Commentary & Analysis
The Corrugated Packaging Sector, excerpts from PRIMIR Research
For the next few weeks we will be looking at the corrugated sector of packaging, which accounts for approximately $85 Billion in shipments globally and $24 Billion in North America.
By Kevin Karstedt
Published: March 8, 2013
For the next few weeks we will be looking at the corrugated sector of packaging, which accounts for approximately $85 Billion in shipments globally and $24 Billion in North America. To help us introduce the various packaging sectors to the growing WhatTheyThink Labels & Packaging readership we asked PRIMIR if we could pull excerpts from their 2012 study that Karstedt Partners was commissioned to write titled Packaging: Evaluation of Vertical Markets & Key Applications. This study was unique to many industry studies in that it looked at the force being placed on Brand Owners, the originator of packaging orders. Taking this focus a step further the study looked in-depth at the major vertical markets of food, beverage, household, personal care and healthcare to see what will be driving packaging demand in these verticals and thus driving the supply chain. Following are some of what we brought to the readers surrounding the corrugated packaging sector. The full table of contents for the report can be downloaded here.
In that study the food and beverage vertical was identified as the largest end-user of corrugated boxes of all segments in North America, accounting for 51% of shipments in 2010. Corrugated for the food vertical are forecast to continue increasing at an average annual rate of 2.4 % through 2015.
Demand for corrugated boxes traditionally fluctuates with the growth of a wide range of consumer products including both durable and non-durable manufactured goods. General macroeconomic conditions such as changes in real GDP, consumer spending, international trade, industrial production and factors that affect manufactured goods markets are the drivers behind volume shifts in corrugated shipments.
The report notes the high percentage and volume of corrugated cartons used for shipping containers has historically insulated the corrugated industry from volume fluctuations caused by material substitutions. Corrugated cartons are valued for their low cost, durability and strength. By industry estimates shipping containers account for 75-80% of corrugated volume.
The corrugated industry is a net exporter of product, for converted cartons as well as Kraftliner. Exports, combined with the emergence of club store volume have helped the corrugated industry to overcome volume losses created by the movement of North American manufacturing offshore. Some analysts project that the U.S. may become a low cost producer again within the next five years due to wage inflation in China and the risk of doing business in Mexico. Manufacturing is beginning to move back to the U.S., and this bodes well for the corrugated industry. According to the U.S. Department of Commerce the corrugated industry export significantly more in 2010 than it imported.
- Paperboard Mill Products (Kraftliner) $0.133 Billion
- 3.4 million tons exported
- 53% to Canada and South America
- 18% to Asia and Europe
- 29% to Africa and Middle East
- Paperboard Mill Products (Kraftliner) $0.039 billion
- Corrugated and Solid Fiber Boxes $0.314 billion
With the focus of the PRIMIR study on how vertical markets affect the demand for packaging there is a heavy focus on how lifestyle changes are affecting packaging demand and corrugated board. Following are some of the lifestyle changes that are projected to affect packaging demand moving forward.
Demand for convenience foods continues to increase, at both the retailer as well as convenience restaurants. This trend continues to stimulate the demand for corrugated board, particularly in microflute applications such as take-home pizza boxes and other fast food containers. Fast food establishments are also interested in digital printing for promotional campaigns, cross-selling coupons, and targeted marketing initiatives at the local level. Personal grooming products are expanding product categories to reach specific demographic audiences.
The growth of multimedia products drives increased demand for folding carton, corrugated and microflute. Mobile phones, digital cameras, satellite navigation systems, tablets and other technologies are driving demand for microflute with high quality print.
Microflute packaging also penetrates markets such as confectionary, powdered drinks, personal care, alcoholic beverages and other markets. This creates growing demands on the printing industry for improved graphics and finishes, utilizing analog as well as digital printing.
Aging populations exhibit different spending patterns. Health foods, healthcare products, nutraceuticals and anti-aging remedies are growth segments. These products will generate incremental growth in corrugated material used for merchandisers and displays.
Online shopping is the fastest growing retail segment. Packaging is a big issue for online merchants, as consumers frequently object to receiving their product simply placed in a plain shipping container. The objection is based on the consumer perception of the retailer lacking permanence or staying power, and potentially disappearing immediately after the sale. Online retailers are attempting to promote brand identity, and a stronger connection between the online web site and packaging. The need for brand identity must be tempered with the reality of the shipping world, and the need to ‘safeguard’ the identity of the contents being delivered. This creates multiple opportunities for corrugated packaging, from smart packaging for tracking and tracing of shipments, to shipping containers, to high impact primary packaging.
Technological developments in papermaking and corrugating have allowed the same functions to be performed by lighter boards. From 1990 to 2010, the average weight of corrugated board decreased approximately 12%. In recent years, new capacity and equipment upgrades have created lightweight board.
As part of the study Karstedt Partners interviewed 122 Brand Owners in multiple vertical sectors as well as 60 converters and industry leaders to compile comprehensive trending information that will be affecting buying decisions for the next few years. For more on the study and to become a member of PRIMIR visit them at http://www.primir.org.