SAI INDUSTRIAL LLC OPPORTUNITY ASSESSMENT FOR THE U.S. FLEXIBLE PACKAGING INDUSTRY. A presentation to FLEXIBLE PACKAGING ASSOCIATION

Transcription

1 SAI INDUSTRIAL LLC OPPORTUNITY ASSESSMENT FOR THE U.S. FLEXIBLE PACKAGING INDUSTRY A presentation to FLEXIBLE PACKAGING ASSOCIATION February 24, 2012 The purpose of the document is to share with the client SAI s proposed format and preliminary findings to date. The format and information contained in the document is subject to change as SAI completes its field research and analysis. In addition, any outstanding deliverables and clerical errors will be addressed in the final report. SAI will issue the formal report upon project completion. VISIT SAI S WEBSITE FOR MORE INFORMATION BELGIUM BRAZIL CHINA INDIA JAPAN RUSSIA SINGAPORE UNITED STATES PROJECT OBJECTIVES Update previous research Update information Focus on trends that favor flexible Look for low flexible penetration Determine challenges Identify trends Profile opportunities Cost Materials Equipment and capital Market perceptions Globalization Sourcing strategies Materials costs Sustainability Differences between flexible and rigid Find opportunities Identify threats SAI (FPA7) 1 1

2 SCOPE Scope Industry Description Flexible Materials includes paper, resins, plastic film, or combinations Packaging format Flexible Targeted non-flexible Corrugated Paperboard Glass End-use category food non-food Institutional food Geographic United States Time period, forecast to 2015 Rigid composite Rigid metal Rigid plastic Institutional non-food Industrial Medical and pharmaceutical (Market value based on both growth and inflationary levels) SAI (FPA7) 2 RESULTS ORIENTED INTERVIEWING SEQUENCE Most sensitive Least sensitive Field interviews Secondary (published) data FPA reports, statistics & perspectives Number of interviews-a Type of organization Phases I & II Industrial manufacturers and 63 CPG companies ers 28 Packaging manufacturers 22 (mostly rigid) Material and equipment 15 suppliers Other-c 12 Total 140 a- Number of interviews, not organizations b- Based on five end-use categories being examined for the Phase II c- Includes government agencies, contract packagers, designers and other knowledgeable industry sources SAI (FPA7) 3 2

3 EXAMPLES OF PHASE II INTERVIEWS: RETAIL FOOD AND NON-FOOD SAI (FPA7) 4 EXAMPLES OF PHASE II INTERVIEWS: INDUSTRIAL, INSTITUTIONAL, MEDICAL SAI (FPA7) 5 3

4 US $, Billion GROWTH IN PACKAGING END-USE MARKETS Packaging grew at 2.3% annually over the period Unfortunately, inflation grew at 2.6% Strongest performers were: Medical : 4.8% CAGR : 2.7% CAGR 48.6 TOTAL PACKAGING SALES VALUE BY CATEGORY Total sales : $114.5 Billion : $136.8 Billion CAGR 2.3% SAI (FPA7) Source: US Census Bureau, SAI analysis and field interviews food Instit'l food non food Industrial Med/Pharma Instit'l non food Other-a a- Includes wood crates, packing materials, foams, etc HISTORIC VALUE IN PACKAGING FORMATS Flexible value grew more in absolute dollars than any other format over the period US$, Billion PACKAGING VALUE Total sales : $114.5 Billion : $136.8 Billion CAGR: 2.3% Corrugated Flexible Metal Cans Pboard - Fldg Ctns Rgd Plast Botttles Pboard - Otr Glass Others-a a- Includes rigid/misc. plastics, wood crates, packing materials, foams, etc. SAI (FPA7) Source: US Census Bureau data and SAI Analysis 7 4

5 FLEXIBLE PACKAGING END-USE MARKETS The food market, both retail and institutional, was the primary source of increased dollar sales of flexible Institutional Non- 7.6% Flexible Packaging by market Flexible Packaging g by market $19.9 Billion $24.5 Billion Medical Industrial Pharmaceutical Institution Industrial Medical 10.2% al Non- 7.5% Pharmace 8.2% utical 5.5% 9.7% Non- 11.3% Other 5.5% 2.6% CAGR Non- 13.2% Other 2.2% Institutional 15.7% 41.6% Institution al 16.6% 45.3% Source: SAI analysis SAI (FPA7) 8 CHANGES IN FLEXIBLE PACKAGING FORMATS Plastic film and sheet led growth Flexible Packaging g Flexible Packaging g $19.9 Billion $24.5 Billion Unsupported plastic film and sheet 30.9% Plastic 38.1% Converted Al 3.7% Coated and laminated paper & plastics 6.4% Plastics, s, and coated paper 3.1% 26%CAGR 2.6% Uncoated paper and multiwall 10.5% Laminated Al 7.3% Unsupported plastic film and sheet 36.5% Plastic 37.1% Converted Al 2.1% Coated and laminated paper & plastics 6.3% Plastics, s, and coated paper 3.9% Uncoated paper and multiwall Laminated Al 8.4% 5.7% Source: US Census Bureau data and SAI analysis SAI (FPA7) 9 5

6 INSIGHTS INTO FLEXIBLE PACKAGING "PRODUCTS SHIPMENTS" EXAMPLES OF FORMAT GROWTH Improvements in technology enabled film and sheet growth $ million Plastic Film and Sheet CAGR 5.1 % $ millions Plastic Bag CAGR = 2.2% $ million Plastics s and coated paper bag sales 1200 CAGR = 6.2% $ million Aluminum Packaging CAGR = -6.0% Source: US Census Bureau, Annual Survey of Manufactures Products Shipments Value, SAI analysis SAI (FPA7) 10 INSIGHTS INTO RIGID PACKAGING "PRODUCTS SHIPMENTS" EXAMPLES OF FORMAT GROWTH Rigid markets continue growth $ million $ million Corrugated Board CAGR = 1.1% Rigid Plastic Bottles CAGR = 4.5% $ million $ million Metal Can CAGR = 3.0% 5,500 Glass Bottle 5,000 4,500 4,000 3,500 3,000 2,500 2,000 CAGR = 2.4% Source: US Census Bureau, Annual Survey of Manufactures Products Shipments Value, SAI analysis SAI (FPA7) 11 6

7 DYNAMICS IN ALL PACKAGING FORMATS Package format Impact Driver Flexible Rigid plastic bottles Paperboard, cartons, and corrugated Metal cans Glass Low weight, easy disposal, new materials, high intensity graphics Stackability, recyclability, clabilit perceived ed fill speed-a Significant down-gauging, recyclability Materials Rigidity, space utilization, graphics Fewer cases, elimination Thinner walls, recyclability High cost and weight low material costs, inert Weight limiting, fragile a- Cited in interviews for cans and beverage bottles, perception includes cost to retool to achieve higher fill speeds SAI (FPA7) 12 FORECAST METHODOLOGY SAI developed projections based on several factors including: Field interviews with customers and suppliers Trends and drivers Growth opinions Opportunities for flexible U.S. Census Bureau estimates for Congressional Budget Office Inflation projected at 2.15% through 2015 Statistical analysis SAI (FPA7) 13 7

8 Light-weighting/ sustainability TECHNOLOGY DRIVERS AND TRENDS Applicable market RF, IF Trend/Driver Reduces cost, uses less material Requires new dies, processing equipment and materials New films RF, IF, MP Woven and laminated structures, bio films, others to reduce cost, improve barrier properties, sustainability Pouch technology Microwave RF, IF, IN RF Improved materials and equipment More sizes, dispensing/closure/sealing designs, faster fill speeds Convenience, new food products Market codes: RF- s, IF- Institutional s, MP- Medical Pharmaceutical, IN- Industrial, RNF- Non- Manufacturers of packaged goods everywhere face two constant challenges. One is to reduce their environmental footprint to the minimum. The other is to cut costs. Manager, Packaging SAI (FPA7) 14 CONSUMER PACKAGED GOODS MARKET TRENDS AND DRIVERS Applicable market Trend/Driver Right sized RF, IF, MP Proliferation of pack sizes Market timing RF, IF, MP Requires more pack sizes based on pay cycles, more SKUs Wal-Mart leading Sustainability All Broader definition of sustainability Tipping point for purchase Corporate and consumer pressure More regulation Concentrates RF, IF, IN, MP Increased concentration reduces units Private label RF, IF, RNF, MP Value mindset, retailers don t want to give up profits Market codes: RF-, IF- Institutional s, MP- Medical Pharmaceutical, IN- Industrial, RNF- Non- The paycheck cycle we ve talked about before remains extreme..adjusting pack sizes, large pack sizes at the beginning of the month, small pack sizes at the end of the month. Bill Simon, CEO of Wal-Mart U.S. SAI (FPA7) 15 8

9 CONSUMER TRENDS AND MARKET DRIVERS Applicable market Trend/Driver Focus on All Cost consciousness holding price Varied sizes RF, IF, INF Ease of use through single serve, family, re-sealable packages, etc. Natural content RF, IF Consumer trend to seek natural content impacts Private label RF, RNF, MP Continuing value with no significant sacrifice. ers unlikely to give back shelf space Market codes: RF-, IF- Institutional s, MP- Medical Pharmaceutical, IN- Industrial, RNF- Non- SAI (FPA7) 16 FINANCIAL TRENDS AND DRIVERS Applicable market Trend/Driver Raw material costs All Drive to reduce cost Changes in raw materials Capital investment All Reluctance to invest slowed implementation of new technologies Economic recovery All Weak recovery resulted in reluctance to invest in development, expansion and capital Corporate consolidations All Industry continues to consolidate, changing competitive pressures Market codes: RF-, IF- Institutional s, MP- Medical Pharmaceutical, IN- Industrial, RNF- Non- Resin obsoletions, increased raw material costs, and increased energy prices. Our business has made a concerted effort to tighten our control over raw-material supply. Manager, Medical Flexibles Companies will use more flexible if it is cheaper. Cost is a major hurdle since investment in new equipment is necessary! Packaging Manager, Beverage Manufacturer SAI (FPA7) 17 9

10 CHANGES IN FLEXIBLE VERSUS RIGID Increases reflect economic recovery and long-term industry growth Flexible is projected to gain share from rigid 150 US$, Billion PROJECTED PACKAGING SALES Rigid Flexible a a a- Rounded 0 Packaging $136.8 Billion Packaging $161.1Billion Flexible 17.9% Flexible 18.7% Rigid 82.1% Total: 3.3% CAGR Rigid 81.3% SAI (FPA7) 18 FLEXIBLE PACKAGING END-USE MARKET GROWTH 2015 Growing economy will lift all markets particularly non-food markets Flexible Packing $24.5 Billion 2015 Flexible Packaging $30.1 Billion Industrial 7.5% Institutio nal Non- 5.5% Non- 13.2% Medical Pharmace utical 9.7% Other 2.2% Institutio nal 16.6% 45.3% 4.2% CAGR Medical Pharmaceutical 9.1% Industrial 7.4% Institutional Non- 5.5% Non- 13.1% Other 5.8% Institutional 15.5% 43.5% Source: SAI analysis SAI (FPA7) 19 10

11 FLEXIBLE PACKAGING MATERIAL GROWTH Improved technology will benefit film and sheet due to an expanding market and some substitution within flexible Aluminum 2.4% Plastics film and sheet 34.0% Flexible Packaging 2015 Flexible Packaging $24.5 Billion $30.1 Billion Coated and Coated and Aluminum laminated laminated Plastics, pkg pkg s, and materials materials coated 1.7% 6.4% 6.3% paper 3.8% Uncoated paper and multiwall Plastics Plastic 38.0% 8.8% Flexible 6.7% 4.2% CAGR film and sheet 41.2% Plastic 33.8% Plastics, s, and coated paper 4.9% Uncoated paper and multiwall 7.2% Flexible 4.7% SAI (FPA7) 20 Potential application Current Packaging requirement Motivation for switching MARKET PENETRATION OPPORTUNITY RETAIL/INSTITUTIONAL CANS SOUPS, VEGETABLES, OTHER Pouches for condensed, concentrated or other soups, canned vegetables Tin can is the common package all sizes Long shelf life, food safety, good display graphics, shelf display/presentation, shelf space utilization Lower weight, sustainable Easy to open and use Long shelf life Technical/commercial Investment is the key issue requirements Shelf display Stackability Customer acceptance Shelf space and stackability fill speed Other considerations FDA/USDA compliance, sustainability, recyclability, carbon footprint Leading edge products Restaurant and single serve pouches 12 lbs SAI (FPA7) 21 11

12 MARKET PENETRATION OPPORTUNITY RETAIL FOOD GLASS HIGHLY PROCESSED FOODS, FRUITS, OTHER Potential application Current Packaging requirement Motivation for switching Technical/commercial requirements Other considerations Leading edge product Replace glass in all markets Fruits, gravies, sauces, other Glass bottles, jars Product safety/protection FDA/USDA regulations Sustainability/Cost Lighter weight Shrinkage protection Cost to change including investment Recyclability Long shelf life, safety Capital equipment expense Wal-Mart s sustainability index ranks flexible higher than glass Specialties SAI (FPA7) 22 MARKET PENETRATION OPPORTUNITY RETAIL FOOD PLASTIC BOTTLES NON-CARBONATED Potential application Current Packaging requirement Motivation for switching Technical/commercial requirements Other considerations Leading edge product Individual serve packages for juices, energy drinks, others Mixed group of bottles, pouches, boxes Light weight, cost savings, sustainable, resealable Display ready Easy to grab, open and use New cost effective plastic materials Sustainable packages Use of existing pouch equipment is a plus High fill speeds Cost of change Recyclability Use of existing equipment Consumer acceptance Competition from thinner plastic bottles Single serve, toss and go SAI (FPA7) 23 12

13 MARKET PENETRATION OPPORTUNITY RETAIL NON-FOOD E.G.TOYS Potential application Current Packaging requirement Motivation for switching Technical/commercial requirements Other considerations Leading edge product Higher quality for toys and puzzles Cardboard boxes, thermoformed plastics, other High impact graphics Sustainable lighter-weight packages Use that promotes impulse buys Need to keep costs low, improve shipping Better graphics Product specific Better quality/high impact graphics, embossing Tamper proof Consumer acceptance Potential threat in move to cardboard Puzzles and small toys SAI (FPA7) 24 MARKET PENETRATION OPPORTUNITY RETAIL NON-FOOD DETERGENTS Potential application Large packages, single use, and/or dissolvable Current Solids in boxes, liquids id in plastic bottles Some detergents in dissolvable or single use sachets Packaging requirement High intensity graphics (depends on application) Convenience Resealable Motivation for switching Technical/commercial requirements Consumer-oriented marketing Convenience and recyclability Large volume, high speed Investment -- cost to change Other considerations Leading edge product Consumer acceptance Concentrated liquid detergent SAI (FPA7) 25 13

14 MARKET PENETRATION OPPORTUNITY RETAIL NON-FOOD PERSONAL CARE Potential application Current Packaging requirement Motivation for switching Technical/commercial requirements Other considerations Leading edge product Body wash, shampoo, conditioner, etc. Refill pouches Plastic bottles, small volume of refill pouches, sachets High quality, attractive shelf appearance Less material, lower cost, transportation advantages Capital cost required to change to new High volume requires fast fill speed fill speed Recyclability Customer acceptance Liquid soap refill SAI (FPA7) 26 NEW MARKET OPPORTUNITY INDUSTRIAL AGRICULTURAL CHEMICALS Potential application Replacement of 1 to 5 gallon containers Current HDPE, polycarbonate, polypropylene, l other plastic used bottles, buckets and Packaging requirement Motivation for switching Technical/commercial requirements Agricultural chemicals considered hazardous Must contain materials, and survive transportation, accidents, etc. Lightweight, disposability and sustainability Packages must meet UN Packaging s U.S. DOT/49 CFR Meet company and government specifications Other considerations Leading edge product Resealability a plus Under development New Concept SAI (FPA7) 27 14

15 NEW MARKET OPPORTUNITY INSTITUTIONAL FOOD BULK DRIED FRUIT Potential application Current Bulk dried fruit specifically Wholesale food overall Boxes and rigid totes Packaging requirement Suitable for transport of bulk dried fruits and other products Motivation for switching Weight reduction Storage of empties Cost Technical/commercial i l Capital expenditure for packing and handling requirements equipment Cost to change Other considerations Leading edge product Customer acceptance Wholesaler request New Concept SAI (FPA7) 28 KEY FINDINGS FOR FLEXIBLE PACKAGING Strengths Low cost Light weight New barrier and physical properties p Net sustainable Graphics Easy to store and use Weaknesses High cost of switching Fill speed Stackability Shelf density Not easily recyclable New to consumer Opportunities Plastic bottle, tin cans and glass replacement Potential low cost polyethylene feedstock Use of new materials and biobased materials Continued penetration in the food market Threats Competition from lightweight cans and plastic bottles Energy and material price spikes Consumer acceptance Perceived environmental/safety SAI (FPA7) 29 15