Packaging: A Change Continuum
Growth prospects for package printing are optimistic, but competition will be on a global playing field.
March 2008 by Corey M. Reardon
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The packaging market is certainly going through a period of change—evolutionary, not revolutionary. Macro issues outside the control of even leading companies are causes for concern and bringing pressures to bear on the sector. Currency exchange rates complicate and inhibit international trade, particularly with the weakening U.S. dollar. Retailer competition in the consumer market is intense. Globalization has become a reality for many companies and, in some cases, an imperative for continuing success.
For the packaging industry supply chain, the complexities are also complicated by high raw material costs and an increasing choice of technologies available to the brand manufacturer to package, identify, and decorate products. Margin and cost pressures are creating the need for consolidation and rationalization. In the face of climate change, the desire to use less energy and create fewer VOC emissions is also increasingly becoming a part of the equation—and in some countries now, or soon to be, forced by legislation.
New geographical opportunities
Geographically, Europe and North America are mature markets, and companies based in these areas are taking advantage of many new exporting opportunities in the world’s developing economies. Russia, China, India, and some countries in South America are providing current business growth for North America and European companies, but the real future will lie in establishing subsidiaries in these locations, or losing out to the fast-growing base of local suppliers.
In general, where major retail groups are expanding into developing geographical markets, it is likely that local sources of packaging printed for their own private label brands—an area where there has been a surge of activity—will be found to keep costs down, with consequent reductions in print orders in the home market. Suppliers in the home country will not likely benefit from such market growth. We already see in these geographies a proliferation of locally manufactured printing presses, substrates, inks, and other ancillaries being used in the domestic market. We see strong evidence today that package printers in countries like China are actually competing in North American markets for business—and winning not only on cost, but with a quality product.
Political and economic uncertainty may constrain quick decision making in this respect, but many companies have already made the decision to expand geographically to grow their businesses by responding to the need to “act global, think local.” With dynamic local growth in technology, the window for successfully building a business presence in these developing economies will only be open to the rest of the world for a short while.
For the packaging industry supply chain, the complexities are also complicated by high raw material costs and an increasing choice of technologies available to the brand manufacturer to package, identify, and decorate products. Margin and cost pressures are creating the need for consolidation and rationalization. In the face of climate change, the desire to use less energy and create fewer VOC emissions is also increasingly becoming a part of the equation—and in some countries now, or soon to be, forced by legislation.
New geographical opportunities
Geographically, Europe and North America are mature markets, and companies based in these areas are taking advantage of many new exporting opportunities in the world’s developing economies. Russia, China, India, and some countries in South America are providing current business growth for North America and European companies, but the real future will lie in establishing subsidiaries in these locations, or losing out to the fast-growing base of local suppliers.
In general, where major retail groups are expanding into developing geographical markets, it is likely that local sources of packaging printed for their own private label brands—an area where there has been a surge of activity—will be found to keep costs down, with consequent reductions in print orders in the home market. Suppliers in the home country will not likely benefit from such market growth. We already see in these geographies a proliferation of locally manufactured printing presses, substrates, inks, and other ancillaries being used in the domestic market. We see strong evidence today that package printers in countries like China are actually competing in North American markets for business—and winning not only on cost, but with a quality product.
Political and economic uncertainty may constrain quick decision making in this respect, but many companies have already made the decision to expand geographically to grow their businesses by responding to the need to “act global, think local.” With dynamic local growth in technology, the window for successfully building a business presence in these developing economies will only be open to the rest of the world for a short while.
Companies Mentioned:
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