Demographic Demands

Published: March 01, 2008, By By Esther Palevsky, The Freedonia Group

Demand for converted flexible packaging is forecast to expand 4.2%/yr to $16.5 billion in 2011 (see Figure 1). Growth will be attributable to cost, performance, and source reduction advantages over most rigid packaging. Moreover, heightened barrier requirements in many markets will drive increased demand for value-added materials to enhance shelf life or product protection.

Developments in breathable and self-venting films and resealable features also will fuel growth. Additionally, demographic changes such as greater numbers of single-person households and older consumers will support demand for more convenient prepared foods and single-serving portions. This trend will boost material consumption as smaller packages tend to use more packaging relative to their size.

Real growth will continue to be healthy. However, value gains will decelerate from the 1996-2001 pace due to more moderate raw material price increases.

More than 400 firms are involved in the converted flexible packaging industry in the US. These range from integrated producers and broad line packaging concerns to companies that concentrate on a single market.

Pouches, Bags & Overwraps

Among major converted flexible packaging types, pouches will log the fastest advances. Demand is expected to grow 5.9%/yr to $6.9 billion in 2011.

Solid prospects will be driven by continued expansion of the stand-up pouch segment and healthy gains for flat pouches in certain markets. In addition, process enhancements such as faster line speeds and the increasing incorporation of such value-added features and properties as spouts, zippers, retortability, and microwavability will boost prospects for pouches further.

Bags will post more moderate growth based on the maturity of many applications along with loss of share for paper bags to plastic bags and sacks as well as pouches. Food applications will outpace the bag average, benefiting from ongoing widespread usage for produce and meat products.

Overall gains for other converted flexible packaging, primarily wrap products, will be nearly in line with the industry average. Solid outlooks for specialty overwraps for meat products and ream wrap for office and consumer copy paper will be key stimulants.

Market Applications

Both food and nonfood uses will expand in line with the average pace. Other factors that will bode well for converted flexible packaging include efforts to reduce packaging waste via the use of thinner-gauged materials and the growing influence of large retailers in the development of more efficient packaging among their vendors.

Food markets, which accounted for 69% of total converted flexible packaging demand in 2006, are projected to increase 4.5%/yr to $11.6 billion in 2011. Gains will outpace the overall market slightly as a result of increased demand for convenience-oriented or other processed food items, which often use more costly higher-barrier packaging materials for extended shelf life.

Heightened demand for food in smaller package sizes or larger multipacks containing smaller units will bode well for converted flexible packaging demand. However, competition from single-serving and other novel rigid containers in markets such as snacks, candy, and dairy products will restrain growth to some degree.

Meat and related products, baked goods, grain mill products, and snack foods were the largest food markets for converted flexible packaging in 2006, accounting for a combined 50% of food packaging demand. Among major food markets, fastest advances are anticipated in produce, meat, and related products, beverage, and frozen food applications.

Growth in meat and produce markets will result from rising demand for convenience-oriented products that require value-added packaging materials for extended shelf life. Above-average prospects in the frozen food market will be fueled by product and packaging innovations enhancing the quality and convenience of frozen foods. Growth in beverage applications will be driven by continued use of pouches as a packaging option for juices and fruit drinks, along with rapid growth for pouches and bag-in-box packaging with other beverages.

Medical & More

Nonfood markets are forecast to climb 3.5%/yr to $4.9 billion in 2011, aided by cost, source reduction, barrier protection, product visibility, theft protection, and product unitization advantages. The pharmaceutical and medical markets will expand more rapidly based on heightened barrier requirements, cost and convenience advantages, and adaptability to growing unit-of-use requirements. Moderating advances will be the maturity of large markets, such as paper and textiles, and the shift to offshore production in many consumer product markets.

Pharmaceuticals accounted for 16% of nonfood converted flexible packaging demand in 2006. Continued shipment growth and the compatibility of converted flexible packaging such as pouches and strip packs with unit dose delivery will stimulate favorable advances for converted flexible packaging. Film will remain the dominant material based on advantages of strength, transparency, and good barrier properties.

Paper and textile products accounted for 15% of all converted flexible nonfood packaging applications in 2006. Most of these products are considered necessities and exhibit inelastic demand patterns, tending to avoid severe downturns in recessionary times. Consumption is based largely on population growth, demographic changes, and consumer buying and pricing trends.

Materials Get Competitive

Consumption of primary converted flexible packaging materials is projected to advance 1.6%/yr to 8.2 billion pounds in 2011 (see Figure 2). Plastic film will experience above-average volume growth based on performance and weight reduction advantages over other flexible (i.e., paper and foil) and rigid materials. While polyethylene will remain the dominant film, polypropylene (PP) is expected to log faster gains based on its combination of cost, light-weighting, and performance attributes.

Among other film types, ethylene vinyl alcohol films will provide the strongest growth prospects, although from a much smaller base, as a result of growing barrier requirements in food packaging applications. Heightened barrier requirements in food packaging also will support above-average advances for polyester (PET), as the material becomes more competitive with PP film in the packaging of snacks, cookies, and other products.

Though paper demand will decline modestly, usage in laminations with film and foil will provide opportunities. The availability of paper with improved barrier properties that is suitable for conversion into pouches also will boost prospects. Moreover, paper's good environmental profile will be advantageous as interest in sustainable packaging increases. Foils will maintain niche applications, especially where moisture and other barrier properties are mandated, along with excellent esthetics.

Moderating gains will be competition from metallized PP and PET films and newer clear grades of these films with barrier properties approaching those of foil. Still, robust growth for retort and stand-up pouches will stimulate opportunities for aluminum foil in laminates with polyolefin and PET films.

Esther Palevsky, an industry analyst with The Freedonia Group, Cleveland, OH, for more than 15 years, has an undergraduate degree from Case Western Reserve Univ. and a master's degree in library science from the Univ. of Pittsburgh. Palevsky concentrates on the packaging industries. Contact her at 440-684-9600; www.freedoniagroup.com.

Figure 1
US Converted Flexible Packaging Demand
(million dollars)

				% Annual Growth
Item	2001	2006	2011	2001-2006	2006-2011
Total	10,461	13,420	16,500	5.1	4.2
Bags	5,935	7,014	8,120	3.4	3.0
Pouches	3,530	5,171	6,880	7.9	5.9
Other	996	1,235	1,500	4.4	4.0
© 2007 by The Freedonia Group Inc.

Study Analyzes $13.4 Billion Industry

“Converted Flexible Packaging to 2011,” a 373-p study published by The Freedonia Group, analyzes the $13.4 billion US converted flexible packaging industry. It presents historical demand data and forecasts for 2011 and 2016 by material, product, and packaging market. The study also considers market environment factors and profiles 33 major players including Bemis, Alcan, Printpack, Sealed Air (Cryovac), Altivity Packaging, Pliant, and Exopack. Available for $4,600; for more information contact The Freedonia Group at 440-684-9600; www.freedoniagroup.com.

Figure 2
US Converted Flexible Packaging Demand by Material
(million pounds)

				% Annual Growth
Item	2001	2006	2011	2001-2006	2006-2011
Total	7,096	7,580	8,210	1.3	1.6
Plastic Film	4,797	5,425	6,120	2.5	2.4
Paper	2,049	1,890	1,810	1.6	-0.9
Aluminum Foil	250	265	280	1.2	1.1
© 2007 by The Freedonia Group Inc.