Ahead of the Curve
March 2001
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Carton converters should use their economic head start to get a handle on sometimes-elusive niche opportunities.
by Susan Friedman, Editor
Folding carton converters, as well as other primary packaging producers, typically have the unique, though sometimes stomach-wrenching, opportunity to see and experience what will happen to the general economy before it takes hold at large.
According to Jerry Van de Water, president of the Paperboard Packaging Council, the U.S. folding carton industry is generally regarded as a harbinger of economic cycles because cartons are produced and entered into the supply stream months in advance of consumer goods production. What carton converters see now, he notes, is a fair predictor of where the economy will be in six to nine months. Has this segment, then, already weathered the big-picture worries currently dominating the headlines?
"No. 1 on the hit parade is the potential for recession," says Van de Water. "Though leading economists say we will avert it," he notes, "it's going to be a close call. If we do get by it's going to be by the skin of our chin." Though 2000's fourth quarter downturn was interrupted by an uptick in carton production in January 2001, carton market conditions are expected to continue to be spotty for some time. "For some converters, business has never been better," he points out.
Proof of recent profit-making comes from the Pacific Coast Paperbox Manufacturers Association, which represents folding and rigid paperbox manufacturers west of the Rocky Mountains from British Columbia to Baja, Mexico. Executive Director Edwin Mozley reports members' collective sales volume during the period January to November 2000 increased 10.51 percent over the same period in 1999.
And there should soon be more good business to go around. Van de Water believes once interest rates come down and tax relief is acted upon, converters should be able to generate working capital that could help build a roadway out of the current slowdown.
"Converters who have done a good job of keeping themselves unleveraged will weather the current economy better," advises Ben Markens, president of consulting firm Converter's Resource. In addition, carton converters will need to get more savvy at securing previously contracted business.
"Lots of carton business is tied up in contracts that may not come up for review for 24 months," Markens elaborates. "It can be tough to get in the queue to compete for this business." He adds the increased cost of paperboard production (primarily due to higher energy rates) may be particularly hard to recoup for converters already locked into a customer contract.
by Susan Friedman, Editor
Folding carton converters, as well as other primary packaging producers, typically have the unique, though sometimes stomach-wrenching, opportunity to see and experience what will happen to the general economy before it takes hold at large.
According to Jerry Van de Water, president of the Paperboard Packaging Council, the U.S. folding carton industry is generally regarded as a harbinger of economic cycles because cartons are produced and entered into the supply stream months in advance of consumer goods production. What carton converters see now, he notes, is a fair predictor of where the economy will be in six to nine months. Has this segment, then, already weathered the big-picture worries currently dominating the headlines?
"No. 1 on the hit parade is the potential for recession," says Van de Water. "Though leading economists say we will avert it," he notes, "it's going to be a close call. If we do get by it's going to be by the skin of our chin." Though 2000's fourth quarter downturn was interrupted by an uptick in carton production in January 2001, carton market conditions are expected to continue to be spotty for some time. "For some converters, business has never been better," he points out.
Proof of recent profit-making comes from the Pacific Coast Paperbox Manufacturers Association, which represents folding and rigid paperbox manufacturers west of the Rocky Mountains from British Columbia to Baja, Mexico. Executive Director Edwin Mozley reports members' collective sales volume during the period January to November 2000 increased 10.51 percent over the same period in 1999.
And there should soon be more good business to go around. Van de Water believes once interest rates come down and tax relief is acted upon, converters should be able to generate working capital that could help build a roadway out of the current slowdown.
"Converters who have done a good job of keeping themselves unleveraged will weather the current economy better," advises Ben Markens, president of consulting firm Converter's Resource. In addition, carton converters will need to get more savvy at securing previously contracted business.
"Lots of carton business is tied up in contracts that may not come up for review for 24 months," Markens elaborates. "It can be tough to get in the queue to compete for this business." He adds the increased cost of paperboard production (primarily due to higher energy rates) may be particularly hard to recoup for converters already locked into a customer contract.
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