- May 01, 2008, By Stanley Sacharow, The Packaging Group
Over the past 15 years, the world of flexible packaging in Western Europe has morphed from a booming, innovative industry to a stable, low-growth sector. Three factors that describe the industry in 2007-2008 are consolidation, Eastern/Central European production, and oversupply/high prices. Further impinging these characteristics are sustainability, an accelerating drift of production into India and China, and the effects of the loss of national identity and creativity in packaging caused by the slow homogenization imposed by European Union (EU) regulations.
The consolidation of flex-pack converters in Western Europe has been ongoing for at least ten years. Nations such as Spain, Denmark, and the UK have a heavily fragmented flexible packaging indusry characterized by many small to medium-sized converters, which have been targeted for consolidation by the larger multinationals. Giants such as Amcor Flexibles (UK), Alcan Packaging (France), and Constantia (Austria) have acquired many smaller-sized converters over the years.
An even more recent trend has been the confederation of several medium-sized converters into one autonomous organization. United Flexibles, for example, was formed by the confederation of three German/Austrian companies: Reuther Verpackung (Neuwied, Germany), LEIPA Verpackung (Schrobenhausen, Germany), and Pawag Verpackungen (Wolfurt, Austria). The organization is able to supply a wide range of multifunctional customers in five countries and generates sales of about e350 million (US$540 million).
There have been many additional mergers and acquisitions by European flex-pack converters. Constantia recently purchased Hueck Folien, a prime supplier of both food and pharmaceutical aluminum foils. In Romania, Constantia recently acquired a 60% interest in Novis, a paper label producer, and in Poland, a 70% interest in Color Cap, a supplier of caps and closures.
The Suominen Group, a Finnish flex-pack converter, opened a greenfield plant near Warsaw, Poland, in 1999-2000. The group further expanded in 2002 and achieved enhanced printing ability in 2005, and has current sales of more than e20 million. The company is focusing its attention on the rest of Central Europe — Russia and the Baltic countries — as are many other European converters.
Already in Hungary, Mondi Packaging Consumer Flexibles is making significant new investments there. The firm enlarged production capabilities for printing and overall machine capacity. Located in Békéscsaba, the facility offers an extensive product range of laminates and stand-up pouches.
Amcor Flexibles Europe, the largest flex-pack converter in Europe with 38 plants in 15 countries including seven plants in Southern Europe (Spain, Italy, and Portugal) and one plant each in Poland and Russia, is in the midst of an extensive restructuring process. The company is attempting a significant reduction in the number of sites with flexographic or gravure printing. Capacity utilization will increase considerably, and more efficient manufacturing will deliver a meaningful waste reduction.
An important element in this process is the announcement of a new e26 million plant in Poland, dedicated to PepsiCo and supplying flexible packaging for PepsiCo's fast-growing snack food packaging business in Eastern Europe. This market segment is estimated to be growing at 15%-25%/yr. Poland is in the middle of vital growth in flexible package converting, notes Dr. Giancarlo Caimmi, sales director of Nordmeccanica.
PepsiCo, one of the world leaders in snack foods, requires focused and efficient operations that deliver high quality, food-safe products. The manufacturing process is technically demanding, and Amcor currently is an approved strategic supplier to PepsiCo in both Europe and Australia.
This investment is consistent with the company's strategy for flexibles in Eastern Europe of supporting the market leaders in fast-growing segments with low-cost manufacturing facilities. In addition, Amcor Flexibles plans to increase the percentage of manufacturing in the lower-cost regions of Southern Europe. By the end of the program, the company's objectives are as follows:
- Strengthen market positions through better leverage of technology and manufacturing capabilities;
- Increase production in lower-cost regions, particularly in Southern and Eastern Europe;
- Improve alignment to customer needs and market trends;
- Create a strong platform for innovation and continued growth.
Alcan Packaging, a div. of Rio Tinto Alcan, appears to have zeroed in on Russia by building two new plants in St. Petersburg. Although Russian producers meet as much as two-thirds of demand in the overall packaging materials market, more than $1 billion worth is still imported. According to Sergey Minko, a commercial specialist with the Foreign Commercial Service at the US Embassy in Moscow, companies that sell printed materials and packaging films are most successful in this market, selling $290 million worth of materials to Russia each year. Foreign suppliers provide 25% of the corrugated market ($75 million annually), 40% of paperboard boxes ($82 million annually), 45%-55% of labels, and 70% of label paper.
With increased resin prices causing a squeeze on converters, European flex-pack converters are gearing toward more value-added products to offset these costs. Particularly hit are the commodity producers such as bread bags and toilet tissue overwraps. Smaller companies in Europe are feeling the pressure and some will succumb, thus reducing capacity in 2008 while resin prices stay high.
Another factor is the price squeeze imposed by many leveraged buyout (LBO) firms on well-established converters. In an effort to show profit, the LBO firms cut prices excessively to end-use customers. The problem of oversupply has caused both Alcan and Amor to look at more plant closures in the next few years.
Many European flex-pack converters are investing in research and development in an effort to offset these high prices. The key issue is package simplicity, and that is why multilayer technology is increasing in importance. If a multilayer film is available that avoids the need for secondary processes such as coating, metallizing, or laminating, it will save the end-user time and money.
The high price of materials has sharpened the competitive nature of the marketplace. The result is that companies are increasing investment in R&D to find the added value that will provide them with competitive leverage.
Customers will pay more only for improved products with better functionality. The emphasis is on developing “intelligent” packaging solutions, including films for controlled atmosphere, breathable, and heatable applications.
It's important to note that while there appears to be an ever-increasing influx of Western European converters into the Eastern/Central European market, there are also many national converters that are quite successful and do supply the multinational food/pharma firms. Companies that manufacture world-class flexible packaging include Ukrplastic (Ukraine) [see PFFC's May 2007 issue], Chemosvit (Slovakia), Grupa Kety (Poland), and specialist firms such as Bargan Production Group (Russia).
Bargan Production Group is a specialist in self-heating products and has developed both a self-heating snack cup and a superbly designed self-heating fondue package. Comexi, the Catalan (Spanish) equipment producer located in Girona, currently is building a full-scale school for the converting industry. The company will sponsor courses in flex-pack converting at regular intervals. The school is dedicated to Comexi's founder, Sr. Xifra.
Turkey: A Special Country
Turkey is the only nation in its geographical area where flexible packaging has grown into a serious industry with a strong infrastructure of technology, manufacturing, and manpower. Although the average Turkish citizen utilizes only 5 kg of flex-pack annually (lower than other countries), the nation is a growing supplier to European end-users.
There are an estimated 15 flex-pack producers in Turkey — up from 13 in 2006 with a 5% annual growth. Both Turkey and Eastern/Central Europe with its 6% annual growth are the two main growth areas in the European flex-pack industry.
With its relatively small flex-pack industry, Greece is expected to show increased growth in the next few years. There are an estimated six flex-pack converters in Greece, with several more in the works.
The many nations now in the EU have given rise to various trends reflecting the differences in national characteristics. Here is a summary gleaned from both personal observations and informed interviews:
- Bioplastics in Short Supply — Although the European Bioplastics Conference is fully attended, there is a definitive shortage of bio-based polymers. Germany and Italy are leaders in utilizing these materials for both food/pharma packages. Reported situations of non-availability of polylactic acid (PLA) and other resins have hampered developmental activity seriously. It should be noted there have been announcements that many producers will increase production significantly in the next few years. An ever-increasing number of firms also are investing in product and technical development. In Hall 7A at Interpack 2008, there was an exhibit of bio-based packaging under the title, “Packaging Goes Bio.” Many new concepts were exhibited.
- PET Recycling Booming in Europe — There is a definite trend in Europe toward “super-transparent” packages, both flexible and rigid. The move away from foam and colored trays to clear recycled PET rapidly is taking hold. European consumers demand full package visibility. Another major trend is adding value from pure meat to more of a ready-meal type of approach — marinated, cured, or processed. Packaging trends in Europe vary from region to region. In regions such as Germany, where industry is driven by big discounters like Aldi and Lidl, standard trays are used. Other regions, such as France, Spain, and Benelux, use specific tray sizes. Differences also exist in packaging materials. Some use polypropylene (PP)/ethylene vinyl alcohol (EVOH)/polyethylene (PE) and others use PP/EVOH/PE. In the UK, polyvinyl chloride (PVC) is being used.
- Although there are still a large volume of multilayer films used, there is a trend away from multilayers toward single films. This is because of environmental concerns and an overall concern for package simplicity.
As converting production continues to drift east from Western Europe, the world will see more cutting-edge flexible packages produced in Eastern and Central Europe.
Stanley Sacharow has been in the flexible packaging industry for more than 35 years. His company, The Packaging Group, is an organizer of targeted conferences to the packaging/converting industry. Contact him at 732-636-0885; email@example.com.
Top 10 European Flex-Pack Converters
Alcan Packaging | www.alcan-packaging.com
Amcor Flexibles Europe | www.amcor.com
Constantia Packaging | www.constantiapackaging.com
Clondalkin Group | www.clondalkin-group.com
Sealed Air | www.sealedair.com
Huhtamaki | www.huhtamaki.com
Wipak | www.wipak.com
Mondi Packaging | www.mondigroup.com
Bemis Co. | www.bemis.com
United Flexibles | www.united-flexibles.com
Huhtamaki Ronsberg, Ronsberg, Germany, describes Cyclero as an optimized version of a conventional stand-up pouch that is classified as an environmentally beneficial pack in accordance with the German packaging decree. It is said to have considerably less environmental impact than returnable glass bottles and aluminum or tin cans.
The Cyclero system consists of the main base, body, and lid components. In production, the laminate material supplied in rolls is formed into a cylinder with a diameter of 30-100 mm. Then the base element is sealed to this cylinder. Filling can be carried out through the open end of the cylinder before the lid section is applied, or the lid section can be put on first and the product filled through an open twist closure.
In the first year after its launch, Cyclero won the Alufoil Trophy, the German Packaging Award, and the prestigious WorldStar award.
For more information visit www.cyclero.com.
European Flex-Pack Converting Factors
- Aging population with oversupply;
- Drift toward Eastern/Central Europe production, away from Western Europe;
- Use of less complex laminates toward more simple structures;
- Sustainability a strong factor in company development;
- Accelerated plant closures by big converters in Western Europe;
- Trend toward healthy foods with short shelf life and modified atmosphere packaging (MAP);
- Changing lifestyles in less-developed nations causing an increased use of converted materials.