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  • 09 Sep 2012

Land of opportunity

The North American market is on an upward curve, so converters operating in the region tell David Pittman.
 
The overriding impression from packaging converters operating in North America is that the region’s market is on an upward curve.
 
‘The North American market is improving,’ says Lou Iovoli, Hammer Packaging’s vice president of strategic partnerships and marketing. ‘It has been a tough three years, where capital expenditure has been held back.
 
‘Things are moving forward now though. As capital projects move forward, it opens up opportunities for packaging and decoration.’
 
Evan Arnold, product development manager at flexible packaging specialist Glenroy, says: ‘North America is seeing an upturn. The market is still tough, but our business is based on understanding our customers and working with them to help them find their own niche.’
 
‘More projects are coming to fruition at the moment than they have in the last three years,’ Iovoli adds. ‘The market is stabilizing and improving.’
 
Flexible packaging growth
Market research organization Freedonia has issued the Converted Flexible Packaging study, which indicates that US demand for such products will see the market grow at a rate of 3.8 percent annually to 2015, resulting in a US$18.2 billion valuation at the end of that period.
 
Growth will continue on to 2020, according to the report, by which time pouches will provide US$9.8 billion and bags US$10.1 billion as part of a market total of US$21.6 billion.
 
The demand for shorter, customized run lengths is getting stronger, says Arnold. As a result, customers require greater flexibility from their suppliers, and Glenroy is working to tailor its processes to match this demand.
 
‘We’re working to alter the ordering process to cope with the growing demand for smaller quantities and variations, making it easier for our customers to request what they need and easier for us to be able to respond to what they want.
 
‘It’s a challenge to understand how flexible we need to be and be able to meet the demands of our customers from a production and ordering standpoint.
 
‘You also need robust quality systems to be able to cope with the speed that materials are needed and to make sure the quality of your products is maintained.’
 
For Iovoli, cost efficiencies are integral to growth. ‘There’s a lot of focus on controlling costs at the moment. We’re doing more engineering to help our customers achieve greater efficiencies before projects are even commercialized. For instance, are they using the most lightweight substrate available?’
 
The environment is another key topic for the packaging market. Freedonia packaging industry analyst Esther Palevsky says: ‘Flexible packaging has always done well because of its environmental advantages. It is lighter weight and uses less material.
 
‘Flexible packaging is not always the right packaging though, and there will remain rigid solutions, but there’s been so much emphasis on sustainability in the past few years.
 
‘It has always been an important advantage but the environment is being talked about more and more, and flexible solutions fit in well with the efforts of packaged goods companies, such as Unilever, Proctor & Gamble and Walmart.
 
These packaged goods companies are focusing more on improving all of their production processes and packaging is part of this as they are reducing their material use by putting things in flexible packaging.’
 
Iovoli adds: ‘In the past, the environment was not a standard component of strategies, but now it is. Some companies weight it higher than others, but it is there.
 
‘There’s a misunderstanding of the impact packaging has on the environment, as it protects food. It’s a trade-off. We have little food waste in the US from the products themselves compared to other markets.
 
‘The trade-off is that we have more packaging. We need to find a solution to make the packaging work in this situation.’
 
For Arnold, chain of custody and traceability is an important part of the environment equation.
 
‘The market has become so global that you can have a structure that features different materials from around the world. It’s important to be able to trace that and supply that information to clients. Customers want it and, although it’s difficult, it’s possible.’
 
Carton potential
Kentucky-based carton converter Zumbiel Packaging sees business in a similarly positive frame as those handling flexible substrates.
 
Tom Zumbiel Jr, the company’s marketing director, says: ‘The market is still soft. All markets are soft.
 
‘Business is good at the moment though. We’re in a unique position as one of the biggest converters in the state.’
 
He says there has been heavy consolidation in his region in recent times, and this has reduced the level of innovation in the market due to synergies and standardization.
 
‘That’s not what brands want to see. They want options and to see innovation. As an independent company, we can provide that.’
 
Corrugated & Paperboard Boxes, another report by Freedonia, predicts 2.3 percent annual growth in box demand, valuing the market at US$36.5 billion in 2016.
 
This will be boosted by overall strengthening of the US economy following the 2007-09 recession, with expanded food, beverage and durable goods output.
 
Freedonia says gains will be helped by a trend toward more expensive boxes, such as folding cartons that offer high-quality graphics and printing.
 
Demand for folding paperboard boxes is expected to increase 1.7 percent per year to US$9.8 billion in 2016.
 
Market dynamics
New York State-based Island Pro Digital is preparing for growth of its own. The company has grown from seven employees at the start of 2010 to 13 in 2012, as well as moving to a new facility offering twice as much space.
 
A full-service media fabrication company that specializes in digital, offset and wide format printing, nearly all the packaging work Island Pro Digital carries out is from trade customers looking for an economical way to deliver short-run printed packaging to their customers. It is able to produce quantities ranging from 1 to 100,000 pieces.
 
Island Pro Digital is now in the midst of growing its customer base, having started locally, expanding within New York State and now serving customers on the other side of the country. This growth has been driven by its online presence, but also by the growing demand for its services as a supplier of high-quality short-run packaging. President Kurt Kubik says: ‘Growth has been good but it has been challenging.’
 
Warren Werbitt, founder of Canadian packaging converter Pazazz, says: ‘The market is good, but how well a business performs is based on how you think and how progressive you are.’
 
He says a two-tier market is emerging, where larger packaging houses handle the larger volume jobs, while smaller companies and commercial printers moving into packaging soak up the rest of the demand as they are better suited to handling just-in-time orders and smaller run sizes.
 
As a result, the market is changing differently for different players. ‘Everyone has to think smarter and invest to increase margins and profits.’
 
Hammer Packaging has used the downturn to invest in its business, which Iovoli says has put it in a strong position to capitalize now the market is showing signs of recovery.
 
‘We’re seeing an upturn as the market has stabilized and customers are moving forward with capital projects, at the same time that we have invested in our technology to handle their demands and productivity requirements.
 
‘It’s a perfect storm as these three things have come together.’
 
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