Neil Farmer looks forward to a year of rationalisation, aquisition and greater innovation in the european packaging industry…
2011 looks set to be a year of rationalisation, acquisition and a greater pace of innovation within the European packaging industry. Arguably we are witnessing the first signs that the economy is slowly dragging itself out of the throes of the worst economic downturn since the 1930`s. However in the UK alone the current round of spending cuts and public sector job losses, allied to increases in taxes, will impact on consumer demand. Rising commodity and raw material price rises will impact all over Europe and the fallout from the euro- zone currency disasters still has some way to go before coming to a conclusion.
Acquisitions and disposals
With declining levels of profitably in some sectors and with limited funds available for investment by smaller businesses, leading packaging groups are assessing the opportunities for acquisitions of companies with added value skills and technical expertise. These larger groups are equally seeking the disposal of underperforming and loss-making divisions.
The announcement just before Christmas that RPC Group was acquiring Superfos Industries for around £203 million (240 million Euros) is a great case in point. RPC is acquiring a good business, with expertise and skills in a number of key areas, including barrier packaging for extending shelf life and lightweight packaging technology, with all its environmental benefits. Superfos claim to have technologies which can double shelf life of certain food products, compared with conventional packaging.
This is good news for the industry, because food supply chain companies are demanding products with longer shelf life, greater protection of flavour, good nutritional content, visual appeal and weight reduction. To achieve these objectives they will require packaging with outstanding performance characteristics and enhanced technological features. Clearly more leading companies in the industry will be investing in these types of technologies or making niche market acquisitions of businesses who already possess this expertise, but who, because of financial constraints, cannot take the technology to the next stage of commercialization.
The rise of barrier technology
The RPC acquisition says much in terms of the way the industry could develop in the next 12 months. The battle lines are being drawn between new plastics barrier technology and traditional forms of packaging, including glass and metal. In the last few months of 2010, there were further signs of the trends in these sectors of the market. Premier Foods announced it was changing its Sun-Pat peanut butter packs from glass to rPET. The jars are said to be 90% lighter than glass and the use of 50% recycled material is also an environmental benefit. They are made by RPC, Blackburn.
Ultimately which will triumph, plastics or glass? Glass packaging has many advantages and has achieved considerable recycling success, material reductions and the creation of innovative new shapes and designs. However, improved shelf life, lightweighting and recyclability of plastics will drive the move away from glass, with further market share gains likely for plastics.
Medium sized businesses will be squeezed
Whilst the move is on for larger groups to acquire businesses with leading edge technology, (such as Superfos), there are corporate businesses which have already made, and will continue to make, tough decisions about underperforming operations. Tetra Pak announced last autumn that it was closing its carton production plant in Wrexham. Nampak is selling its underperforming European Cartons and Healthcare business for £65 million to Platinum Equity, a private equity company. Other groups with loss-making and non-core operations will surely follow the same route and divest themselves of businesses that are surplus to requirements.
The classic squeezing of the industry, (between the large multinational operations and the small , niche businesses, with those in the middle being acquired by the larger players, or else being forced out of business because they are no longer economically viable), is set to be a continuing theme over the coming year. The current round of raw material price
rises will not help those companies who have been struggling to pass on cost increases to their customers during the downturn.
The pace of innovation in packaging
The pace of development of innovations in packaging is set to increase as the New Year progresses. It is probably true that many innovative developments have been put on hold over the last 3 years, because of the economic downturn and the cost versus innovation equation firmly falling on the side of cost savings.
However there are signs that developments in active and intelligent packaging will grow at a healthy rate over the next 5 years driven, amongst other things, by innovations in barrier films, coatings and additives, oxygen scavenging technology, biodegradable and compostable materials, and the long term sustainability visions of leading companies in the supply chain. These are all exciting and include substantial progress in the drive to use 100% renewable or recycled materials for all products and packaging.
Companies like Coca Cola with its Plant Bottle are setting the pace globally in this field. I will return to some of these themes as part of my regular page for each issue of Packaging Gazette throughout the year. 2011 promises to be a year of challenges for all involved in the packaging supply chain. However, only the lean and hungry will succeed in seizing the opportunities that will be presented.
- Products2017.09.19Rubbish removal in Barrow is paramount to tourism and way of life
- Products2017.09.18Fast single-head tray erector designed and made in the UK
- Products2017.09.18M&H Plastics creates Trevor Sorbie Tube after product line refresh
- Products2017.09.18Krones.Shop clicks all the right boxes