A new PCI Films Consulting study on the €9.2 billion European converted flexible packaging market highlights continued downward pressures on company profitability and the need for further rationalization of West European converting capacity.
Author Paul Gaster says: "The highly competitive flexible packaging environment, especially in Western Europe, is becoming more intense. It is clear that overcapacity remains a problem there, and increased interest from end users in sourcing converted products from Turkey and some low cost Asian sources is also creating additional pressures."
The The 250-page report also notes the effect on converter profitability of rapidly rising raw material costs in the second half of 2004 and concludes that high substrate prices are likely to remain a feature for the rest of 2005. Another trend noted is that leading multinational brand owners are switching more of their production out of Western Europe to lower cost East European locations and have begun to source their flexible packaging from local suppliers.
Leading multi plant converter groups such as Amcor Flexibles and Alcan Packaging are establishing a much stronger manufacturing presence in the East through acquisition and greenfield investment. More are expected to follow as this trend continues.
Overall, Amcor and Alcan retained their market leadership in 2004, accounting for almost a third of the European market.
The study forecasts European demand for converted flexible packaging growing at 1.7 per cent/year from €9.2 billion in 2004, to reach approaching €10 billion by 2009. PCI expects annual growth in Western Europe to remain around one per cent over the period, while for Central and Eastern Europe the picture is much brighter, with average annual growth rates of nearly seven per cent. In Turkey, PCI expects growth to moderate from eight per cent in 2004 to an average of five per cent/year over the next five years.
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