Starting a Paper Cup Manufacturing Business

Paper cups are disposable cups made out of paper and lined with wax or plastic to prevent liquid from soaking the paper. Paper cups are made using food grade paper, which is hygienic and capable of storing both hot or cold liquid for long times. With the rising awareness and rapidly changing lifestyles, the demand for paper cups has increased tremendously year on year. In this article, we look at the process of starting a paper cup manufacturing business in detail.

Market for Paper Cup in India

Paper cups are becoming more and more popular across the globe as a way to become more eco-friendly and reduce exposure to foodborne infections. Paper cups demand is majorly originating from IT companies, educational institutions, food canteens, industrial canteen, restaurants, coffee or tea shop, fast food, supermarkets, health clubs and event organizers.

As paper cups are a product of daily use and have mass consumption requirements, selling of paper cups in the market will not be a problem. With well-established demand and supply forces, the prices of paper cups in the market can be easily ascertained and sold in bulk to traders or end customers through a variety of channels.

Paper Cup Manufacturing Process

There are mainly three stages in manufacturing a paper cup. In the first stage, the paper cup's sidewall paper is shaped and formed. In the second stage, the paper cups bottom paper is shaped and joined with the shaped sidewall. In this third and final stage, the paper cup is pre-heated and bottom/rim curling is done to complete the paper cup manufacturing.

Licenses and Registrations Required

To establish a paper cut manufacturing unit, a minimum of Rs.10 lakhs investment is required for purchasing the required equipment and raw materials. With an investment of Rs.10 lakhs, the paper cups business can manufacture over 2.2 crore paper cups with an estimated sales turnover of over 66 lakhs.

Since the business would achieve a turnover in excess of Rs.66 lakhs per annum, it is best to incorporate a company. With the business being registered as a private limited company, it would be easy for the Entrepreneur to obtain a bank loan, scale-up quickly and have the ability to bring on partners. In addition to company registration, the business would also require GST registration for selling paper cups.

Bank Loan for Paper Cup Manufacturing Business

Banks provide loans for paper cup manufacturing business under various schemes. A term loan of Rs.10 lakhs and a working capital of Rs.15 lakhs would be required for setting up the business. The loan can even be obtained under the MUDRA loan scheme wherein loan of upto Rs.10 lakhs is provided by various banks and financial institutions without any collateral.

Land and Building

For a paper cup manufacturing business, it requires an area of about 500 square meters with an electricity connection.

Equipment

Automatic machinery for paper cup manufacturing can be purchased from various vendors in India. The cost for automatic paper cut manufacturing machine is Rs.8,50,000/- and dyes would be required with a cost of Rs.1,50,000.

Labour Requirement

The labour requirement for setting up of paper cup manufacturing is minimal. It requires only about 3 persons. It is recommended that there be 1 Sale cum Production Manager, 1 Skilled and 1 Unskilled worker.

Raw Materials Requirement

Raw material in the form of printed PE paper, bottom reel and packing material would be required for the paper cup business. The total investment in raw material per month would be about Rs.4 lakhs.

Profitability in Paper Cup Business

The paper cup business set up with an investment of about Rs.10 lakhs in machinery and Rs.15 lakhs in working capital would generate an annual turnover of Rs.66 lakhs. The total cost for production would be about Rs.57 lakhs thereby providing a profit of Rs.9 lakhs for the Entrepreneurs. The net profit ratio in paper cup business is usually about 14% and the rate of return on total investment by 39%.

To know more about starting a paper cup business, talk to an IndiaFilings Advisor