For Flexibles, Stable Doesn't Mean Stagnant

Flexible packagers must stay alert to hints of change, even in the face of repetitive annual growth rates.

By Susan Friedman

The numbers make it tempting, but flexible packaging converters can't afford to be lulled into a sense of predictability.

By Flexible Packaging Association (FPA) estimates, the industry grew at a rate of 3.7 percent in 1998, to a shipment level of $17.5 billion—a rate almost dead even with 1997's 3.5 percent annual growth.

The same 3.7 percent growth rate emerges in FPA's forecast for 1999—with familiar rainmakers like multi-web rollstocks, rigid to flexible conversions and stand-up pouches still firmly in place. However, if converters respond to this prediction by setting their businesses on cruise control, they may not be positioned to act decisively under a sudden wind of change. A closer look at 1998's business climate reveals several areas where converters' current course could shift.

Fads or enduring trends?

Multi-web paper/foil and paper/film roll stocks were among the most dominant forces behind flexible packaging's growth in 1998.

Fifty-two percent of flexible packaging suppliers and converters polled in FPA's 1999 Outlook Survey said they are now involved with stand-up pouch roll stocks, marking a more definitive jump into the technology after involvement had held steady at 47 percent in the 1997 and 1998 surveys. This latest data, says FPA Director of Business and Economic Research Bret Biggers, "suggests that stand-up pouches aren't a fad."

FPA data also indicate the continued switch from rigid to flexible package constructions as a source of growth in 1998. The aging baby boomer population is expected to create a hot new application area for these conversions: medical and ethical drug packages.

New orders for flexible packaging to replace rigid are down slightly, with 55 percent of converters receiving orders in 1998 compared to 61 percent in '97. Consumer food packages are still at the top of converters' rigid-to-flexible request list.

Has the rigid-to-flexible turnover hit a peak or a plateau? The long-term prospects of this source-reduction trend aren't yet certain.

"It's out there, it's a novelty, but I don't think it's completely accepted yet," says Andrea Mandel, who heads consulting firm Andrea S. Mandel Associates in Princeton Junction, NJ.

Mandel sees rigid packages containing liquid product replaced with flexible materials most often. She also acknowledges successful flexible transitions for granulars, powders and cereals, but maintains that larger flexible package designs with cap or spray mechanisms are still viewed by consumers as a little too unwieldy.

No rest for execs

Industry activity away from the production floor in 1998 could be seen as a further call for converters to stay awake at the wheel.

The year's pace of flexible packaging industry mergers and acquisitions was nearly as brisk as in 1997, with 21 transactions confirmed through the first nine months of '98 and a year-end total expected to come close to '97's 33 transactions. Biggers says the repeated joinings of major corporations—Fort Howard and James River, Cryovac and Sealed Air, Jefferson Smurfit and Stone Container, and Clorox and First Brands—will go down as '98's signature M&A pattern.

From an environmental standpoint, 1998 was a "year of investment" for flexible packaging converters, says Mark Wygonik, FPA director of technology and regulatory affairs. With many rules pending, but no big announcements or proposals in 1998, the industry and related associations poured their efforts into educating the EPA on converting processes, with the hope that more reasonable regulations will result in coming years.

The EPA decision docket looks much fuller for 1999. The Printing MACT takes effect in May, and EPA rulings are anticipated on the Coating MACT and Control Technique Guidelines revisions. Wygonik says education of EPA will again have to take precedent, as "some of the things developing around the Coating MACT are extremely harsh. Some of the regulations aren't even viable with currently available test methods."

The most dramatic financial fallout for converters could result from the most recent version of the proposed New Source Review (NSR) reform. The new rule would require every major source of air pollution (including printing presses) to install the most technically advanced pollution control equipment available. The pending implementation of the National Ambient Air Quality Standards further complicates this rule by lowering the level for defining major sources of pollution.

The '99 converter mindset

Converters' growth expectations for 1999 show prospects for medical/surgical and drug markets to be up significantly, with produce and snacks at levels of potential similar to last year.

As the top growth contender, the surgical/medical market drew enthusiasm from six out of 10 surveyed converters, in a surge of interest that could be springing from pressures to lower healthcare costs. Not far behind is the fresh produce market, targeted for growth by five out of 10 converters, followed by the drug market, agricultural and industrial chemicals and snack food.

Volume and market competition again led off the list of converters' concerns for 1999. Concern with labor issues has doubled, tying it with material costs as the third-highest ranking concern for '99.

Converters' more pronounced tendency to choose film over paper and foil for package constructions isn't expected to let up in 1999.

Mandel believes more of the inexpensive, readily available standard films such as polyethylene and polypropylene will be this year's workhorses. Specialty film materials will get the most attention when converters look at metallization to replace foil, either as a barrier or for aesthetics. Laminations and coextrusions with materials such as EVOH and polyester will continue to play a part where barrier materials are required.

Two formerly experimental barrier film materials that are moving out of the lab and into test markets are polyethylene naphthalate (PEN) and liquid crystal polymer (LCP). In contrast to these new ways of using film to achieve heavy barriers, Mandel identifies a trend toward "not necessarily perfect barriers, but designed barriers."

Yet another barrier material—silicon oxide—continues to wait in the wings for mainstream acceptance. "Every so often, it looks like it's going to take off, but then it doesn't," contends Mandel.