Growth slows in European flexible packaging industry

Growth in value of the European flexible packaging industry slowed last year, with weaker demand and lower raw material inflationary pressures suppressing the market.

According to PCI Films Consulting’s latest The European Flexible Packaging Market report,  annual value growth in flexible packaging last year slowed to 2.1 percent, down from over five percent in 2011.

Weaker demand resulted from flexible packaging buyers responding to static sales of packaged food by reducing stock levels, while the industry was able to avoid a repeat of the inflationary pressures experienced in 2011 when the cost of plastic films, foils and papers, inks and adhesives rose significantly, and in order to maintain margins converters had to pass these increases on to customers.

The latest report details regional and national differences in demand trends, and notes that while there was modest expansion in Europe’s largest market, Germany, little or no growth was seen in the UK and France, and there were real declines in Italy, Spain, Greece and Portugal.

Standout markets were Turkey and key countries in Eastern Europe, such as Russia and Poland, which increased in value at more than twice the European average.

Market consolidation is another important factor identified in the report as changing the structure of the industry, such as Mondi’s acquisition of Nordenia International.

Private equity firms have played a prominent role in the flexible packaging market, with one firm, Sun Capital, making a series of acquisitions in Europe and North America to form Exopack Holdings. This company is now ranked amongst the top 10 players in Europe.

PCI Films said it expects the European converted flexible packaging market, worth €12.1 billion, to produce a similar scenario in 2013.

Report author Paul Gaster said: ‘While value growth has slowed, European consumption of flexible packaging in volume terms approached two percent in 2012, confirming that flexible packaging continues to perform better than many other industries in the current economic climate.’

Gaster adds: ’20 percent of the flexible packaging industry’s sales in Europe are currently generated by private equity portfolio companies.’

Read more about substrates here