Flexible packaging now has consumer conveniences, sustainability, reduced costs

By Tom Polischuk

Ampac’s Retort Pouch for Sprout Baby Food

Ampac was awarded the Alufoil Trophy for Resource Efficiency by the European Aluminum Foil Association (EAFA) for its Sprout Organic Baby Food pouch. The EAFA awards are designed to reward excellence in aluminum foil packaging in Europe, and the Alufoil Trophy recognizes companies that show innovation in consumer convenience, technical development, and sustainable solutions.

Ampac partnered with Sprout to provide a more sustainable alternative to standard baby food products packaged in glass jars or rigid cups. Sprout desired the added convenience of reclosability in case the product was not consumed in one sitting, and an easy-open feature to improve access to the product, as well as for consumer convenience. Although the pouch could have been designed to be microwavable, Sprout desired a foil barrier pouch to ensure the consumer would not use the microwave or any other potentially harsh heating method. One of Sprout’s product advantages is to provide a fresher food product, therefore, by design, the product is meant to be heated in hot water and not boiled or microwaved.

Ampac provided a recloseable stand-up retort pouch with photo-quality rotogravure printed graphics and incorporated Ampac’s Linear Tear technology for straight and easy tear opening of the pouch. Ampac also incorporated a retortable recloseable zipper. The new pouches achieved all of Sprout’s requirements and provide significant savings in shipping and storage weight, while also minimizing product breakage versus a glass jar.
Ampac’s John Shipley said, “It’s a great honor for Ampac to be recognized by our peers in the packaging industry. Our retort zipper stand-up pouch demonstrates Ampac’s commitment to innovation in action, offering customers sustainable, flexible solutions to challenge traditional rigid alternatives in retort.

Flexible packaging has a lot going for it. Somewhere within its many variants it can provide a variety of consumer conveniences, sustainability advantages, reduced costs, improved product quality, and improved processing. Advantages can be found up and down the supply chain, with a common denominator being innovation.

Any casual observer (or not so casual consumer hurrying down a grocery store aisle to make a purchase) will see a multitude of products that have recently adopted a flexible packaging format—single-serve drinks, tuna fish (which made industry news not too long ago), health and beauty and personal care items, and baby food (a category into which flexible packaging is currently making inroads, see sidebar). Some of the novelty and distinctiveness that the flexible packaging format enjoyed several years ago has worn off, but the tangible benefits mentioned above will continue to carry it forward for some time to come.

This is reflected in observations presented in The Freedonia Group’s study, “Paper versus Plastic in Packaging to 2014” released in November 2010. “Plastic’s share will expand more slowly than in the 2004-2009 period due to the maturity of a number of applications in terms of the share controlled by plastic. Nonetheless, material enhancements providing extended shelf life and increased durability, along with reduced material requirements and the addition of convenience features such as resealability and microwaveability, will fuel continued opportunities for plastic packaging.” The report goes on to project demand for the use of plastics in packaging markets to increase 2.3 percent annually through 2014.

Dynamic industry

The Flexible Packaging Association’s (FPA’s) Annual Meeting held in March reflected the generally upbeat view of economic and market conditions impacting the industry. One quick point stands out. William Burke, president and COO of Nordenia USA and chairman of the FPA, started out his presentation on the association’s annual State of the Industry Report with the news that FPA had picked up 32 new members.
According to the FPA, the total U.S. flexible packaging industry came in at $25.5 billion in 2010, of which $19.7 billion was classified as “value added”—defined as not including retail poly bags, storage bags (e.g., trash), and wraps. This reflected a compound annual growth rate (CAGR) of 2.6 percent during the last ten years.

Burke expressed some confidence for the 2011 outlook, projecting 2011 revenues to be up 8.1 percent versus 2010. This is based, in part, on a favorable forecast of overall U.S. GDP growth of 3.0 percent.

It also reflects what FPA member companies view as the industry’s continuing market opportunities. These include: continuing conversion from rigid to flexible packaging; sustainability advantages of flexible packaging; growth in emerging markets; ongoing industry innovation; and the overall economic rebound.

A good indication of the favorable market opportunities can be seen in the results of a Packaging Machinery Manufacturers Institute (PMMI) survey performed early last year and cited in Burke’s presentation. The PMMI Flexible Packaging Survey showed that 53 percent of companies in the food industry are increasing their use of flexible packaging formats, particularly stand-up pouches. And food is already the largest market segment using flexible packaging formats.

The number one area of concern for flexible packaging companies is raw material costs and availability. This is the largest component for costs in this sector, consistently reported by FPA to be about 56 to 59 percent of costs. Clearly, oil-based materials—whether substrates or inks, coatings, and adhesives—will have the most volatility in the foreseeable future.

Consolidation

The flexible packaging industry continues to be ripe for consolidation at both supplier and converter levels, according to several experts following industry trends. There are any number of ways to look at this. One byproduct of consolidation is that the big get bigger and the small get smaller. The FPA follows this trend by reporting the market share of companies in different revenue classes. For companies with revenues greater than $500 million, FPA reports market share growing from 28 percent in 1996 and 39 percent in 2004, to 43 percent in 2010. During the same period, those companies with less that $50 million in revenues decrease from 25 percent to 23 percent. The FPA also reported the number of flexible packaging companies in the industry as 665 in 2000, 437 in 2005, and 407 in 2010.

In his annual meeting presentation, Jon Ewing, managing director at Bank of America Merrill Lynch, compared flexible packaging to several of the more mature packaging formats. According to Ewing, the top three companies in the glass packaging segment account for 93 percent of market share; for food and beverage cans, that share number is about 85 percent; and for folding cartons, it’s 55 percent. Even with the industry consolidation reflected above, the top three companies in flexible packaging currently account for less than 40 percent.

Company snapshots

A look at a couple major players in flexible packaging can provide a representative view of the industry as a whole, in terms of 2010 performance, industry consolidation, and a tangible view of the innovation driving the industry. Both Bemis and Sealed Air Corporation reported strong overall performance for 2010, ending the year on high notes.

Bemis reported record annual net sales, with organic sales growth accounting for about 7 percent of the total and acquisition-related growth, about 31 percent. For 2010, flexible packaging net sales of $4.27 billion represented a 43.2 percent increase compared to 2009. Acquisitions increased net sales by an estimated 36.4 percent; 4.4 percent of the increase was driven by higher sales across a variety of market categories.
President and CEO Henry Theisen states, “Our flexible packaging segment reported solid organic sales growth in 2010, driven by unit volume increases and sales mix improvements in a number of market categories. … Our technical teams are integrating the proprietary processes and material science expertise of our now larger organization and expect to accelerate new product development going forward.”

Sealed Air also reported strong 2010 performance, highlighted by a volume increase of 5 percent, with all segments and regions contributing. William V. Hickey, president and CEO says, “As we conclude Sealed Air’s 50th anniversary year and look ahead to 2011, I am pleased with the good volume momentum that our businesses achieved in all regions this year, resulting in solid fourth quarter volume performance. During the year, we remained focused on growth by successfully launching over 55 new solutions, including expanding our service-based offerings, and by completing four early-stage strategic investments.

“Through the strengths of our extensive global footprint, customers’ solid reception of our new products and services, a strong new product pipeline that leverages differentiated, patented technologies, and a leaner cost structure, we are well positioned to capture the many opportunities ahead of us.”

Conclusion

As the economy continues its slow improvement—however unsteady—the packaging industry is enjoying the benefits. And of all the packaging segments, flexible packaging is probably in the best position to lead the way. pP

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