Novel Products, Steady Growth
Innovation, materials developments, and sustainability advantages will continue to drive growth in flexible packaging.April 2012 By Tom Polischuk
The flexible packaging segment continues its position as a leading bright spot in the overall packaging market. It has a number of advantages, most noteworthy being sustainability advantages (with opportunities for continuing conversion from rigid packaging configurations) and a high-level of innovation in materials and products.
At the recent Flexible Packaging Association (FPA) annual meeting held in February, predictions for segment growth topped 4 percent. James Mize, FPA chairman, and vice president, global sector—food packaging solutions for Sealed Air Corporation, highlighted information from FPA's State of the Flexible Packaging Industry Report. Projected growth in 2012 is 4.5 percent, with higher volumes, but relatively flat profits overall. In a presentation on "Growth Opportunities for U.S. Flexible Packaging," Jeff Bornstein, vice president for business research firm SAI Industrial, LLC, predicted the U.S. flexible packaging segment growing at a 4.2 percent compound annual growth rate (CAGR) from 2010 to 2015, with a $30.1 billion segment in 2015. He also noted another strength of the flexible packaging market—its strong position in food categories. More than 55 percent of flexible packaging is used in the relatively stable food markets.
The Freedonia Group, in its report on "Converted Flexible Packaging to 2015," noted some of reasons for solid growth in food applications. "Advances will be driven by favorable demographics and rising demand for convenience-oriented and other processed food items, which often use more costly higher barrier packaging materials for extended shelf life. The fastest gains are anticipated in beverage, meat and related products, and snack food applications."
Pouches have been a real bright spot for flexible packaging for some time and will continue to be so. Much of the innovation in materials and products results in expanded opportunities for pouches, especially in food categories. Freedonia notes: "Growth will be driven by continued conversions to stand-up pouches and healthy gains for flat pouches in a number of markets, along with a smaller environmental footprint due to light weight and reduced material use, which also holds down shipping costs."
Last year—although sluggish and teetering at times on the edge of falling back into recession—was generally a favorable year and ended with some signs of strength. Some of the bigger players in the flexible packaging industry highlighted obstacles they faced during 2011 in their annual reporting.
"2011 proved to be a challenging year," said Sonoco's Chairman and CEO Harris E. DeLoach, Jr. "In addition to the unexpected decline in industrial-related volumes at year end, we faced escalating raw material, energy, freight, and other costs during the year and productivity was well below our historical standards. Despite these significant headwinds, Sonoco achieved record sales, while achieving our second highest base earnings before interest and taxes and the third highest base earnings in Company history."