- November 01, 2002, Volker Fritz, Lemo Maschinenbau GmbH
Faced with competition from Asia and pressure from packagers to lower costs, bagmakers in Europe are finding ways to trim expenses and reduce downtime.
European flexible packaging producers see big changes coming. One reason is the steady development of a still comparatively young business and technology. Further driving factors are the development of new technologies for packaging/preserving food and the corresponding development of new packaging materials with improved properties.
Generally, flexible packaging is a growing business, growing quicker than the general European economy, as many traditional packaging solutions change over to flexible materials. This means a very high percentage of new packaging solutions will use plastic films and film-compound materials.
The European population development pyramid signals another big influence on packaging. The number of elderly people is growing quickly within an overall stagnating population. Young people live in one-person households at an increasing rate. Both trends lead to more and smaller consumer packs out of the same basic volume of goods to package.
Flexible packaging producers — a few years ago mainly medium-sized and often family-owned companies — are consolidating quickly into a few very big pan-European and often internationally active converting groups, which gain an ever increasing share of the cake from the remaining rest.
Growing capabilities for packaging production in Asia and other areas with low workforce costs make a further impact on flexible packaging production in Europe.
But what does all this mean for plastic film bagmaking?
First of all, when looking at this segment of flexible packaging production, one must differentiate between primary packaging (bread bags, diaper bags, pouches, and other bags for industrial packaging) and secondary or service packaging (carrier bags and household, garbage, and garden bags and sacks, etc.). Both areas of prefabricated empty packaging are close together from the converting viewpoint, but the bag buyers' main goals nevertheless are remarkably different for each of the application groups.
The primary part of the business is going directly parallel to innovative new packaging processes and new material solutions. Material demands are high in many aspects, not only with regard to material strength-to-price ratio.
High bag quality and quality consistency over the whole supply volume of an order have a premium position, as no one in the packaging and sales line wants to have filling process interruptions or returns of ready packs from outlet stores or from consumers because of failing packaging bags. Therefore, packaging companies want to have reliable bag suppliers with assured quality, capable of following when they change bag designs. The supply partners mostly have highly integrated converting plants to meet the specs, including premium quality film production and flexo printing. Naturally, bag prices are very important, but not the only reason for buyers' decisions.
This field of activity loses some fractions to form/fill/seal (F/F/S) lines by a slow but steady drain. Once a filling and packaging concept has been run successfully on F/F/S instead of by filling into prefabricated plastic bags, the packaging process will be transformed to F/F/S and stay there.
Bags, sacks, and mainly carriers for secondary use are not bound directly to product consumption. They are sold as packs or on-the-roll to stores of all levels, to consumers for household use, and to communities or private organizations for waste collection. Their overall quality level, including print, shows a wide variation. The high quality, high advertising appeal of boutique-style bags and carriers with central impression flexo printing can be seen as well as the simplest one- or two-color stack-type prints on recycled polyethylene (PE) film. Low-priced, mass consumption bags, sacks, and carriers are extremely price sensitive. Film developments for this use focus on increased strength, aimed at film thickness and thus cost reduction, as material costs today add the main part to production costs.
The technical and cost advantages of plastic carriers and sacks over flexible paper solutions for the same use have led to a drastic change to poly bags in the last two decades with a stabilized situation today, where paper bags and carriers have their assured field of use in Europe for specific purposes as, for example, the classic one-ply paper gusseted bag for bakery products. The capability of paper to let the humidity breathe off helps to keep breakfast rolls fresh or freshly baked bread crisp.
In Europe, there were several movements in the past — mostly for environmental reasons — to ban or reduce plastic bag consumption, but so far European homemakers have decided to use what they think is best for their needs. And this is the plastic bag, sack, and carrier in all its designs.
It seems amazing that officially virtually no one in the branch talks about the multiple steps of bag re-use in a family before it goes its last way to save the waste bucket from humidification and dirt. Homemakers know how unpleasant it is to clean dirty kitchen trash buckets. Only the use of a plastic bag or carrier is reliable in avoiding this job. So, whatever bag is available at home will be used finally as a one-time liner for trash, as long as size allows. Furthermore, as many European countries have installed special pre-selected waste collecting systems, the homemaker has to fill more than just one bin with different waste and packaging material for recycling.
We already see a large impact by bag and carrier imports to Europe from low salary areas. Asia is not the only one but one of the most active regions of production.
European converters take action to keep their costs low by slimming down production and by changing their product portfolio to get relief.
As with all young industries, there was space for nearly everybody at the beginning to make money in this new area. Later on, when the boom time of large expansion was over, the weaker players could no longer withstand and gave up or sold to competitors. This still happens today with converters in all areas in Europe and will continue. The trend to form larger groups also results in cost advantages when buying raw materials.
Some converters of mass production commodities are defending against attacks from low salary areas by reducing labor costs for their production, e.g., by investing in automatic handling and packaging systems, which fill the ready packs of prefabricated bags directly from the delivery of the bagmaker into shipping cartons without manual intervention.
Others keep open their supply lines to customers but produce or buy an increasing part of their commodity business in cheaper areas instead of making them at home. This will even increase.
A third activity line of converters is increasing their engagements in “specialty bags or carriers” to create niche areas where the products gain better profits and where competition is not this high. This deals very much with the consumer convenience of bags and carriers of all styles.
Typical examples are reclosable freezer bags and the thermo-protective, clip-reclosable carry-out bags for deep-frozen food. Consumers are prepared to pay good money for such bags as they get added value by function and/or convenience, compared with a simple standard product of that kind.
As “convenience” is still a rarity in Europe compared with a longer tradition in North America, there are many options and possibilities available, offering good potential for the bagmaking industry.
Another interesting field, well known since the introduction of PE film carriers, is the production of high-class advertising carriers for brand marketing. Cosmetics, perfumes, textiles, cigarettes, sweets, shoes, etc., are advertised via high-quality print pictures on the carriers.
In Germany high-class carriers with excellent pictures are the No. 1 advertising media because of the city shopping custom. On average, more than 70 pairs of eyes see the message on the surface of a carrier during its trip home and during secondary use afterwards. This is by far the best brand marketing for the invested cost of some euro cents per carrier.
The field of higher quality advertising bags remains attractive for European converters, even if competition is getting stronger.
Also, here production costs for bagmaking can be reduced by engaging automatic in-line handling and packaging systems and by exchanging older machinery for the latest bagmaking lines.
Another very important aspect is the necessary changeover time for the bagmaker and, if so, for the in-line packaging system. All new bagmakers have improved abilities for quick adjustments at order changes, but this feature will find much more attention in the future, as the average order size is reducing further. Thus, a greater share of the nominal production time of a bagmaking line is lost to machine changeovers.
The investment of a new bagmaking system may pay off just by gaining more effective production hours or more smaller-order runs per day than with the older model. A converter's commercial success may depend on how far it is able to execute small orders profitably.
Generally, European poly bagmakers anticipate higher consumption in 2003, compared with 2002, in line with a general increase in European economic growth. But for now many of the potential consumers hold onto their money and wait.
Volker H.A. Fritz is marketing manager of Lemo Maschinenbau GmbH, Niederkassel-Mondorf, Germany. With a background in mechanical and process engineering, Fritz has more than 15 years of experience in machine building for the flexible packaging industry, especially in the field of film converting of all kinds of bags.