics/biopolymers present interesting opportunities globally, and in India. Opportunities are present across a variety of industrial sectors that include packaging, water, beverages, insulation materials, specialty materials and more.
Bioplastics still constitute a very small percentage of the total plastics market. Of the total 300 million tons of plastics consumed in 2015, only about 2.1 million tons (0.7%) was bioplastics. Of this, only about 0.8 million tons (0.3% of total) was biodegradable bioplastics – that is, bioplastics which degrade naturally within a short period of time.
Learn more about the properties, applications and market for Bioplastics
The above share however is expected to rise significantly owing to some key drivers.
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Drivers for the Bioplastics Market Growth
A number of key drivers are accelerating the growth of the bioplastics market
- Mandates & regulations
- Increasing eco-awareness among consumers
- Corporates becoming more focused on sustainability
- Technology stabilization
- Cost reduction
Challenges for Bioplastics
At the same time, bioplastics face critical challenges before they achieve large scale market penetration.
- They are much more costly than conventional plastics (could be 2-4 times as costly, depending on product)
- Upstream technology is still evolving, and hence there are uncertainties in technologies and processes
- Uncertainties present in post-use processing and end of life options for bioplastics
- Substitutes – some of them authentic and some not-so authentic substitutes – also present competitive challenges to the adoption of bioplastics in many mainstream markets
- Customer awareness – a number of misconceptions result in a poor and sometime faulty understanding of the market, resulting in delays in investment decision-making
Strategic Market Approach
Given the Opportunity and Challenges, how does an entrepreneur approach the bioplastics business opportunity?
Identify the Right Market/s
In order to decide which of the business models and products to go with, an entrepreneur first needs to have a good idea of which market he will be targeting.
Here again, one can consider four types of market segments-
Let us look at each of the four combinations in brief –
Currently Available – Commodity – this cell represents the most obvious market segments for bioplastic products; one can readily imagine what comes in this – disposable carry bags, for instance. These market segments already exist with some amount of competition.
Currently Available – Premium – this cell represents more premium bioplastic market segments. Similar to the cell above, these markets are already being catered to with varying levels of competition, but these are more specialized than the commodity segment, and could hence provide good margins to the producer. An example of a product in this cell could biodegradable medical implants.
Emerging – Commodity – this cell represents those market segments that are fairly new or are just emerging, but would be most likely requiring relatively commoditized and unsophisticated products. An example of a product that belongs to this category could be punnets/small boxes used for take-aways and for shipping specific food products. Currently made of plastic, these are currently used by a number of premium hotels as well as by online shopping firms, and there is a reasonable need for them to switch over to biodegradable plastics.
Emerging – Premium – this cell represents an exciting, though relatively uncertain set of market segments. These are segments in which the needs require fairly specialized bioplastic products, and these segments could also be willing to pay top dollar prices for these. An example of a product in this segment could be bioplastic, biodegradable microbeads to be used in cosmetics, now that some developed countries have started banning use of plastics microbeads in cosmetics.
- The matrix above provides a perspective of the type of market segment opportunities present for an entrepreneur.
- Each of the four combinations presents a specific Opportunity-Challenge profile.
- It is highly recommended that an entrepreneur starts with a clear understanding of each of the four combinations, and based on the combination that is best aligned to his aspirations and constraints, select the optimal combination.
Identify the Right Product/s
Bioplastics Product Categories
At first sight, bioplastics appears to be a rather homogeneous product category, but it is not.
For one, all bioplastics are not biodegradable. This comes as a surprise to many, as they thought that the whole point of going for bioplastics is to have a biodegradable product. Not so. Some bioplastics are not biodegradable, and they are used as a renewably sourced substitute for durable plastics.
In addition to bioplastics being biodegradable or not, a bioplastic product can come in the following categories:
- Homogeneous bioplastics – these are bioplastics made with a single, homogeneous resin (PLA, for instance)
- Bioplastic blends/compounds – these are pure bioplastics too, but having more than one rein. An example is PLA/PHA blend.
- Bioplastic blends with petro-plastics – a variation of the above, these are blends that contain both bioplastic and petro-plastic resins. An example of this is PLA/PBAT.
- Bioplastic laminates with metal/paper – Typically for films, these are bioplastic films that are laminated with thin layers of metallic foil or paper.
- Composites of bioplastics with wood and fiber – Finally, bioplastc products can also be in the form of composites, where they are blended with wood or fiber.
Identify the Right Business Model
An entrepreneur has the choice of starting at different levels on the bioplastics value chain. Here are the business models available for an entrepreneur in this context.
- Starting upstream with the biomass
- Starting with an intermediate product (such as Lactic Acid)
- Starting with resins but doing the compounding of multiple resins
- Starting with the compounded resins and doing only the moulding of end product
- Purchasing the end product and only involved in trading
Taking it Forward
There could be multiple market segments and product categories that an entrepreneur can operate in. In addition, the entrepreneur also has an option of starting at various points along the business value chain.
Given these combinations and the opportunity-challenge canvas, how does an entrepreneur or startup decide which way to go?
The right or optimal strategy should start with identifying who will be the customer (market segment) and what needs would be satisfied for the customer. This would determine the product categories. The right business model depends to a large extent on the profile of the entrepreneur, his/her current business assets and also the capital that can be brought in for the venture.
Hence, our recommended steps for the way forward are as follows:
First: Select the market you wish to enter. Then –
- Identify the products that are most attractive for the market segments selected
- Identify the business model that will be the best for you
- Identify technical and marketing partners required for the product and the business model
- Firm up business plans and start the business
How Can EAI Help?
With its focus and prior work in bioplastics, EAI has an excellent understanding of all the strategic steps listed above and can assist an entrepreneur in making the optimal decisions for each stage of the decision making process.
Our specialized consulting division provides assistance in market research & business intelligence, market potential analysis, strategy consulting, technology vendor/supplier finder, technology & business due diligence, M&A assistance and more for the complete clean energy, environment and sustainability value chain.
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