The Future of High Barrier Flexible Packaging in North America David Mosgrove, Constantia Flexibles October 25, 2017
Constantia Flexibles in a nutshell #2 in Europe #4 globally 55 production sites in 24 countries Vienna Headquarters in Austria, Vienna 3 business segments FOOD, PHARMA, LABELS ~ 10,000 employees Shareholders Wendel Group (~61%) AREPO Foundation (~27%) Maxburg Capital Partners (~11%) 4,000 requests for sustainability/year 50% plastic-based 7% paper-based 43% aluminum-based 2
Global production network: 55 plants in 24 countries 12 7 10 Production Site Sales Office 3 5 9 1 8 3
Strong market position in attractive segments Global #1 Confectionery foil Die-cut lidding Alu-container systems Global #2 Reel-fed lidding Global #2 Blister lidding foils Coldform foils Global #1 Beer labels In-mould labels ~ 56% of sales in attractive markets, where Constantia commands a #1 or #2 position 4
Integrated Production Adhesive lamination Pre-press and cylinder engraving process Blow film extrusion Cast extrusion Printing process and varnishing process of metallized paper Slitting process/ finishing Rolling Raw material PET/PE/AL/Paper Extrusion process Ink kitchen Finishgood product (reels or pieces) 5
Sales by region and division 2016 Labels Middle East/Africa Sales by region Asia 6% 9% Sales by division Pharma 14% America (USA/Mexico) 24% 61% Europe Labels 29% 57% Food Company Presentation 6
Foil Flexibles at Constantia Teich, Austria Production Steps Input Materials Processing of Semi-finished Goods Printing Finishing Aluminium foil rolling Capabilities Lacquering Coating Lamination Rotogravure printing UV-Flexo printing Die cutting Embossing Deep drawing Production steps Flagship production facility within the Constantia Group
Consumer Packaging Trends Brand protection Product piracy is increasingly becoming a serious threat to companies in the consumer goods industry Brands need to be more and more protected to preserve consumers physical integrity Responsibility In order to enlarge the security for consumers a higher barrier resistance is necessary to ensure lower migration and to keep the product safe and increase shelf life. Sustainability Across the globe, and especially in developed nations, we are becoming increasingly aware of the need to protect the environment and make the best use of resources. As the world population grows, we strive to throw away as little food as possible and to allow as little food as possible to spoil. Urbanization The expansion of urban ways of life is synonymous with the development of convenience products and packaged food items Changing demographics Aging users need opening aids, easier access to pharmaceuticals, individual dosages and prescriptions. The easy opening features also apply to food products and beverages. An increasing number of single households call for more single helping products and also reclosability features to keep the food fresh over a longer period of time. Globalization Product branding and packaging decisions are very important decisions as in the present age of globalization, a large number of brands of various products are available to the consumer to choose and select from. 8
Total Flexible Packaging Market: Size & Growth by Region Flex. packaging demand worldwide reached c.a. 70 bn end of 2016 Global flex. Packaging market CAGR (2016-2020) Oceani a India 9% ROW 1% 14% 1% 8% 13% 18% 16% Europe India China Other Emerging Markets Mid. East & Africa North America 10% 70 bn South America Chin a 12% 9% 5% 6% 30% 30% North America Europe Oceania Japan 8% 5% 5% Japan 0% 2% 4% 6% 8% 10% 12% Mid. East & Africa South America Inner ring: 2016 Outer ring: 2020 Emerging Markets account for > 60% of global flex. pack. Growth till 2020; both India and China account for 40% of this growth in question (absolute value) 9
Total Flexible Packaging Market: Breakdown by Substrate & Print Technology Split by substrate Breakdown by printing technology Flexo 7% Paper 29% Film 82% 70 bn 11% Foil Roto 70 bn 1% 5% UV Flexo Other 65% 10
High barrier Materials North America: Market trends Rigid formats are still the preferred format for beverages today; however there is a scope for flexibles substitution due to good portability. Transparent pouches are already in force for singleserve alcoholic drinks. Cheese under convenience formats has grown rapidly in recent years, particularly in stand up pouches with reclose features. Protection against oxygen remains critical for such products; Evoh-based solutions remain the favorite ones for this product type. Retort pouches are popular for soups, ready meals and processed rice. A mix of aluminum and transparent laminates are being used. Single-serve condiments are mainly using metallized PET laminates, as well as some Pvdc coated PET. A limited amount of Si Ox laminated films is used for snacks; triplex metallized PET laminates are steadily growing for premium potato snacks and popcorn. Pvdc films are in force for pretzels, nuts and beef jerky. With dehydrated food sachets, side dishes, soups are all very well established products. There has been little or no pressure to replace aluminum foil and this remains the barrier layer of choice. 11
Future of Foil in Flexible Packaging in Regions North America High growth in niches, e.g. lids Share of foil: ca. 10-12% Europe Well established demand Slight growth at ca. 1-2% p.a Share of foil: ca. 15% Emerging Markets Market development mainly in film High growth in niches from a lower base: 10-30% p.a. Share of foil: 8-10%
Why do we believe in growth of foil applications Barrier properties Trend towards excellent barrier properties & extended shelf-life Foil is still the most effective barrier material in flexible packaging (light, water, oxygene) Processability Excellent process-ability both in converting and filling Premium Perception End-consumers perceive foil as packaging for premium products (e.g. confectionery) Competitive cost / benefit ratio Foil is highly competitive in typical foil applications (e.g. lidding) Leverage of economies of scale in pre-material production Foil in flexible packaging will continue to grow in the foreseeable future
Sustainability & Food Safety Down-gauging Strong possibilities to down-gauge foil specifications, particularly in combination with coextrusion coating Replace solvent-based lacquers Replacement of solvent-based heat-seal lacquers with polymer based coatings Recycling High recyclability, particularly for unsupported / non-laminated foil products Minimum Migration With increasing standards for food & product safety foil has the best properties for food contact There are a lot of possibilities to meet sustainability demands in foil
Future of Foil in Flexible Packaging markets Food Continued and slightly growing demand for premium brands (confectionery, cream cheese, pet food, ) Continued demand for foil based die-cut lids in the dairy industry in Europe Strong growth potential for foil based lids in coffee (Europe & North America) and dairy (North America) Pharma Continued demand for blister foil and cold-form blisters in Europe and Emerging markets Continued demand of foil as barrier in sachets Labels Continued demand for foil for premium brands
Conclusions Growth in High Barrier Flexible Packaging should continue at a healthy rate in North America. Films and laminates will be the dominant formats. Foil will continue to have a niche presence, also with attractive growth.