The future of rigid packaging (or Beam me up, Scotty!)

By: 
May 19, 2010


Did you get caught out when the recession hit, or were you prepared for the downturn? In either case, you can fortify your operations and proceed with a plan.

Where is the rigid packaging market headed? There are studies that show the packaging market is set to increase at this or that percentage over the next few years, and specifically that rigid plastic packaging is projected to grow slightly more or less. The exact numbers are subject to guesstimates on the overall global economy, resin prices, currency exchange rates, environmental pressures, and consumer trends.



CM Packaging’s CEO Mark Faber: “We were actually green long before it was cool.”



Bob King, CEO, says Eco-Products is targeting 40% growth in 2010 by converting existing markets to its line of environmentally friendly food service disposable products.



Diversification within its niche is key for Alpha Packaging, says CEO Dave Spence.

Regardless of the exact numbers, rigid plastic packaging will continue to take space from glass and paperboard, and from flexible packaging in some cases. Flexible will replace rigid in other areas.

So what does the future hold? It is what we make it, and I talked with some of the people who are doing just that in the rigid packaging field.

To set the stage, let’s look at the past 15 months or so for the rigid packaging industry. Picture an old Star Trek episode. A few of the federation starships are zipping around the galaxy, when suddenly they are attacked by unseen forces (Romulans). There are a lot of explosions, alarms, panic, and people running around trying to figure out how to do their jobs in the face of impending doom.

After the commercial, we discover that, fortunately, most of the spaceships survived and are slowly assessing their damage, either drifting along or moving ahead on impulse power. But one ship and its crew seem to be different from the others. They have escaped serious damage, recovered quickly, and are planning to go on the offensive. Of course, loyal viewers recognize the Starship Enterprise with its fearless crew. What is it in the rigid packaging world that will allow some companies to be leaders while others struggle to maintain market share?

Deflector shields

One of the keys to sustainable growth is being able to survive the downturns without a big decrease in revenue. That means having some diversification in the product line, product mix, or end user markets. For example, companies with a significant healthcare or medical exposure performed relatively better during the past recession. Alpha Packaging (St. Louis, MO) is a good illustration. Alpha is a $125 million manufacturer of stock and custom PET, HDPE, and PLA bottles and jars for the pharmaceutical, nutritional, personal care, and niche food and beverage markets. It maintained its record 2008 sales levels throughout the downturn, ended 2009 strong, and is poised for continued growth at 10% per year or better.

Dave Spence, president and CEO of Alpha, attributes its continued success in part to being diversified within its niche. “We know our customers very well, and we ask them what they need. That might be a new product, or perhaps a different size within an existing product line. We are also adding capacity where it makes sense. Our plant in Roosendaal, Netherlands, will open in May 2010 and will be our seventh manufacturing facility.”

Alpha has grown through selective acquisitions, four in all, although Spence notes that as a percentage of sales, it has actually had more organic growth. Today, Alpha produces about 2.5 million bottles per day and employs 550 people, shipping to more than 30 countries and to every state. “I like to tell people it took us 25 years to become an overnight sensation,” Spence laughs.

Photon torpedoes (made of 50% recycled photons)
Boulder, CO-based Eco-Products is targeting 40% growth in 2010 by converting existing markets to its line of environmentally friendly food service disposable products. While the food service disposables market is expected to see up to a 3% gain this year and next, the green segment of that market is projected to grow 17%-20%. Bob King, CEO, says that legislation is currently providing a tailwind as well, as America’s desire to be a better steward of the environment raises awareness of such products.

“There is still a lot of misinformation out there on green products,” says King, “so even though we are still a small company, when we see the opportunity to provide thought leadership, we try to do that.” King anticipates adding sales and marketing staff in the coming year to support Eco-Products’ growth. When evaluating potential new employees, the company wants to ensure that everyone shares the company’s values. “We like our people to be environmental patriots,” says King.

CM Packaging, a Lake Zurich, IL company that provides packaging for the bakery, produce, deli, supermarket, pizza, restaurant, packer, processor, distribution, and food service industries, is also responding to increasing customer demand for greener products. CM’s president and CEO Mark Faber says that the company plans to introduce a line of produce and bakery clamshells made from recycled water bottles in the middle of this year. It also makes a line of products from PLA.

“We were actually green long before it was cool,” notes Faber. “Our company roots go back to aluminum foil, which is fully recyclable forever. I think we will get to that same level of environmental stewardship with plastic, but it takes a conscious effort.”

Warp drive
Innovation is the engine that propels the market leaders faster and higher than the industry as a whole. Constar International (Philadelphia, PA) is one of the world’s major suppliers of PET containers, going head-to-head with larger competitors. It is the only major competitor that develops its own barrier material technology internally, however, which has led to a family of proprietary barrier technologies that protect sensitive food and beverage products from degradation induced by oxygen ingress. They extend the shelf life of products such as beer, juices, teas, enhanced waters, wine, flavored alcoholic beverages, ketchup, and other food products, according to Alex Fioravanti, VP of material sales for Constar.

“Food companies will increasingly be switching from glass containers to PET alternatives in the next one to two years, particularly for foods like pasta sauces, salsa, jams, and jellies,” predicts Fioravanti. “Thanks to our new DiamondClear oxygen scavenging technology, we can showcase the package and the product much more clearly than before in a PET container that is recycled and recyclable, has a lighter weight, and helps to reduce carbon footprint and transportation costs.”

Fioravanti is currently working to extend the DiamondClear value proposition to the thermoforming side of the house, where the innovations offered by this technology are also apparent. “We are looking at food applications where shelf life is important, such as packaged and fresh meat, puddings, and other segments where barrier is used today. These are areas where we can offer more environmentally friendly DiamondClear PET cups and trays that are also much clearer than other alternatives.” Working with brand owners and converters, Constar is hopeful that new markets will continue to open up.

To seek out strange new worlds
Every great starship has a strong leadership team that sets the course and enables the crew to do its job. What these leaders have in common is a vision for the future, and the ability to share that vision throughout the organization. At Alpha, that vision means aggressively reinvesting in equipment and technology. “We are constantly looking forward,” says Spence, “always asking ourselves how we can get faster and better.”

Faber agrees, and is looking to add to CM Packaging’s existing product development and marketing staff in the coming year to support his aggressive growth plans. “Our goal is to continue to develop excellent new products that meet the needs of the consumer,” says Faber.

So if you want to know how to survive economic downturns and resume double-digit growth in the rigid packaging business, we’ve laid out the easy recipe. First, diversify your products and/or markets, then be innovative, recognize that sustainability is a very real priority, and have great team leadership. On behalf of Captain Kirk, Mr. Spock, and the rest of the crew, let us boldly go forward; warp factor three . . .

Survey results
When asked what types of staff they planned to add in 2010, respondents said:
Engineering    63%
Sales/marketing    53%
Product development    42%
Manufacturing/QA    32%
Purchasing    11%
Finance/accounting    5%
Human resources    5%

When asked what is the most important factor in increasing their companies’ profitability in the next 18-24 months, respondents said:
Cost reductions    31%
Innovation    26%
Market diversification    24%
Market share    19%

Paul Sturgeon is business manager with KLA Industries in Cincinnati, OH, an executive search firm specializing in the plastics and packaging industries.


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