What does the future hold?

6 July 2010

The Global Packaging and Converting Industry Outlook 2010 conducted by ICD Research shows that the packaging industry is generally optimistic about the revenue growth of its companies. In all, 66% of packaged goods manufacturers and 62% of converters are optimistic over growth. Revenue growth optimism among packaging suppliers grew from 20% in Q2 2009 to 58% in Q4.

And the printing sector among converters is positively buoyant, if comments after the Ipex exhibition are anything to go by. See my Ipex report for a taste of the positive vibe that was running around the show: I personally didn’t talk to anyone who wasn’t ‘over the moon’ at the interest from visitors, and, more importantly, their serious intentions to invest in new presses and auxilliaries. Some weighty deals were done at the show, with more in the pipeline, from all accounts.

Many at the show remarked on the high level of international visitors, notably those from India, China and Brazil. These are obviously up and coming areas for future business, and this is borne out by the ICD survey, which found that packaging buyers in these areas were more optimistic about the sales growth of their companies than developed countries, due to the growth in the food processing market and other related industries such as pharmaceuticals. Also, these developing regions were identified as the fastest-growing markets for the next 12 months.

Not surprisingly, ‘recyclable’, ‘biodegradable’ and ‘smart’ packaging sectors are predicted to offer the greatest growth potential in the developed world in the coming year.

Companies are trying to cut down on their environmental impact in a number of ways, but there will almost always be waste generated by the packaging and converting sectors. How to deal with this waste is the subject of one of our features this month.

More good news from the ICD report: the majority of packaging companies will be increasing procurement spend over the next 12 months by 6.3%, taking the annual procurement budget to US$66 million in 2010-2011. If this proves to be the case, it will be a big leg-up for an industry that has had its hands tied behind its back in the past year due to lack of funding.

However, the industry still faces a number of challenges over the coming months. Every day I receive notifications of raw materials prices increases, and ‘responding to price pressures’ is high on the agenda of concerns, with 60% of respondents citing this as their top concern, according to the ICD report. ‘Cost containment’ and ‘rising competition’ have additionally been identified as the most pressing business concerns.

The rise in competition should spur companies to provide better service to customers. However, the survey indicates that most industry suppliers are falling short of their knowledge of buyer needs. Aside from price pressures, suppliers need to have contingency plans in order to mitigate supplier failure and maintain business continuity. Packaged goods manufacturers identified that they are ‘looking for alternative suppliers/capacity’ and ‘seeking preferred customer status with existing suppliers’ to plan for future product/supply shortages.

Packaging suppliers also identified their major issues for 2010. The majority of companies are adopting ‘waste management/reduction’; budget control’ policies; and ‘automation/technology advancements’ to overcome present business challenges. Most of the respondents are also concentrating on ‘new product development’; ‘new market entry’; and ‘price reviews’ as key ways to drive sales.

So, although the future is looking decidedly brighter, those companies that don’t address buyers’ needs will begin to lose out to competitors who can guarantee continuity and a high level of services.

It’s not rocket science, but it is worth taking the time to re-assess business models and practices to address these real concerns.

Maureen Byrne,


Maureen Byrne

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