Flexible Packaging Leads the Way
March 2005
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With favorable trends in the use of plastics and pouches, flexible packaging converters are set for success.
FLEXIBLE PACKAGING CONTINUES to cast a shining glow over the package-printing landscape. The category has at least two very positive forces filling up its sails (could be spelled "sales"). One is the continuing industry trend toward the use of plastic materials and, along with this, the growth of pouches as a preferred packaging method.
In a study released last October titled "Paper versus Plastic in Packaging to 2008," The Freedonia Group projected plastic materials used in packaging to increase 3.1 percent annually through 2008. At this rate, plastic would continue to pick up share from paper and would account for nearly 50 percent of packaging demand (measured in pounds) by 2008. Its advantages include improvements that extend product shelf life, reduced materials usage, and various convenience features.
For pouches, growth projections are more dramatic. Freedonia forecasts U.S. demand for pouches to increase 7 percent annually through 2008 to $5.2 billion. This growth is being fueled by such value-added features as resealability, pour spout availability, and retort and aseptic capabilities. In addition, pouch-processing improvements have resulted in faster line speeds and reduced costs, which have opened up additional opportunities for pouches as a packaging option.
2004: A mixed bag (or pouch)
Generally, 2004 was a year on the upswing, but one in which package printers had to work real hard for everything they got. Bill Klein, executive director of the Packaging and Label Gravure Association (PLGA), said the bulk of his association's packaging and label printers estimated growth between 3 and 12 percent in dollar sales. Unit volumes were somewhat higher, reflecting a downward pressure on prices.
Marla Donahue, president of the Flexible Packaging Association (FPA), reports that sales of U.S. manufactured flexible packaging reached more than $21 billion in 2004, of which about 75 percent were printed. Preliminary data being compiled by FPA for 2004 is pointing toward revenue growth of close to 4 percent and volume growth in the range of 5 to 6 percent. "The difference between the revenue growth and the volume growth is related to increases in raw materials," says Donahue.
Last year was a particularly rough year for the pricing pressure cooker. This did not take anyone by surprise as the issue of material costs was listed as the top issue for both converters and suppliers in FPA's State of the Industry Report 2004.
The root of virtually all the pricing evil last year can be attributed to the significant and sustained increase in crude oil prices throughout 2004. These increases directly affected the costs of inks, films, paper, and energy. Coupled with the seemingly never-ending spiral of medical insurance and costs (which make college cost increases seem like deflation), package printers experienced cost increases on many fronts, while still being squeezed by the customer side of the supply chain to keep prices down.
FLEXIBLE PACKAGING CONTINUES to cast a shining glow over the package-printing landscape. The category has at least two very positive forces filling up its sails (could be spelled "sales"). One is the continuing industry trend toward the use of plastic materials and, along with this, the growth of pouches as a preferred packaging method.
In a study released last October titled "Paper versus Plastic in Packaging to 2008," The Freedonia Group projected plastic materials used in packaging to increase 3.1 percent annually through 2008. At this rate, plastic would continue to pick up share from paper and would account for nearly 50 percent of packaging demand (measured in pounds) by 2008. Its advantages include improvements that extend product shelf life, reduced materials usage, and various convenience features.
For pouches, growth projections are more dramatic. Freedonia forecasts U.S. demand for pouches to increase 7 percent annually through 2008 to $5.2 billion. This growth is being fueled by such value-added features as resealability, pour spout availability, and retort and aseptic capabilities. In addition, pouch-processing improvements have resulted in faster line speeds and reduced costs, which have opened up additional opportunities for pouches as a packaging option.
2004: A mixed bag (or pouch)
Generally, 2004 was a year on the upswing, but one in which package printers had to work real hard for everything they got. Bill Klein, executive director of the Packaging and Label Gravure Association (PLGA), said the bulk of his association's packaging and label printers estimated growth between 3 and 12 percent in dollar sales. Unit volumes were somewhat higher, reflecting a downward pressure on prices.
Marla Donahue, president of the Flexible Packaging Association (FPA), reports that sales of U.S. manufactured flexible packaging reached more than $21 billion in 2004, of which about 75 percent were printed. Preliminary data being compiled by FPA for 2004 is pointing toward revenue growth of close to 4 percent and volume growth in the range of 5 to 6 percent. "The difference between the revenue growth and the volume growth is related to increases in raw materials," says Donahue.
Last year was a particularly rough year for the pricing pressure cooker. This did not take anyone by surprise as the issue of material costs was listed as the top issue for both converters and suppliers in FPA's State of the Industry Report 2004.
The root of virtually all the pricing evil last year can be attributed to the significant and sustained increase in crude oil prices throughout 2004. These increases directly affected the costs of inks, films, paper, and energy. Coupled with the seemingly never-ending spiral of medical insurance and costs (which make college cost increases seem like deflation), package printers experienced cost increases on many fronts, while still being squeezed by the customer side of the supply chain to keep prices down.
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