The current momentum in the packaging industry can best be described as dynamic and revolutionary. Fuelled by consumer demand, research indicates that packaging industry players will need to concentrate on building core business and respond to demand with innovation.
The US and Europe markets have historically represented the bulk of the industry. Whilst the global recession has had a negative impact in both regions, the US market has been steadily consolidating over the last decade. The European market remains fragmented and is having to focus on restructuring operations and decreasing debt levels. Their quest for growth and higher returns is resulting in the disposal of non-core business. With modest growth in traditional markets, industry leaders have recognised that the resurgence in the industry is now driven by demand from emerging markets. Large European players are pursuing acquisitions within the high growth developing nations, predominantly the BRIC block (Brazil, Russia, India, China) and Turkey. The increased demand from these developing nations is driving commodity prices upwards.
According to Catalyst Corporate Finance, China is aiming to become the largest packaging producer over the next three years. It is anticipated that China will surpass the US as the largest consumer of packaging by 2017. CCF suggests that this will significantly intensify competition and alter the global marketing dynamic. The new opportunities within the FMCG and industrial packaging sectors will see China creating demand for raw material supply. Also, the increased demand for rigid and flexible packaging plastic with applications in the healthcare and surgical sectors is particularly strong in China.
Similarly, India is surging ahead, with demand set to double in the next five years. The packaging industry is adding value to the economy of this nation through employment creation. Addressing the issue of improved packaging quality that enhances shelf life across all consumer categories, India is currently ranked 11th in the world. Due to the rising consumer demand and new technologies, it is poised to assume 4th place in the near future.
It is interesting to note that government legislation in some countries, including China and India, has introduced restrained use of plastic carry bags and packages in those regions. This legislation has had a negative impact on the packaging industry.
Currently, the 3rd fastest growing player in the packaging industry is Turkey. Their organised retail sector is considered 7th largest in Europe and 10th in the world. Developing through organic growth, the compound annual growth rate achieved in Turkey has exceeded expectations (estimated to be 7.65% during the 2007 – 2011 review period). Export oriented, growth stems from meeting the large demand for packaging exports from foreign countries. Turkey’s favourable geographical location sees them exporting predominantly to Eastern Europe, the Middle East and North Africa. Whilst domestic packaging companies have a strong presence in Turkey, some foreign companies have begun operating in the paper and board categories there.
Eastern Europe is showing great potential for development and is eager to attract investment. Typical of the world-wide trend, lifestyle changes centred on time strapped consumers with more disposable income have affected consumption habits and strengthened the demand for convenience – especially in the category of prepared meals. Single and small households, increasingly more common in Eastern Europe, represent a growing target market globally. Smaller packs geared to limited fridge space and longevity is challenging the industry.
The increased demand for multi and bulk packs of non-perishable and long shelf life goods supports the price to volume ratio where economic pressures on average households still exist. The trend here is also to purchase more concentrated products, increasing the demand for smaller sizes. An added opportunity for manufacturers is to find packaging solutions that optimise retail shelf space. The research notes that Eastern Europe is not yet up to speed on the recycle, reduce, re-use strategy being adopted globally.
Differentiation in packaging shapes, colours, closure mechanisms and functionality is becoming crucial to brand identity and message within the retail industry. The food, beverage and consumer retail sectors are driving the plastics industry to produce stronger, more cost-effective packaging solutions. Important factors are aesthetic appeal and better barrier protection. This trend is encroaching on the metal, glass and paper industries.
The rigid plastic category is dominated by PET and HDPE polymers. Unyielding technological innovation is striving to produce materials that emulate glass so that it can cater for the alcoholic beverage sector. Rigid plastics are also finding increased applications within the cosmetics, toiletries, household and personal care segments.
Whilst board products still account for the biggest sector in packaging, demand for light-weight flexible plastics is growing significantly in the consumer retail sector, predominantly in perishable foods and healthcare. The positive implications inherent in this category lie in the cost efficiencies offered in production, transportation and carbon footprint.
Industrial packaging remains at the hub of demand for flexible packaging with LDPE dominating the market.
Pira International estimates that the global packaging industry will grow to US$820 billion by 2016. Growing urbanisation and burgeoning healthcare within developing countries is boosting expansion. According to a recent article posted by Plastemart, innovation in polymer materials, manufacturing technology and applications is also expected to drive the expansion of the industry. The move is towards finding sustainable, light weight, user friendly and functional packaging solutions that cater for the growing “at home” consumption requirements of consumers.
Opting for better materials made from renewable sources and developing sophisticated, cost-effective technologies to meet consumer demands remain the goal of the packaging industry.
References:
Packaging News: http://www.packagingnews.co.uk/news/china-largest-producer/
Yahoo! Finance: http://finance.yahoo.com/news/research-markets-indian-packaging-industry-111400893.html
Euromonitor International: http://www.euromonitor.com/packaged-food-in-nigeria/report
Euromonitor International: http://blog.euromonitor.com/2010/07/european-packaging-industry-trends-opportunities-in-the-eastern-european-market.html
