Upward curve

24 January 2014



Thanks to a range of factors, including changing consumer tastes and disposable incomes, the global packaging market is predicted to rise steadily over the next five years, in a new series of reports by Smithers Pira, Converting Today looks at the findings for individual market segments and the reasons behind this anticipated growth


Global packaging sales were projected to end 2013 at $797 billion, and grow at an annual rate of 4% to 2018, according to a new market report by Smithers Pira.

Sales of packaging are found to be concentrated in Asia, which accounted for 36% of the total in value terms in 2012 (see figure 1). North America and Western Europe totalled shares of 23% and 22%, respectively, while Eastern Europe was the fourth largest consumer of packaging with a global share of 6%, closely followed by South and Central America with 5%. The Middle East represents 3% of the global demand for packaging, while Africa and Australasia each have a 2% share.

According to the report, which is titled The Future of Global Packaging to 2018, this segmentation of the market is expected to change significantly over the five-year period studied. Asia is predicted to represent more than 40% of global demand, while North America and Western Europe noticeably lose out.

There are numerous potential reasons for this expected growth in the world packaging market, such as technical developments, cost per package, sustainability initiatives and - perhaps most importantly - the growth of the consumer class in Asia-Pacific, South and Central America, and Eastern Europe.

Indeed, the trends vary according to geographical region. Growing urbanisation, investment in housing and construction, the development of retail chains and the burgeoning healthcare and cosmetics sectors are driving packaging demand in China, India, Brazil, Russia and other emerging economies. An increase in living standards and personal disposable income in the developing regions is fuelling consumption across a broad range of products, with subsequent growth in demand for the packaging of these goods.

In terms of economically developed markets, on the other hand, a number of key social and market trends have been having a major impact on developments in packaging over recent years. These include the trend towards smaller households and accompanying rise in demand for more, smaller pack sizes; the increasing requirement for convenience among consumers; and the growing number of men interested in health and beauty products.

The report found that all end-use sectors registered growth in value terms during 2012. Medium term forecasts for food packaging demand indicate a potential growth rate of 3.4% on average to 2018, by which stage the market will be valued at about $284 billion. Consumption of drinks packaging over the period is projected to increase at a rate of 3.3% on average per annum until 2018, reaching a value of $102 billion.

Smithers Pira then investigated specific market segments, projecting how their values would grow over the next five years.

Stretch-and-shrink to grow
Global consumption of stretch-and-shrink sleeve labels is forecast to grow at a calculated annual growth rate (CAGR) of 5.6% in the 2014-2019 period. Sleeve label consumption is projected to reach 6.43 million square metres in 2014, with a value of approximately $4.4 million. Sleeve labels are growing at a faster rate than the label market as a whole, and represent a projected 12.5% share of global label consumption by area in 2014.

Sleeve labelling is used predominantly for food and beverage product packaging, which accounts for a projected volume share of 85.3% in 2014 (see figure 2). But gains have been made in other, non-food and beverage markets, and sleeve labels are now used for cosmetics and toiletries, health and pharmaceuticals, household care and many other products.

So, what are the key factors that are driving this market forward? According to the study, The Future of Stretch and Shrink Sleeves to 2019, sleeve label demand is largely driven by its advantages in terms of marketing, brand identity and visual on-shelf appeal for customers. Growing demand for plastics bottles and the lightweighting of plastics and glass bottles are also positive influences on demand.

New technology developments in films and manufacturing processes are improving the quality and definition of sleeve labels on a continual basis. Other market drivers for sleeve labels include economic influences, consumer demand for convenience products and retail trends.

Western Europe is found to be the largest regional market for sleeve labels, accounting for a projected share of close to a third of global consumption in 2014, followed by Asia-Pacific and South America. The South and Central American market is forecast to grow at the fastest rate in the next five years.

As the major sleeve label markets mature in developed countries, and competition from lower cost labelling alternatives intensifies, the market is not expected to increase in value as quickly as it did during the early-to-middle part of the last decade.

There is also mounting concern from recyclers and brand-owners that some sleeve label materials are incompatible with existing PET bottle recycling processes.

Film stars
Smithers Pira found the global market for speciality films to be worth $6 billion in 2013, projecting that it will grow at a CAGR of 6% until 2018.

Speciality films are not a homogenous market, as each film type has separate characteristics, functions and applications, such as barrier protection, biodegradability, safety and protection. These various types are all at different stages of development, and therefore exhibit different supply and demand dynamics, not to mention growth potential.

The Future of Specialty Films: Market Forecasts to 2018 reports that barrier films dwarf all other speciality film types, accounting for half of total market tonnage in 2013. Despite being long established and reaching market maturity in developed countries, barrier films still offer good growth prospects.

The electronics sector looks set to show the biggest gains in terms of growth over the five-year period to 2018, driven by new end-market product development and growing consumer demand for alternative solar cell technologies.

The US is found to be currently the largest national market for speciality films, with a projected 19.3% volume share in 2013 (see figure 3). Asia is the largest regional market, with 32.9% of global consumption, followed by North America and Western Europe. Asia, and South and Central America are the fastest growing regional speciality film markets, with India, China and Brazil as the fastest growing countries.

However, this is all set to change: at some point during the 2013-2018 period, China will to overtake the US as the world's largest speciality film consumer. The rest of the world is also forecast to show above-average growth rates in the market. As North America and Western Europe are relatively mature markets, they are forecast to show below-average growth rates between 2013 and 2018.

Smithers Pira examines the various possible reasons behind this growth. A move towards convenient food and beverage products has meant that microwaveable ready-meal packs, boil-in-the-bag and stand-up pouches, all of which use speciality films, have become increasingly popular. In addition, the explosion of the consumer electronics market, and the introduction of products such as LCD screens and smartphones, have dramatically increased demand for high performance films in applications such as semiconductors and displays.

Barriers to growth
The global market for functional and barrier coatings used in paper and board applications was worth an estimated $4.2 billion in 2012, and is predicted by Smithers Pira to increase by almost 420,000 tonnes by 2018.

The Future of Functional and Barrier Coatings for Paper and Board to 2018 reports that demand is fairly evenly spread across the three major sectors: the Americas, EMEA and Asia-Pacific (see figure 4). The US holds the largest share of the global market at 28% of the 2012 volume; however, in coming years, there will be a marked shift towards the Asia-Pacific sector. China will usurp the US' lead position, increasing its share to 26% of the market in 2018, while the US will slip to 25%.

The expected economic recovery will mean increased disposable income and, therefore, growth in household expenditure on products within the functional and barrier coating market. Changes in consumer lifestyles and demographics, such as a growing demand for convenience, on-the-go meals and smaller packs, have led to increased use of functional and barrier coatings for the paper and board sector.

Recycling and sustainability are also important concerns. Many retailers are insisting on the traceability of source materials and expect environmental awareness from their suppliers, which is creating a need for biodegradable, recyclable or compostable coating materials.

Cost remains at the forefront of everyone's minds, from raw material suppliers to final consumers. Many coatings consist of polyethylene, aluminium or both, so raw material price volatility in these markets increases the pressure on manufacturers to come up with viable alternatives at competitive prices - while still offering the same characteristics as the materials they are intended to replace. That is easier said than done, and commercially viable volumes and prices are still some way in the future.

The packaging of food and beverages accounts for 85% of the demand for these coating materials, and within this group above average growth in demand can be expected in the fresh, chilled and frozen food sectors over the medium term. Good growth prospects are also anticipated in the much-lower-volume non-food applications, including tobacco packaging and reel and ream wrapping. Almost 40% of coating materials are used in the beverage and liquids sector, mainly in the form of extrusion polymers and aluminium foil laminate.




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