Margins are also under pressure at the small end of the market, dominated by the Carter Holt Harvey-controlled Wadepack, plastics maker Plaspak, as well and the latest sector entrants, Colorpak and Pro-Pac Packaging, and the privately owned Hannapak.

Amcor and Carter Holt Harvey control about half the market in Australia, but analysts say the pair are focused on the high-volume, less sophisticated segment of the market, targeting fast-moving consumer goods such as beer and cereals.

Colorpak is the third-largest folding carton maker after Amcor and CHH, with an 8.5 per cent market share.

Its shares have eased from a record high of 77 in March to about 59, prompting a price query from the Australian Stock Exchange last week.

Colorpak, which posted a 45 per cent jump in first-half net profit, said its business plan remained “on track” and the outlook for the rest of the year was “very positive”, with the recent softness in consumer spending not affecting its operations.

Colorpak has become several analysts’ top pick in the small-cap packaging sector since listing in April last year. They like the firm’s strong cash flows and blue-chip customer base, which they claim is relatively immune from the slowdown in consumer spending.

Big pharmaceutical and health-care companies such as Sigma, Gillette, Cussons, Pfizer and Roche account for close to 60 per cent of Colorpak’s annual revenue of about $60 million.

“Colorpak’s products are principally used to package non-discretionary items such as food and health-care products, which are less susceptible to downturns in consumer spending,” Grange Securities analyst David Langford said.

At Tolhurst Noall, diversified financials analyst Nick Maclean said that while Colorpak’s margins contracted during the first half, this was a result of the company securing new clients.

“Securing new customers is more expensive than maintaining existing clients,” Mr Maclean said.

The broker also noted that Castle Graphics, a Sydney-based maker of flexible packaging and self-adhesive labels that Colorpak bought for $4.2 million in March, operated on lower margins than Colorpak.

“The acquisition is an ideal fit with Colorpak’s current operations, particularly given its focus on the pharmaceutical [and] health-care sector.”

“This is a very positive step, as the more entrenched Colorpak becomes in its clients’ operations and processes, the more difficult it is for these clients to shift their business.”

Mr Maclean said Colorpak had an “excellent” reputation within its industry and more than one-third of the company’s sales were generated from customers who had been with the company for more than five years.

“While this gives us confidence in Colorpak’s ability to manage its financial structure, we would prefer to see it continue to pay down debt and grow its interest cover.”

Analysts say Colorpak could benefit from CHH’s $100 million acquisition of Wadepack last year, picking up any clients who are either disgruntled or unwilling to work with the new owner.