| Growth in the European flexible packaging market is continuing despite economic and financial upheaval in some countries, as per PCI Films Consulting. The report points to a sales upswing of 4.7% in 2010 to just over EUR 12.3 bln, with the 6.2% growth in Eastern Europe outpacing Western Europe’s 4.4% improvement. Much of the higher sales total is attributed to “escalating” raw materials and energy costs, which converters for the most part passed on to customers. Assuming lower prices for starting materials, the consultants expect 2011 to see a more moderate sales upturn, of 3% on the whole. A decline in real terms is forecast for Portugal and Greece. Consumption is predicted to increase by 1-1.5% this year, boosted by demand for packaging used in pet food, pharmaceuticals, beverage and a number of human food applications. Converted materials accounted for EUR 11 bln of flexible packaging sales in 2010, with 60% of European demand concentrated in six end-use categories: confectionery; fresh and processed meat; cheese and dairy; coffee, dried foods and cereals; baked goods and medical pharmaceutical. Output rose by nearly 4%, with more than 55% of production concentrated in four countries – Germany, France, Italy and the UK. About 8% of production, worth EUR 890 mln, was exported. Imports from outside Europe, worth EUR 273 mln, accounted for only 2% of European demand. Consolidation in the industry continues, propelled by private equity transactions. Additionally, total demand for flexible packaging in the Middle East & Africa in 2010 approached US$3.5 bln, representing 5% of world flexible packaging sales. This still represents consumption of less than US$3 per capita. Overall flexible packaging demand in the region grew by 7% in 2010, with sales having recovered from more modest growth in 2008 and 2009 when the market was most affected by the global economic downturn. Over 45% of regional demand was accounted for by South Africa, Iran, Nigeria and Egypt with most rapid growth seen in Nigeria, Egypt and Kenya. The region’s largest national markets are fairly self-contained, while smaller countries such as the UAE that have heavily invested in new capacity have a high proportion of output exported. The top 20 converters account for around 40% of total regional sales. With few exceptions, most of these companies are locally owned. Intra-regional trade has been growing, with 15% traded between countries within the region. Significant volumes are exported to Africa from Middle Eastern countries. Exports to other regions have been increasing with Israel alone accounting for over 40% of the export total. Imports from outside the region have been growing and currently account for 14% of regional consumption mostly sourced from Europe, India and China. Dried and dehydrated foods which includes pasta, staples such as salt, sugar and rice, milk powder and other powdered foods such as soup mixes accounts for a fifth of total demand. Despite economic and political challenges, overall regional consumption of flexible packaging is expected to see steady growth of 4.5% pa overall across the region. Another report by PCI shows, India represents a US$3 bln market that is expected to continue growing at around 15% pa until 2015, but businesses and investors need to understand the business environment before they can expect to be successful here. India is, in flexible packaging as in so many other things, a land of opportunity. With a middle class the size of Europe, Indian consumers have the purchasing power to match their counterparts in the West, and the Indian retail sector is rushing to satisfy them. India is poised for huge growth within the retail sector, as well-developed, major retailing expands within Indian cities. With only 5% of food currently packaged, and WalMart only last year allowed to move into retail, the opportunities in flexible packaging are clearly enormous. Added to that, are large, mostly coastal, government-supported food manufacturers manufacturing cash crops for export throughout Asia and beyond. The Indian converting industry is distinctly two-tiered: serving the major food producers are very well developed converters producing European standard flexible packaging with German and Italian equipment. Outside the main centres, there is a less organised market, with a large number of small converters producing flexible packaging of generally lower quality. International groups are almost missing, with Huhtamaki the only substantial player. Indian export trade in converted flexible packaging has been growing, with long-run customers across Africa, the Middle East, USA, Asia and Europe recognising the high quality available from the major contractors. Some of the end-uses are rather unfamiliar to Western converters. By some estimates, for example, 25% of all laminate sales are accounted for by small sachets of chewing tobacco, although they are the subject of Indian government legislation to combat litter. Pack sizes are generally smaller to match consumer purchasing power. Many commentators have expressed the view that the Indian flexible packaging market will develop on the same lines as the Chinese. As the report demonstrates, however, the dynamics of the two territories are completely different. A bureaucratic and challenging political landscape, an increasing focus on environmental issues and the presence of established players, sometimes owned by the very manufacturers they supply, means that, while it may well be time to ‘dip a toe’ in the Indian market, there are still substantial hurdles to clear.
The growth of the flexible packaging industry in India is being spurred, as most would guess, by the rapid growth of the country's middle (consuming) class. With a middle class the size of Europe, Indian consumers now have the purchasing power to match their counterparts in the West, and the Indian retail sector is rushing to satisfy them, note the authors. To date only 5% of food sold in India is packaged, with farmers' open markets still a major market force, but change is occurring rapidly. According to PCI, the Indian packaging converting industry is two-tiered: serving the major food producers are converters producing European standard flexible packaging with equipment sourced from German and Italian equipment manufacturers. US flexible-packaging demand is expected to top US$18 bln in 2015, as per a report by Freedonia. Demand for converted flexible packaging is projected to increase 3.8% annually to US$18.2 bln in 2015. Gains will be similar to the pace of the 2005-2010 period based on the now more well-established presence of pouches in a number of food and nonfood markets coupled with overall deceleration in raw material price growth. Converted flexible packaging’s source reduction capabilities will be increasingly advantageous in light of initiatives by major retailers and packaged goods firms to evaluate their packaging in terms of eco-friendliness and cost reduction. Pouches will experience above-average advances, with demand expected to increase 4.6% yearly to US$8 bln in 2015. 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. Additionally, the ageing of rigid packaging equipment will create openings for replacements by pouch packaging equipment over the coming decade. Gains for bags will be moderated by the maturity of many applications along with competition from pouches and rigid packaging. Still, advances will represent an improvement from the 2005-2010 performance based on the expected recovery in the US economy. Plastic bag demand will outpace that of paper bags due to cost and performance advantages, along with widespread usage in baked goods, produce, meat, frozen food and grain mill product applications. However, growing efforts by packaged goods firms to demonstrate their commitment to sustainability will lead to some degree of renewed interest in paper, which possesses such qualities as renewability, recyclability and compostability. Converted flexible packaging demand in food applications is projected to climb 4% pa to US$12.9 bln in 2015. 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. Demand in nonfood markets is projected to increase 3.2% per year. Advances will be led by above-average gains in the pharmaceutical and medical product markets.
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