- December 01, 2008, By Dr. William Llewellyn, AWA Alexander Watson Assoc.
Across the globe, the traditional commercial markets for extrusion-coated/laminated materials are being eclipsed in terms of volumes by applications in both flexible packaging and liquid packaging. While North America's main consumption of extrusion-coated materials currently remains in the food service sector — for poly-coated paperboard cups and plates, bowls, and take-out food containers — liquid packaging and flexible packaging continue to represent the best future volume growth.
Barrier coatings for gable-top and aseptic packaging have become a major area of focus in the packaging world, creating new impetus in the available coating processes and their possibilities. Extrusion-coated materials — the choice for many high-volume applications today — are, of course, affected by the macro trends, particularly in the packaging industry, that currently are driving change.
Both margins and methodology are under pressure in an environment of rising raw material costs coupled with aggressive end-user buying, more just-in-time deliveries, shorter production runs, and brand owners' needs to differentiate their products on the supermarket shelf. However, the market remains buoyant.
Consolidation and globalization are taking place in extrusion coating as in many other manufacturing industries, changing the face of the somewhat parochial regional markets that have existed in North America and Europe. This trend is particularly evident in liquid packaging and flexible packaging.
Liquid packaging consolidation and globalization have been particularly notable, with Rank Holdings of New Zealand becoming the second largest global supplier through acquisition of the largest supplier of gable-top cartons and the second-largest supplier of aseptic packaging. Although there is still some room for consolidation in this market, the number of global competitors is small, and the market structure will not change significantly in the immediate future.
North America leads in supply of gable-top cartons and polyethylene(PE)-coated boards for these products. Meanwhile Europe leads with aseptic packaging products.
Environmental concerns are rightly turning brand owners' and consumers' attention to packaging that is lightweight, user-friendly, and recyclable. Extrusion-coated packaging meets all these criteria — and today liquid packaging represents the largest market for extrusion-coated materials across the globe, with 43% on a weight basis.
When milk packaging moved to plastic containers, the use of gable-top cartons in this market declined 40%.Today that decline has been offset somewhat by growth in usage for juices, food, and non-food packaging, including powders, pellets, and other dry materials.
Gable-top containers also have embraced many innovations, including windows, pouring spouts, and creative shapes to offer added market appeal. Improved multi-ply barrier cartons are expected to gain further growth, along with co-extruded barrier materials for containers and foil liners that improve quality and freshness and/or extend shelf life.
For conventional liquid packaging cartons, the North American market is served by both regional and global suppliers, including Potlatch and Evergreen Packaging. The aseptic packaging arena is dominated by multinationals such as Tetra Pak and Rank's Sig Combibloc.
The aseptic packaging laminate typically is multilayer PE/paperboard/PE/foil/PE, and generally 70% paperboard, 24% PE, and 6% aluminum by weight. Developed in Europe by Tetra Pak in the early 1960s, aseptic packaging has been enjoying good growth in North America since its introduction in the early 1980s.
Aseptic containers are used for juices, soy products, wines, syrups, and other foods. They are shelf-stable and do not require refrigeration to maintain freshness until opening. They also are lightweight, strong, convenient to carry and store, and pack well for shipping.
North American market growth is estimated at greater than 3%/yr. This is fueled by typical away-from-home eating habits.
Flexible packaging remains a fragmented market sector with many producers, but it also exhibits significant consolidation, both globally and in North America, in both film- and paper-based products. Recent evidence of this trend is Rank's acquisition of Alcoa's flexible packaging operations, which resulted in broadening the product offering of the world's second-largest liquid packaging company into flexible packaging in a very significant way.
Further notable consolidation is expected in the flexible packaging market sector. In North America, flexible packaging has not yet replaced much rigid packaging — folding cartons, primarily paperboard-based — for frozen and fresh foods and other food packaging requiring moisture and grease resistance. That is because suppliers in North America are mostly vertically integrated, from fiber to final product. It is also a result of the slower move toward reduction in packaging and in packaging weight, which is currently an imperative in the European packaging market.
Given the growing global interest in the reduction of packaging in the waste stream and the reduction in shipping costs through lower packaging weights, flexible packaging is positioned to enjoy strong growth over the next several years.
This will be at the expense of some rigid packaging products.
Flexible packaging is extremely versatile. It takes many forms, ranging from very simple bags to products with specialized features.
Constructions include pouches (e.g., stand-up, retortable, and stick), sachets, wraps, and blister packs for many food and beverage applications from snack food bags and condiment portion packs to coffee packaging and pet foods. These make up 70% of the North American market, with health (including pharmaceutical) and personal care products and packaging of other goods — hardware, automotive parts, inkjet cartridges, etc. — taking the remaining share.
The applications for flexible packaging in all sectors appear endless. They continue to grow at rates exceeding GDP, at around 4% on a weight basis — testimony to their physical characteristics: lighter weight, smaller package size, and lower level of raw material consumption per package.
Base materials for extrusion-coated flexible packaging encompass a wide range of substrates. Foils and films — PE, polypropylenes, polyesters, and polylactic acid — have increased their share at the expense of papers.
Extrusion-coated polymers are replacing solvent-based lamination for film, paper, and aluminum laminates in such applications as sachets and pouches. Competitive approaches to differentiation include film coextrusion to obtain additional properties from lamination, adhesive lamination, and other coating processes.
The opportunities for developing this versatile technology's capabilities are by no means exhausted in North America. Of the many large-volume end uses, flexible packaging shows the greatest potential for growth at 4% on a weight basis.
Other high-growth applications include digital imaging in photographic and graphic applications, disposable cups in food service, release liners, building membranes, and medical/hygiene applications. All are expected to grow at rates above GDP and above the average rate for all extrusion-coated materials.
Dr. William Llewellyn is VP and senior consultant with AWA Alexander Watson Assoc., Amsterdam, Netherlands, a market research firm specializing in packaging and converting. Contact him at +31 20 676 20 60.
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The content of this article is taken from a new market report, “Extrusion-Coated Materials North American Market Study 2008,” from AWA Alexander Watson Assoc. For more information visit www.awa-bv.com.