A day of two two halves

20 April 2006



Boxes half empty or boxes half full? Pauline Covell reports from the Carton Conference 2006 for media partner Converting Today


Will packaging end-users be buying their cartons from Central and Eastern Europe in a few years? Will innovation at the best price be the secret in their dealing with carton converters? And will the secret to the UK carton industry surviving be a marketing-led, flexible sector with an eye to developing smart cartons printed with electronic circuits?

Yes to all three is the answer, that is if the nearly 140-strong audience at the BPIFCartons and Pro Carton organised conference accepted the well prepared thoughts of an impressive array of speakers whose presentations were held together by the seamless hosting of the BBC’s Nick Higham.

The News 24 presenter opened the event with an ‘on the couch’ interview on the state of trade (a technique featured throughout the conference) with Mark Kerridge. The managing director of Benson Box had welcomed delegates to the company’s state-of-the-art plant just outside Leicester the day before. Asked about the retailers’ position he replied: “I have a lot of regard for the retailers. They are driving a very good business model - investing in their business for growth. They are using the leverage they have, but at the end of the day they have core beliefs to deliver value and choice for the customer.”

Tim Rothwell, senior vp at Lansdowne Capital UK, was not so kind. “I believe the huge growth of Tesco and Wal-Mart has been largely financed by the cashflow of their suppliers.” His thought provoking analysis of the global market and the major issues facing the carton industry pointed to a decline in or flat consumption per capita of cartons in the western economies since the mid 1990s and a vigorous growth in China, Eastern Europe and South America.

Asking why growth in Western Europe was disappointing, he stressed the importance of “cartonboard competitiveness”. He likened the price trends of folding box board (FBB) over the last decade to “the vapour trail of an orbiting space station – up in the stratosphere defying gravity. The major paperboard manufacturers are still constrained by shareholder structures dominated by the forest owners who are basically looking to get the highest price for wood.”

Michael Clarke, of M-Real, retorted: “Our prices have not moved in 22 years”. He took the point on ownership, but added: “We are trying to meet our customer needs”. Tim Rothwell suggested: “Integrated companies should de-merge. You supply a marvellous product, but it costs.”

President of BPIF Cartons John Monks used the Saxa Salt carton to show just how the carton industry had changed yet prices had slid. “The order in 1956 was for 45 million units. (2.25 million sheets were printed.) It took 52 weeks to produce on letterpress machines, board cost £50/t, working week was 45 hours and the printer’s wage was £15/week. A packet of salt was 2.5 old pence (1p) and the carton price was 35 shillings (£1.75)/1,000.

“Today, it wouldn't be produced in one run, but if it were it would take around 270 hours, which at continuous 24 hour working is two weeks. The board price would be £380/£400/t (x 8); the carton price would be £15/1,000 (x 8). The printer’s wage is £600 per week (x 40); the salt costs 27p in Tesco (x 27); and inflation over the period is around six per cent per annum. So board and carton prices have effectively more than halved in real terms.”

Many references were made to the growth in Central and Eastern Europe and the future structure of supply. Not only was there a huge local market opening up, but also opportunities to produce packaging at cost effective rates. Head of global business development at Pira Andy Rushforth said: “In the UK growth is running at around 2 per cent whereas in Eastern Europe this is 5 – 6 per cent.

“Packaging suppliers virtually always follow their customers and then diversify into the local market.” A good example was Gillette and Sonoco’s move to Poland. He stressed: “Emerging markets have room for best in class converters. So partnerships with brand owners are an opportunity.

“Will migration of production continue at a heavy pace? Yes, we are a long way from equilibrium. Short lead time products, for example salads, and high weight to cost items such as shampoos will be protected, but Gillette is packaging razors for several markets at its site in Poland.”

He offered some advice for sustainability. “Firstly avoid the commodity cul-de-sac. Second make sure the culture of innovation goes right through the workforce. That is critical. Third – foster collaborative partnerships across the supply chain. And you can always join the game. Expand regionally.” Companies didn’t need to be large to do this. They can be SMEs. Robinsons was an example of a company that will grow by 50 per cent by building in Poland.

Much travelled technical member of Unilever’s Paperboard Global Supply management team John Pollard was adamant that with the developing middle classes, low costs and high growth in the emerging markets “we will continue to manufacture there. The western world has no technology advantage – the same presses are available”.

“Converters are likely to remain locally to the product packaging sites. If the product moves then the carton will move too,” he stressed – a salutary warning to those converters unprepared to invest outside the UK. “But we need self sustainable suppliers. And we need them to be able to invest. We are not in the business of squeezing people out of business and taking money away from their investment.”




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The Carton Conference

Carton Conference convenes Carton Conference convenes
John Monks (centre) “We shall contnue to be pressurized unless ... John Monks (centre) “We shall contnue to be pressurized unless ...


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