Plastic packaging projected for strong global growth, even in mature markets

30 April 2012 00:00  [Source: ICB]

Driven primarily by food-related applications, plastic packaging is growing globally. It is especially booming in developing regions

Packaging demand is expected to take off as the growth of the middle class in developing nations continues, with more consumers around the world seeking out fresher foods. And while packaging is a mature market in North America, it will continue to grow there, especially with sustainability as a strong driver.

Public demand is a key driver when it comes to food packaging Copyright: RexFeatures

"The desire for sustainability is what is driving [the market] in North America," said Kevin McQuade, president, Americas, for Germany-based styrenics supplier Styrolution. "Demographics will favor growth in the region," he added.

McQuade spoke on the sidelines of the National Plastics Exposition (NPE), where the firm had unveiled its latest product: a high-impact polystyrene (HIPS) called Styrolution PS 6220, created for its customers in the food-service-packaging industry. The company says PS 6220 can be blended with general-purpose polystyrene (GPPS) to customize toughness and stiffness properties based on application. The four-day NPE was sponsored by the Society of the Plastics Industry and is held every three years. NPE 2012 was held this April in Orlando, Florida, US.

CONSUMER DEMANDS
A major component of sustainability is consumers' "need to know it can be recycled," noted McQuade. They also want to know they are using less packaging. "They say they like your material, but [also] want to use less of it," he said. Using the example of disposable cups, McQuade pointed out that consumers want producers to use less plastic, so "lightweight materials are being made that have the same properties [as older polymers]. Sustainability is maintained via innovation."

Many consumers will often describe a product as over-packaged. According to a survey conducted in 20 countries by UK-based research firm Datamonitor, around 60% of consumers polled believed that grocery products have too much packaging, even if the use of packaging is warranted because of product safety, freshness or regulatory purposes.

On the other hand, consumers in Saudi Arabia, the United Arab Emirates and India are more likely to agree that reduced packaging in grocery products may compromise product quality.

RENEWABLES
Fickle consumers are but one hurdle packagers face. "Sometimes the technology you're working on isn't ready yet [Then] we go back and find and 'reshape' previous packaging technologies," said Perfecto Perales, senior director packaging research for global food company Kraft Foods, during a presentation at NPE 2012. Kraft Foods had $49bn (€37.5bn) in revenues in 2011, making it the top food company in North America, and second globally. Kraft manufacturers some of its own packaging, such as for its Oscar Mayer brand of meats, but usually farms out most of its packaging needs.

Public demand for sustainability, as well as recyclable materials, will drive acceptance of biopolymers. "Whether it is a bioplastic or not won't be a question," noted Keith Edwards, BASF business manager, biodegradable plastics in North America. Edwards was speaking on the sidelines of NPE 2012. "The idea that bioplastics is a separate part of the polymer world is going away," he added.

A new market driver will be renewability. Consumers say "make everything renewable," and will be considering "the best way that the product has a life after use," said Edwards.

"The carbonated soft-drink market wants more recycled material," noted Jon McNaull, vice president of the resin business unit for US-based polyester and polyethylene terephthalate (PET) producer DAK Americas, on the sidelines of NPE 2012.

But food items will not be an easy area in which to bring in recycling. A potato chip bag, for example, means around seven to nine levels of polymers to keep out oxygen and moisture that could spoil the food. Edwards says those multiple levels are "too many chemistries, [and] it can't be recycled." This has driven research into improving barrier technologies in bioplastics where something like a chip bag can be made compostable, he added.

BASF is further testing the applicability of its co-polyester Ecoflex, which has already been used in some food bagging applications as well as plastic cups and cutlery.

Regarding renewables, Kraft believes that growth is "regional, not global," influenced by "many different laws and regulations," said Perales. "Customers love renewables, but don't want to pay for them."

Perales said the tipping point will be "when oil is $200/bbl. [Then] people will want renewables. But at $60/bbl, no."

GROWTH TO GO
Packaging is "driven by trends, consumer insights and technology enablers," said Perales.

"It's not just the first time a consumer sees your package, it's all the times after that," he said. "Many of our products have no shape without a package Coca-Cola's design has stood the test of time."

In the global plastics packaging industry, growth was roughly 7.2%/year between 2001 and 2010, notes US-based market research firm ReportsnReports.

For China, the market scale of the plastic packaging industry was around $66.4bn in 2011, accounting for 31.2% of the total worldwide. Currently, the supply-demand situation is balanced, says the consultancy.

"Developing countries have a high potential [but only] as 'quick service' food providers establish themselves" in these areas, noted Styrolution's McQuade.

In 2011, flexible packaging in the US was a $25.54bn industry, and was the second-largest packaging segment, garnering 19% of the $134bn US packaging market, according to the US-based Flexible Packaging Association.

Exports account for about 6% of industry shipments, and the largest market for flexible packaging is food - both retail and institutional - accounting for about 57% of shipments (see pie chart).

The global consumption of PET packaging will grow to almost 19.1m tonnes by 2017 with a value of $57bn, projects UK-based consultancy Pira International.

Driven mainly by increasing demand in emerging and transitional economies, the PET packaging market will grow 5.2%/year with a focus on Asia Pacific, Latin America, Central and Eastern Europe and the Middle East and Africa. Additionally, barrier PET bottles and jars for juices, milk, teas, beer, wine and food, are forecast to register strong growth over the period 2012-2017.

"Globally, the PET packaging market is forecast to grow by 6% annually," said John Van Hulle, president of global color, additives and inks for US-based specialized polymer materials producer PolyOne, during the ­company's third-quarter conference call in November 2011.

"In Asia and Eastern Europe, PET [packaging] growth ranges from 9-14%/year."

The developing countries will show higher growth for PET packaging as a result of growing real incomes and the replacement of traditional pack formats by PET bottles, said Pira. Asia Pacific overtook both North America and Western Europe during the period 2007-12 to become the largest regional market for PET packaging.

Asia Pacific accounts for a projected 29.4% of world PET packaging consumption in 2012, followed by North America with 24.1% and Western Europe with 19.7%, according to Pira. "Additional volumes of resin production will spur the growth of the packaging industry and will encourage markets to migrate from less efficient materials to PET as the preferred clear rigid polymer," said Sheikh Saad Suhail Bahwan, chairman of Oman-based PET producer OCTAL, at a press conference in October 2011.

Global consultancy Frost & Sullivan projects that flexible packaging in the countries comprising the Gulf Cooperation Council (GCC) is poised to grow from 273,200 tonnes in 2009 to 480,950 tonnes in 2016 due to increased preference for processed foods.

For example, Saudi Arabia's food industry is growing at 18-20%/year, with pre-packaged food constituting 50% of the industry, says Frost & Sullivan.

Meanwhile, world demand for food containers is forecast to increase 3.9%/year to $124bn in 2013, with global demand for food service disposables is projected to grow by 5.4% per year to $53.3bn in 2015, projects US-based consultancy The Freedonia Group. The US, which accounted for 37% of global foodservice disposables sales in 2010, will remain the largest national market in the world, but China will surpass Japan to become the second largest market by 2015, Freedonia projects.

Generally, foodservice disposables can be made from polystyrene (PS), polypropylene (PP) and other plastics.

GREEN PACKAGING
As for green packaging - which includes recycled material, reusable and degradable packaging - Freedonia projects global demand for will rise by 5.7%/year to reach $212bn by 2015.

Recycled content packaging will remain the largest segment but will grow the slowest of the three categories of materials because of the maturity of metal cans and glass containers. Reusable and degradable packaging will exhibit above-average demand growth, Freedonia says.

The US accounted for 23% of global sales of green packaging in 2010 and is the largest national green packaging market in the world, according to Freedonia.

By: Ivan Lerner
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