Landmark events for common household items are not coming often these days. At its 100th anniversary, paper cup still retains the imperative status in the world’s drink consumption. The history of the paper cup began in 1907 when Lawrence Luellen first became interested in a paper drinking cup, which would be delivered by a vending machine and connected to a water cooler. The turn of the 20th century saw a strong effort to control epidemics, therefore the object was to dispense a pure drink of water in a new, clean, and individual drinking cup instead of common jug in public places.
In 1908 Lawrence Luellen and his college roommate Hugh Moore, started a company selling penny cup-vending machines with bottled water to promote a sanitary way to get a drink of water. They soon abandoned selling water, concentrated on making and selling paper cups and in 1910 acquired Individual Drinking Cup Company name for the business. The company also went through several name changes for the patented cups, eventually acquiring a name "Dixie", which became a household name for paper cups. Emphasizing the hygienic use or paper cup, Dixie Cup Company sold them to more than 100 railroads throughout the country, including the Pennsylvania Railroad, the Lackawanna, The Chicago, Illinois Central, as well as the Pullman Company. The company soon expanded its market to drug stores and soda fountains. Since then, disposable paper cups have been the preferred choice for drinking on the run. This perception has helped to create the industry in the United States and Europe with such names as Maryland Cup, Lily Tulip Cup, Sweetheart Cup, Solo Cup and Polar Cup. International use of the paper cup has grown over the years with the expansion of fast food industry.
Development of special grades for cup stock by major paper companies took off with the arrival of polyethylene-coated paper for cups in the 1950s. Numerous paper companies dedicated their research to establish the industry standards for quality cup stock. The leading paper companies like International Paper Company and Enso spent over 40 years providing variety of cup stock with basis weight from 105 to 150 lbs/3000sq.ft.for the industry’s major cup producers as well as for startups.
The United States is the largest consumer of paper cups in the world (see pie chart). Out of 220 billion cups per year used worldwide 130 billion cups are consumed in North America. Paper cups for cold and hot drinks in the retail trade sector are sold in supermarkets, price clubs and groceries across the country. The food service sector takes about 30%-40% of total output and fluctuates following the public’s taste for fast food and drinks. In the rest of the world the paper cup retail business is almost non-existent with exception of tiny party products niche. In the Western Europe and Japan the growth of foodservice paper cup market is constrained by the environmental regulations for packaging disposal. Developing economies of Asia and South America show significant growth of food service business, however, a low budget of the local paper cup makers prevent them from buying higher end production machinery. During the last decade China experiences sharp rise in both areas of paper cup use driven by the explosive growth of Chinese consumer market.
The cup-making machines used to be closely kept proprietary equipment designed and developed by three major paper cup producers - Dixie Cup, Maryland Cup and Lily-Tulip Cup companies. After World War II, the constantly rising demand and growing deficit of cup converting capacity led to creation of specialized companies concentrated on designing and building commercial cup machines.
Currently, a few dozen of such companies located across the globe, build cup machines and related equipment. Small manufacturers from South Korea, Taiwan, China and India offer low cost cup machines with the production rates of 30-50 cups per minute or some knock-off of American or German made higher speed machines. Only two leading companies manufacture state-of-the-art paper cup machines that can produce all sizes and shapes of quality cups and containers at high production speed. They use different approach to a two-piece cup automated fabrication process. Paper Machinery Corporation wraps a side wall blank around already pre-formed bottom piece, while Michael Hörauf GmbH forms both parts of the cup separately and join them together later in the process. Both companies acknowledge their intentions to make their machines as difficult as possible to replicate by counterfeiters.
Privately held Paper Machinery Corporation (PMC) was founded in 1951 in Milwaukee, Wisconsin and has over 1500 cup/container machine installations worldwide. The company manufactures a range of high-speed cup forming machines covering production requirements for developed markets as well as newer markets where machine speed combines with the cup size versatility. The recently introduced high-tech model PMC 1002 produces cups and containers in sizes ranging from 4 ounces up to 32 ounces at production speed of 300 cups per minute.
Located in Donzdorf, the small town in southern Germany, Michael Hörauf employs over 300 and produces a variety of container and cup making equipment. The company, which started operation in the late 1940s has developed a BMP 400 machine with the production speed of up to 330 cups per minute.
Cup market keeps growing especially for hot-drink cups. The coffee shops expansion worldwide led by Starbucks brand is generating demand for disposable and environmentally friendly cups. Currently, there are several competing cup concepts on the market, from a basic thick single wall polyethylene-coated cup to an air-insulated three piece premium cup for coffee and soup.
Paper cup making used to be entirely domestic business in the United States with a low share of export (about 4%) and import (less than 1%), however, recently, growing flow of Chinese made paper cups shows up in discount stores and even major supermarket chains in the USA. This development might not make economical sense so far but farther changes in the industry are coming.
Paper cup expenditure growth is roughly proportional to the spending habits of the middle class worldwide with the regional differences in the growth rate. For retail operations in the US the source of the highest growth (over 5% annually) is the Warehouse Club Store channel with over 1200 stores across the country. Fueled by highly loyal consumers this channel generated about $95 billion in sales in 2005 with the estimated share of paper cups and plates about $2 billion.
For the last 5 years the entire foodservice industry (both in the US and abroad) was in recovery mode after a few tough years. With the raw material and energy cost climbing, in some foodservice high end sectors like premium coffee houses paper cups for hot drinks are gaining advantage over similar plastic products. Among several competing cup concepts on the market, an air-insulated three piece cup shows more potential for growth due to the utilization of recycled paperboard for the outside layers. From the marketing point of view a paper cup brings a higher value for advertisers due to the latest developments in printing technology.
Paperboard will continue to remain the largest food container material on (its) strength, stiffness, competitive pricing structure and environmental profile. US demand for foodservice paper disposables is projected to rise around 4% per year to about $15 billion in 2008. In Europe the foodservice single use sector is forecasted to grow by a rate of 2%-3% over the next few years to 2008, according Foodservice & Packaging Institute economic research. The strongest growth is expected to be in Central and Eastern Europe (Poland, Czech Republic and Russia). China with its booming economy, 1.3 billion consumers and annual growth of disposable income in urban areas over 9%, has become a top paper and paperboard user (16% of the world total consumption). The China Paper Association predicts that China’s paper consumption will reach 70 million tons in 2010. Expansion of quick-service brands in this country will lead to double digit growth of paper disposables such as paper cup. This development may affect the far away markets like United States and Canada. For years paper cup making used to be entirely domestic business in the North America with low share of export (about 4%) and import (less than 1%), however, a growing number of Chinese made paper cups and plates on the shelves of discount groceries and even major supermarket chains gives an indication about upcoming changes in the industry.