Packaging for the Future - PAC, Packaging Consortium · Packaging for the Future: ......
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Packaging for the Future: Vision 2025
Transcript of Packaging for the Future - PAC, Packaging Consortium · Packaging for the Future: ......
Packaging for the Future: Vision 2025
Presenter
Presentation Notes
Welcome to today’s topic - Packaging for the Future – a look at what the North American packaging market will look like in 2025. My name is Laura Studwell and I work for Omron Automation & Safety, which is a Thomson Reuters top 100 global innovator, specializing in automation technology as well as safety and industrial components. I serve as the Packaging Industry Marketing Manager and am active with industry associations. I serve on PMMI’s Emerging Leaders Committee, the Packaging Association of Canada’s Ontario Region Leadership Council and am an ambassador for IFS PACsecure. And recently, I was named to serve on the Industrial Advisory Committee for the Department of Mechatronic Engineering Technology for Purdue University.
01 State of the Industry as it relates to packaging
02
Trends impacting the packaging industry
05 Vision 2025 and the future of the
packaging market
03
Packaging Machinery and market growth
04
Industry Sectors and the demand
forecast
Today’s Agenda
Presenter
Presentation Notes
I am going to cover a variety of topics today, including: The state of the industry Trends impacting the industry Packaging machinery and market growth Industry sectors And last but not least, the vision for 2025
Source: Smithers Pira
$234B
$119B
Value of the Packaging Market (2015)
Presenter
Presentation Notes
So, let’s kick off this session with a state of the industry summary. The bottom line is that the packaging market is sustaining growth. The 2015 global packaging market was valued at about $867B with the North America market accounting for a little over $234B . North America’s market share is expected to drop by about 2% over the next few years as growth strongly underlines a shift in balance toward emerging markets. Within the packaging market, food packaging is the largest segment, accounting for 51% of the North America market value or $119B. In terms of growth in each of the segments, the food and beverage segments remained more in line with overall packaging growth, while packaging for healthcare experienced above-average growth in 2015.
Source: ITR Economics
Data trend is slowing in its rate of decline Data trend usually reaches a low and begins to rise before
the end of this phase
Rate of Change - Rising
The Four Phases of a Business Cycle
Data trend is experiencing the steepest part of the business cycle decline
Data trends is experiencing the strongest part of the business cycle rise
Data trend becomes progressively milder in the business cycle rise
Data trend usually reaches a peak and begins to decline before the end of this phase
Rate of Change - Declining
Presenter
Presentation Notes
ITR Economics classifies countries into four phases based on the rate of economic change – phase A & B indicate a rate-of-change that is rising while C & D indicate a rate-of-change that is declining.
Source: ITR Economics
Slower growth; no recession
Recent events Weak demand/pricing
for commodities Strong dollar hurting
exports Falling oil and stock
prices China’s economy
Strength of the U.S. Market
Presenter
Presentation Notes
As of FY15 Q4, the U.S. has shifted onto the backside of the business cycle under rate-of-change declining at phase C, meaning slower growth but not recessionary. Recent events have created a series of headwinds. Weak demand and pricing for commodities, a strong dollar hurting exports, falling oil and stock prices, and worrisome news out of China are dominating the news cycles and creating fear. The world is a bit more uncertain, but it is not falling apart. The strengths inherent to the United States remain in place and are as viable today as two weeks ago.
Source: ITR Economics
Slower growth; no recession
5th consecutive month of deceleration
Major producers leaving for U.S. and Mexico
Strength of the Canadian Market
Presenter
Presentation Notes
As of FY15 Q4 Canada is classified under rate-of-change declining at phase C, which indicates slower growth, but not recession. This marks the fifth consecutive month of deceleration, a trend that is anticipated to persist into 2016 as major producers leave the country in favor of the U.S. and Mexico.
Trends Affecting the Packaging Industry
Presenter
Presentation Notes
We’re going to move on and discuss trends affecting the packaging industry. The main drivers include the performance of the North America’s economies and demographic factors such as population growth and increasing levels of disposable income that boost demand for products. However, other trends such as new packaging types and legislation also affect the development of the market.
Source: IHS
Economies of scale Purchasing
rationalization
Ease of MRO Adherence to global
standards
Standardization
Presenter
Presentation Notes
The end market for machine builders ranges from multinational corporations that demand a standard machine globally - to local companies with varied requirements from one supplier to the next, depending on the country. Many multinational end-users have adopted a policy of standardized machinery used in plants. For example, machines used in plants in Canada, are essentially the same as ones used in plants in India. There are a number of advantages to standardizing machinery: Economies of scale where packagers can demand a lower price and rationalize purchasing activities Ease of troubleshooting and maintenance from anywhere in the world And consistent adherence to standards, such as safety, on a global scale
Source: IHS
Upgrade / replace a machine – not an entire line
Minimizes downtime
Optimizes lines for performance
Modularity
Presenter
Presentation Notes
We’re also seeing end-users looking for complete packaging lines that incorporate numerous functions from a single source. There are few suppliers capable of offering a complete portfolio; so often one company will take the lead on a project and integrate machines from other suppliers into the deliverable. And while there is a trend toward complete lines, they are being designed with modular machinery. One benefit of modularity is that instead of paying for a whole new line, customers can upgrade or replace a specific machine. The upfront cost of building a modular line is higher, but it offers significant lifetime savings by eliminating additional capital investment. In addition, failure in a particular part of a modular line will not result in the whole line being shut down.
Source: Packaging World
Less material = less cost
Labels printed direct on package
Machinery to handle new, different materials
Flexible Packaging
Presenter
Presentation Notes
Lightweighting, or reducing the amount of material, is a growing trend. That being said, flexible packaging, which is known for lightweighting - is experiencing rapid growth. Flexible packaging costs less, is lighter in weight, comes in a range of shapes and sizes and utilizes less material. The design of the package is printed directly onto the pouch, so there is no need for printing separate labels. Packagers are gravitating toward pouches as they look for ways to differentiate their product from the competition on retailer shelves. Flexible packaging is already established in emerging markets. The U.S. and Canadian markets have been more resistant to changes in packaging types, preferring the higher throughputs attained from rigid packaging, which are 66% higher than those of pouches. However, within the next 5 years, growth for flexible packaging in North America is expected to exceed that of emerging markets. As flexible packaging becomes more popular, this will result in additional growth for machinery that is able to handle flexible material.
Source: IHS
Real-time data and recordkeeping
Growth in labelling and coding machinery
Increased investment in automation
Traceability and Serialization
Presenter
Presentation Notes
Most everyone is dealing with the ever-evolving regulatory environment which is requiring companies to implement a strong internal risk framework. In the packaging machinery industry, this is most relevant in the food, beverage and pharmaceutical industries. In the U.S., food legislation deals with enhanced tracing and recordkeeping and requires businesses to be able to identify, at minimum, the immediate supplier and recipient of a product. Consequently, traceability and recordkeeping are major factors for machinery builders and there is growing demand for integrated software-based solutions. And regulations will continue to lead to investment in new coding and labelling machines. The market will see growth in advance of deadlines, but will result in a diminishing of sales thereafter.
Source: Coca-Cola
Smart manufacturing
Mass customization
Accommodates product change- overs
Machinery Flexibility
Presenter
Presentation Notes
All of the trends we’ve discussed lead into the need for flexible machinery – or machinery that is smart. Machinery that adds more individualization to production. The best way to explain this trend is by talking about what Coke has done to mass produce customized products. In 2011, they launched their ‘Share a Coke’ campaign where their bottles and cans were labelled with 150 common names. The campaign was made possible because of the flexible labelling machines which enable printing of the different labels without significant change-over between the names.
Source: IFR
Higher throughput
Precision and consistency
Minimize scrap / waste as well as product loss
Incorporation of Robotics
Presenter
Presentation Notes
Another trend we’re seeing in the automation category is the use of robots in packaging. And over the last 5-10 years, the use of robots has increased significantly. Not only are they used in end-of-line applications, their use has moved upstream to primary and secondary applications. In fact, the International Federation of Robotics is predicting 15% annual growth for the next few years. Incorporating robots into production offers many benefits including: Higher rates of throughput Greater precision and consistency And the minimization of scrap and waste
Source: IHS
Machinery Segmentation
Presenter
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The packaging industry segments machinery into 10 consolidated groups. We’re going to talk about the top groups’ value to the market and the trends that are having the greatest impact on demand. As you can see from this slide, the form, fill and seal machinery and the labelling, decorating and coding machinery groups are forecasted to grow the fastest of all machinery groups.
Source: IHS
9% Market Share
Bottling Line Machinery
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Presentation Notes
The value of bottling line machinery is estimated to be worth about 9% of the total packaging machinery market with the sub-category of feeding machinery making up roughly 65% of machinery shipments. Demand for this machinery is influenced by trends in the food and beverage industries such as single-serving portions and food safety. Growth of the food and beverage industries is relatively moderate, which has contributed to the steady, conservative growth of this machine group.
Source: IHS
14% Market Share
Case / Tray Handling Machinery
Presenter
Presentation Notes
The value of case and tray handling machinery is estimated at 14% of the total packaging machinery market – making it the 2nd largest of all machinery groups. The sub-category of case and tray loading and unloading machinery makes up roughly 31% of machinery shipments. The case and tray handling machinery market is similar to the cartoning machinery market, namely in that both deal with similar functions, from loading, erecting, forming and closing to sealing. As with cartoning machines, the trend to sustainable packaging is driving case and tray handling machinery to become more flexible as end-users are requiring the flexibility to handle both non-recycled and recycled card from the same machine. In recent years, we’ve seen a demand from retailers for cases and trays to be shelf-ready. Instead of standard brown boxes, cases or trays are often produced with attractive graphics, tear-away lids and windows that help market the product so it can be placed directly on the shelf. With the increase in the number of case shapes and sizes, the reduced thickness of the material and the need for unblemished end products, automation is being used to ensure smooth acceleration and precise movements throughout the packaging process.
Source: IHS
7% Market Share
Form/Fill/Seal Machinery
FAST GROWING
Presenter
Presentation Notes
The value of form, fill and seal machinery is estimated to be worth around 7% of the total packaging machinery market. It is projected to have the fastest growth of all the groups boosted by the replacement of single function forming, closing and filling machines. Horizontal form/fill/seal machinery makes up about 75% of machinery shipments in this group. A form, fill and seal machine is capable of conducting multiple operations within one machine and: Reduces the footprint of machinery Reduces MRO costs Saves costs as compared to purchasing multiple stand-alone machines And increases throughput There are 2 designs of form, fill and seal machinery - horizontal and vertical, with each being more well-suited to how the product is dispensed. Horizontal form, fill and seal machinery is primary used for solid products that can be easily contained. Vertical form, fill and seal machinery, while being used for solid products, is also able to address liquid and granulated products that are more difficult to contain. These machines typically have a smaller footprint and are easy-to-use, lower-cost solutions. With its ability to fill both solids and liquids, vertical form, fill and seal machines are projected to grow at a faster rate than that of horizontal form, fill and seal machines over the short-term.
Source: IHS
14% Market Share
Labelling/Decorating/Coding Machinery
FAST GROWING
Presenter
Presentation Notes
Labelling, decorating and coding machinery’s estimated worth is 14% of the total packaging machinery market. It is also forecasted to be one of the fastest-growing groups, mainly due to legislation demanding enhanced labelling and coding on products and the continuing proliferation of SKUs. In addition, legislation like the Drug Quality and Security Act, will require serialization of all prescription products with the ability to electronically transfer data throughout the supply chain. End-users are already purchasing new machines in order to meet legislation – and integrating vision systems to review those codes or labels and check for any errors.
Source: IHS
4% Market Share
Palletizing Machinery
Presenter
Presentation Notes
The value of palletizing machinery is estimated to be worth around 4% of the total packaging machinery market. Within the palletizing group, robots are increasingly being used in a range of applications from primary packaging to unit loading. There is growing demand for mixed load palletizing, where a pallet may include different products of different dimensions for a single customer. In combination with a vision system and software, robots can load cases in the proper configuration to ensure the pallet is built up in the most efficient way. The packaging industry is seeing a move from general purpose robots to those optimized specifically for packaging operations, in order to improve performance.
Source: IHS
Growth Forecast per Industry Sector 2015 2025
Pharmaceuticals: Fastest Growth
Personal Care: Smallest Revenue Growth
Food/Beverage: Largest Revenue Growth
Presenter
Presentation Notes
In this section, I’m going to talk about the trends affecting machinery in each of the largest industry sectors. The largest industry sector in terms of revenue growth is estimated to be food, followed by beverages The smallest sector is in terms of revenue growth is estimated to be personal care, toiletries and cosmetics The pharma sector is forecasted to grow the fastest
TRENDS Healthy, convenience food Private-labelling Sustainable packaging Legislation High frequency of changes
to packaging
Source: IHS
Food Industry
Presenter
Presentation Notes
So, let’s start off with the food industry. Economic development is creating busy lifestyles and this is fueling growth for convenience. But as consumers become more health conscious, there is not only a growing demand for convenient options, but also healthy options. This is driving investment in packaging machinery because producers need to introduce new lines. The food sector is also trending toward more sustainable packaging, often through the use of recyclable materials, as we discussed earlier. There are a couple of additional trends impacting machinery within this sector, including: Legislation addressing traceability throughout the supply chain As well as the frequency of changes to packaging that drive demand for automated machinery
TRENDS Portion size Legislation Single-serve High frequency of
changes to packaging
Source: IHS
Beverage Industry
Presenter
Presentation Notes
The beverage industry is mature in North America. This industry is heavily influenced by trends – mainly portion size. For example, Coca-Cola now offers smaller size cans and bottles. Not only does this give the consumer variety, it enables them to compete with cheaper alternatives without devaluing the brand. There are 3 more trends impacting machinery within this sector including: Legislation that demands improved cleanability of machinery Single-serve portions that dictate the modification of existing lines to accommodate new sizes And high frequency of changes to packaging, such as grip styles, that drive demand for specific machinery
Source: IHS
TRENDS Packaging acts as a
differentiator Opportunities in exports
to emerging markets Smaller size, same
content volume Mass customization
Personal Care Industry
Presenter
Presentation Notes
The personal care sector is mature, so it does not change dramatically. Packaging often acts as a differentiator, distinguishing one product from another in a saturated market. For manufacturers in the U.S. and Canada, the greatest opportunities will come from exports to emerging markets. One of the notable trends in the personal care sector is the reduction of container size while maintaining content volume. Essentially, this is simply a reduction in the amount of packaging – or lightweighting – which is a trend we spoke about earlier.
Source: IHS
TRENDS Growth driven by
affordability Outsource production
to emerging markets Packaging is more
functional Patents / legislation Cabinet-less machinery
Pharmaceutical Industry
Presenter
Presentation Notes
The last sector I’m going to cover is the highly concentrated pharmaceutical industry, where few multinational corporations dominate production with little diversification. As with other industries, growth is influenced by general economic development. As more people can afford access to medicine, this will, in turn, drive growth in packaging equipment. In this competitive market, many pharmaceutical companies are outsourcing much of their production to countries with low labor costs. This will bolster growth in emerging economies, but is likely to hurt the North American packaging machinery sector. There are a couple of trends impacting machinery within the pharmaceutical sector, including: The expiration of patents allowing low-cost products to enter the market – which has increased machinery sales because there is different packaging being produced And the use of machinery without electrical cabinets, reducing the number of electronic parts. This lowers MRO costs and allows for greater use of identical system parts
The World in
An Analysis of Market Opportunities
2025
Presenter
Presentation Notes
So… in theme with this meeting, what is the North American economic outlook in 2025? North America is on track for continued improvement but not without risks, particularly over the mid-term (2019).
Source: Smithers Pira
Value of the Packaging Market (2025)
Market Share 2015 CAGR 2021 2022 2023 2024 2025North America 27% 234,090,000,000$ 296,198,529,040$ 308,046,470,201$ 320,368,329,009$ 333,183,062,170$ 346,510,384,657$
U.S. 91% 213,021,900,000$ 269,540,661,426$ 280,322,287,883$ 291,535,179,399$ 303,196,586,574$ 315,324,450,037$ Canada 9% 21,068,100,000$ 26,657,867,614$ 27,724,182,318$ 28,833,149,611$ 29,986,475,595$ 31,185,934,619$
Global 100% 867,000,000,000$ 4.00% 1,097,031,589,036$ 1,140,912,852,597$ 1,186,549,366,701$ 1,234,011,341,369$ 1,283,371,795,024$
2015 value = $867B U.S. $234M Canada $21M
2025 value = $1.3T U.S. $315B Canada $31B
Presenter
Presentation Notes
The global packaging market is projected to reach $1.3T by 2025. North America is anticipated to retain about 27% of the global packaging market. And at that percent, the U.S. will account for about $315B and Canada will account for roughly $31B. The growth of the packaging market is being driven by a number of trends, which vary depending on region. In developed markets, such as North America, the trends toward smaller households and demand for on-the-go or convenience products are having a major impact on developments in packaging.
Source: ITR Economics
2015 consumers provided horsepower for growth Personal disposable income is positive Savings are strong / debt is low
U.S. and Europe critical to market growth Legislation will help drive growth
FSMA – estimated cost per line in excess of $300,000
U.S. Packaging Market Outlook
Presenter
Presentation Notes
In 2015, consumers provided the horsepower for growth mainly due to personal disposable income being positive as well as strong savings and low debt. The U.S. – which boasts many of the world’s top producers - and Europe – which boasts many of the world’s top OEMs - are viewed as critical markets to overall growth in the industry. And both are forecasted as favorable growth. Legislation, mainly the food safety modernization act (FSMA) is going to help drive growth. Traceability and recordkeeping are going to be the major drivers and the major costs behind growth, at an estimated cost of $300,000 per line to get up to specifications. Companies are allotted a time frame in which they have to comply based on the size of the business in terms of revenue.
Source: ITR Economics
2015 brought challenges Decline in oil prices Falling Canadian dollar against the U.S. dollar
Rapid response to changes in the global economy Canadian government instituted economic programs to
boost investment 10-year tax incentive that stretches through to 2025
Canadian Packaging Market Outlook
Presenter
Presentation Notes
2015 was also challenging for Canada’s economy primarily due to the sharp decline in oil prices and the falling Canadian dollar against the U.S. dollar. But with rapid changes transforming the global economy, we’re seeing Canadian manufacturers embracing those changes today. The Canadian government is also taking steps to ensure the future economic success of our manufacturing sector. In early 2015, the government put into effect several items to encourage investment in the Canadian manufacturing sector. For instance, they added a 10-year tax incentive to boost productivity-enhancing investment
Source: ITR Economics
Industry Sector Outlook
Food Outlook Beverages Outlook Personal Care Outlook
Chemicals Outlook Pharmaceutical Outlook
Presenter
Presentation Notes
Let’s take a took at what we can expect in each industry sector through 2025. First of all, the food industry is expected to continue to grow over the next few years. Production in the beverage industry is expected to show high growth years mainly due to coffee and tea. Personal care production is currently at its highest level on record and is expected to beat overall packaging industry growth in the foreseeable The chemicals industry is expanding at an accelerating pace, although a period of slower growth may hit by 2025 The pharmaceutical industry experienced the highest growth over the next 5 years and is expected to continue that growth through to 2025
Thank You!
Thank You
Laura Studwell Industry Marketing Manager, Food, Beverage & Packaging
Presenter
Presentation Notes
<LAURA> Thank you for attending The Power of Packaging: Vision 2025. I am more than happy to answer any questions that you may have at this time or you can contact me at any time and I would be more than happy to answer any of your questions.
