- August 01, 2000, William Weizer, The Freedonia Group
Demand for converted flexible packaging in the US is projected to increase more than 2% annually to 7 billion lb in 2003, valued at $12.7 billion. The industry is shaped by a number of factors, including population size and distribution patterns; average household size and other demographic variables; consumer spending levels; activity within various packaging end-use markets; retail sales; and the overall health of the economy. Environmental considerations, technological developments, and legal/regulatory issues also impact packaging demand.
Efforts to reduce packaging costs and protect the environment will drive growth. Flexible packaging also has storage, production, performance, and distribution advantages over rigid and other packaging mediums.
Plastic films will extend their leadership based on extensive applications and the availability of improved materials. Food packaging markets will remain dominant because of diverse uses and the need for lower-cost packaging options with longer shelf lives.
The converted flexible packaging industry is being challenged by rising material costs and greater demand for products such as low-fat snacks, which require innovative technologies and substrate combinations to meet packager needs for freshness.
The industry is meeting functional requirements while reducing costs by using thinner gauge materials and increasing processing speeds. Although downgauging will remain an important trend, other factors such as flexibility and better graphics also will be important.
Technological advances encompass controlled-atmosphere and modified-atmosphere packaging (CAP/MAP), which result in a much longer shelf life for produce, meats, and other products; novel resins such as metallocenes that are stronger and more breathable than traditional films; and convenience features such as zippered bags and specialized closures.
Film Is Dominant
Plastic film dominates the industry with cost, performance, and environmental advantages over other flexible and rigid materials. Demand for plastic film in converted flexible packaging is projected to grow 2.7%/annum to the year 2003. Although relatively mature, the plastic film industry continues to be stimulated by dynamic manufacturing and resin technologies, which have generated new opportunities.
Polyethylene will remain the dominant film, although significantly better growth is anticipated for polypropylene. Ethylene vinyl alcohol films will exhibit the most rapid growth based on their high-barrier properties. Cellophane demand will continue to decline because of cost and performance disadvantages compared to other resins, notably PP.
Paper and Foil Have Roles
Despite plastic film's dominance, paper and aluminum foil still play a key role.
The paper packaging segment reflects the maturity characteristic of the paper industry as a whole, although advances in technology and manufacturing techniques have spurred innovation in such areas as paper/plastic composite packaging. Paper will continue to be used in diverse applications due to its low cost, environmental compatibility, and lamination applications.
Aluminum foil has advantages such as high-barrier properties and esthetic capabilities. However, further advances will be threatened by increased use of metallized PP and polyester film.
Food Industry Trends
Food industry trends directly influence converted flexible packaging opportunities, since specific flexible materials (e.g., film, paper, and foil) and styles are better suited for certain food products.
A wide array of macro-economic and industry-specific factors influence the health of the food industry and the relative prospects of various food products. These factors include consumer income and spending patterns; population growth; ethnic diversity and age composition; climate and weather patterns; product pricing; advertising initiatives; government programs (e.g., crop subsidies, school lunches, food stamps); product development efforts; foreign trade; and lifestyle trends.
Improvements in food processing and/or preparation technologies also can lead to the use of different containers or the development of new packaging systems.
Food packaging markets will be stimulated by the ability of converted flexible packaging to provide improved, cost-effective methods of protecting food from contamination while enhancing shelf life and visual appeal. Snacks, produce, and frozen foods will present the best food opportunities based on market expansion, product introductions; and technological advances.
Converted flexible packaging demand in nonfood applications will rise at a slower pace yet be stimulated by source reduction efforts and enhanced marketability via the use of more esthetic but functional packaging. Further growth will be threatened by saturated markets and a lack of significant new applications. Textiles, apparels, and paper products will remain the dominant nonfood packaging markets, although better growth is expected for rack and counter applications.
Rack and counter applications include thousands of products found on retail shelves and counters, including nuts and bolts, pins, toys, housewares, paint brushes, grass seed, vacuum cleaner bags, video tapes, potpourri, and cassette tapes. The primary function of the packaging is to display the product, bundle it, protect it from dirt and contamination, and lessen the chance of pilferage. Low-density PE is dominant and is used in a variety of forms, including shrink overwraps. Polyvinyl chloride and PP films are used in more specialized applications where higher puncture resistance is required, such as nails, thumbtacks, and other sharp objects.
Demand for converted flexible packaging will be supported by advantages over rigid packaging in terms of cost, versatility, esthetics, convenience, and source-reduction capabilities. The aggregate packaging industry is dominated by paper-based packages, with plastic, metal, and glass containers comprising the substantial remainder.
The converted flexible packaging industry is only one segment of the $104 billion US packaging industry. As such, beyond food industry trends, vendors of converted flexible packaging are subject to a number of factors, including raw material prices, technological developments, environmental considerations, inter-material competition, and ongoing trends such as single-serve packaging and source reduction.
Converters of flexible packaging know that theirs is an exciting, complicated industry. Change is constant and competition is tough. To stay on top, you must stay on top of the trends.
William Weizer is VP/Chemicals and Plastics at The Freedonia Group, Cleveland, OH, an international industrial research company. He has more than 15 years experience as a research analyst and is an active member of several industry associations. He can be reached at 440/684-9600. Visit The Freedonia Group at freedoniagroup.com.