Position: Remaining steady throughout economic turmoil, the packaging machinery market's defining traits are its maturity and stability. But for packaging trends and technologies, change is the constant.
The packaging machinery market continues to be in fighting form—remaining healthy throughout the recession and setting trends as always. Among the hottest packaging developments are packaging machinery that delivers more speed and capacity, and packaging materials that adapt to the environment to protect products. In addition, packaging lines are getting less integrated and more flexible, accommodating the growing need for smaller batch sizes. In short, it's business as usual for the packaging industry, which owes its resiliency to the fact that its products are used for virtually everything. "One of the fun things about packaging is that it changes every year," says Tee Downes, a professor at the Michigan State University School of Packaging. "There are always new technologies and trends."
The packaging industry's health is one constant. The global market is strong, says Ernst & Young, because of its prominent role in the food chain. (Most packaging, 70%, is for food and drink). Meanwhile in the U.S., packaging personnel reported that the effects of the mid-2001-2002 economic downturn were only moderate in a June 2002 Packaging World survey. Although June was a time when many predicted an impending recovery, the results are still telling because they indicate the strength of packaging operations in trying times. For example, 78% said their company kept packaging department staff sizes unchanged or added more people, 73% said they had as many or more packaging projects, and 73% said their company showed no change or an increase in packaging purchases. In other words, the worst fears of many in the business were not confirmed.
The country's corrugated box industry, in particular, has amazed many with its resiliency. The past few years have been brutal for U.S. corrugated container manufacturers—box consumption has been plunging, the export business has fallen apart, and operating rates have been cut. "If you looked at the fundamentals for this business, financially it ought to be a total fiasco right now," says Mark Wilde, managing director at Deutsche Bank Securities. "The industry has held up remarkably well despite very tough fundamentals." Wilde says that consolidation over the last few years and the removal of excess capacity are some reasons for the industry's current stability.
The global packaging machinery market is remaining steady as well—reaching an estimated $22.4 billion in 2000 and making up roughly 5% of the total $417 billion global packaging market. The machinery market continues to be generally stable despite the fact that demand levels in the U.S have fluctuated wildly. The years 1995, 1997 and 1999 showed significant demand growth (11%, 8.1% and 7.5% respectively) while even-numbered years 1996, 1998, and 2000 saw small increases of 1.1%, 2% and 2.2%.
Packaging machinery with electronic servo control systems—instead of mechanical ones—are enjoying rising demand. In fact, in a recent Packaging World survey, 80% of machine builders reported utilizing servo technology in their machines. While servo drives and motors are more expensive than their AC counterparts, advocates say these machines deliver greater throughput, increased flexibility, more speed and better overall performance. This technology, however, will have to overcome its reputation as a higher cost alternative to enjoy more widespread use in packaging machinery.
Packaging machines are also expected to become easier to reconfigure—allowing changeover in an instant. "They'll be modular and reconfigurable throughout their life to adapt to the changing requirements," said Ian Haynes, a technology specialist, during the recent conference, The Future of Packaging. "The trend towards smaller batch sizes must be matched by reducing changeover times ultimately to zero. These 'digital packaging' machines will reconfigure themselves on the fly." This machinery innovation addresses the growing need for flexibility in packaging lines and equipment. In fact, says Haynes, high-speed integrated lines are on their way out, making way for shorter production lines, which are more flexible and better suited for smaller batch sizes.
Major innovations can be seen in packaging materials as well. Although paper and board continue to be the most used packaging materials in the world—responsible for about a third of the global market—watch out for hot up-and-comers like high-visibility and active packaging. High-visibility packaging taps into the bigger trend of "the more eye-catching, the better." Carded blister packs and clamshell packaging are some examples of this eye-grabbing type of packaging, which enhances the perceived value of products. Demand is expected to increase nearly 6% per year to $7.8 billion in 2006. By that year, over 23.5 billion units will be using this type of packaging, says a study conducted by The Freedonia Group, an industrial market research firm.
Active packaging, meanwhile, refers to materials that can detect and respond to environmental changes. These materials interact with the product they contain and modify their own properties to protect the product and lengthen its shelf life. Active packaging will enjoy a 19% compound annual growth rate in the country in the next five years, says a recent study by food technologist and packaging great Dr. Aaron Brody. According to the report, this technology—which was used in 2.9 billion packages in the U.S. in 2001—will be utilized in 7 billion units by 2006.
In summary, the forecast is anything but gloomy for the packaging industry. In fact, the global packaging market has grown at a slightly faster rate per year (3.95% compared to 3.6%) than the world's GDP, says Ernst & Young. In addition, new technologies are bringing improvements to packaging equipment and materials.
