- April 01, 2000, Huston Keith
With improving technologies in materials and processing, flexible packaging plays an increasingly important role in many markets. Multilayer stand-up pouches have helped invigorate markets such as pet foods and agricultural chemicals. Films and pouches are providing cost-effective packaging forgrowing foodservice, medical, and distribution applications.In 2002, food will be over half (56%) of the $9.7 billion in converter sales in flexible packaging, with the remainder in the consumer industrial market. Sales are split evenly between perishables and dry foods.
The two fastest growing segments are case-ready and pizza in the perishables section, including meats, produce, and other refrigerated and frozen foods. Usually located at the perimeter of the supermarket, these foods often use high-value ($2.49/lb) oxygen barrier films.
Growing 21% annually through 2002, case-ready meats are the fastest growing segment. Major materials in use will include clear, anti-fog lidding materials, high-barrier films, and high-abuse shrink films. More than 30% of the total 7 billion red-meat packages will use case-ready packaging by 2002.
However, the emerging nature of this market, its size, and the complexity of packaging requirements will mean considerable diversity in package materials for at least the near term.
Smoked sausage films are the fastest growing at 9% annually with dinner and breakfast sausage not far behind. Metallocene is more commonly being substituted for ionomer or ethylene vinyl acetate as a sealant. While fresh sausage had experienced a decline after concerns of high fat and with fewer people eating breakfast, the introduction of new flavors and lower fat varieties has helped spur growth.
The projected $350 million in flexible sales for foodservice pouches is in high- or moderate- barrier materials. While the 5% growth rate is mostly due to conversion from more costly #10 cans, the increase in meals eaten away from home also is a factor. As the economy keeps growing, consumers will opt to spend more to decrease tasks such as food preparation.
Bags typically incorporate high-barrier materials such as ethylene vinyl alcohol, polyvinylidene chloride, or metallized polyester or nylon. Bag-in-box is the traditional package, but form/fill/seal pouches are used for many newer applications.
Another one of the fastest growing perishable segments is pizza at 11%, primarily driven by the new rising-crust pizzas. An oxygen barrier is important to prevent dough from rising prematurely.
Graphic appeal is necessary for many markets, especially snacks and candy, since these items often are purchased on impulse. Many require a high moisture barrier. The fat substitute Olestra added $400 million to Frito Lay and may have a significant impact on film sales.
Other markets include cereals, pet food, and coffee, the fastest growing segment (6%) with a $5+ selling price. Most often found in center aisles of the supermarket, single-serve sizes may be placed at the checkout aisles or in convenience stores to stimulate impulse sales.
Candy has some of the highest profit margins and continues to grow at almost 5%. Since more than 70% of candy buys are impulse purchases, high quality graphics--especially with metallization--are used. The niche market of low-fat candy also has helped spur growth.
Premium brands have dramatically increased shares of pet food, driving the use of more expensive packaging. With more expensive, oxygen-sensitive ingredients, these products need more packaging protection. In order to protect the flavors and aromas, which provide superior palatability, foil laminates and other high-barrier films often comprise the bags. Stand-up pouches now have become the package of choice for pet treats, growing 5% annually.
Consumer and Industrial
Industrial products is the largest segment in volume and dollar sales. Healthcare packaging products are the fastest growing, with 6% sales growth. Converters are selling their value-added materials at a price per pound of $7.60. Products include soaps and toiletries, disposable paper products, audio/video products, consumer durables, and other retail products.
Medical disposables lead the medical packaging category with 8% sales growth. As baby boomers age, healthcare needs increase. To contain costs, such items as prepackaged procedure kits use lower-cost flexible packaging. The top five dollar markets were all in medical packaging. Spun-bonded polyolefin, coated papers, and coextrusions are used.
Usually referred to as agchem, the agricultural chemical industry is growing at 4%. The use of high-barrier, reclosable, plastic pouches (including standup) for odor control, convenience, and safety is increasing for retail products. The agriculture and industrial segments had projected sales of $450 million and $250 million, respectively, in flexible packaging. Bulk sacks and flexible intermediate bulk containers (FIBCs) are growing significantly.
Palletizing and Unitizing
Metallocene linear low-density polyethylene is growing at 9% annually to provide thinner, stronger, and more cost-effective stretch films. While the market is becoming saturated, it is replacing corrugated cartons in some markets with its lower cost. There are also opportunities in replacing strapping.
Tobacco is one of the largest markets, but with only 2% growth. Most growth is from foreign sales, since sales in Canada and the US are flat with smoking on the decline. The gravure-printed plastic wrapper and foil laminate sleeve, however, are high-value materials.
In summary, flexible packaging has found its way into nearly every section of the manufacturing economy. Conversions from rigid packaging will continue to occur but at a much slower rate, since many of the easiest conversions have occurred already. Overall growth is expected to be slightly faster than the Gross National Product.
This article is an executive summary of a comprehensive, multiple-client study North American Flexible Packaging Strategies 2002. For more information contact Keymark Associates, 2281 Piedmont Forest Dr., Marietta, GA; 770/579-5979.