PLASTICS PACKAGING MARKETS IN EUROPE
The start of a new Millennium is a good time for the plastics packaging industry to contemplate the current situation and the future. How will the packaging business look in the new Millennium ? What changes can we expect ?
In describing the market, develop-ments in flexible and rigid packaging can be considered together, since the main trends apply to both. Because of the size of the industry and its large, extremely diversified market, it is possible here to give only an overview, outlining only the main developments.
1. The plastics packaging industry is, and will remain, a major economic factor in the future;
2. The increasing globalisation of customers demands ever-greater co-operation and even company consolidation, particularly from small and medium-sized plastics processors;
3. Opportunities in the future will be open to those companies developing and manufacturing innovations, that offer their customers greater added value;
4. The plastics packaging sector is increasingly developing into a service industry with international service, just-in-time delivery and e-commerce. Outsourcing and full-service packages are gaining in significance as far as customers are concerned.
1. The plastics packaging industry - a major economic factor
After the Second World War, the plastics industry underwent incredibly fast development. There is probably no comparable sector of industry (apart perhaps from computing) which has grown so rapidly. The result is that plastics, and plastics packaging, are now an essential part of our everyday life. The key to their success has been versatility. In packaging, plastics are used for many varied applications ranging from sterile storage of medical and pharmaceutical goods, to extending the shelf life of foodstuffs such as bread, meat and vegetables, and protecting sensitive technical products from damage. This means that plastics make a significant contribution to improving the quality of our life. At the same time they preserve valuable resources and help to save costs, as a result of their lower weight. Over time, plastics have become ever more sophisticated, lighter and more versatile due to innovative technologies and they have replaced traditional packaging such as glass and paper in many areas.
Plastics packaging came into widespread use with the introduction of polyethylene in the fifties. Before this, in addition to classical packaging materials such as paper, glass and wood, we used films of converted natural materials such as cellulose acetate and Cellophane transparent cellulose film.
The development of polystyrene, polypropylene, PVC, polyesters and polyethylene copolymers saw the start of the rapid increase in the use of plastics.
About one third of all goods in Western Europe are now packaged in plastics, giving these materials the second-largest market share, after paper and cardboard(1). In volume terms, 55 % of this packaging is flexible while the remainder is rigid. In value terms, however, the position is reversed, and rigid packaging in 1997 was worth an estimated Euro 23 billion, which is expected to rise to Euro 29 billion by the year 2002(2). Flexible packaging on the other hand had a total value of Euro 8.3 billion in 1997, forecast to increase to Euro 9.4 billion by 2002(3). During 1997 a total of 11.6 million tonnes of plastics was used for the production of packaging in Western Europe(4). Plastics packaging is everywhere today. But how will the sector develop over the next five years ? In spite of the size and economic importance of the industry, it is a fact that manufacturers of plastics packaging (predominantly medium-sized and small companies) are now open to a double dependency: on the one side the raw material suppliers dictate the prices of plastics, and on the other side there is massive downward pressure on prices by customers - particularly in the food industry.
In addition there is increasing competition, especially from Eastern Europe, where manufacturers have capacities for high quality extrusion and printing at a lower cost. We can also expect increasing competition from the Far East, although manufacturers there are yet not as advanced as in Europe, particularly in the fields of barrier materials and printing technology. An additional pressure is that the packaging market is characterised by growing overcapacity, which is placing even more pressure on prices. Nevertheless demand for packaging will continue to increase.
It is anticipated that growth rates over the last few years averaging 4-5 % per annum will remain at these levels, or increase(5). There also appears to be a slight trend in Europe towards flexible packaging systems.
As far as the individual plastic materials are concerned, very high growth rates are expected for PET, in the field of rigid packaging. In 1997 global consumption was around 4 million tonnes but, according to forecasts, this level will have increased to 11 million tonnes by 2007, almost trebling in ten years. The main application for PET is bottles for carbonated drinks and mineral water. In Europe and the USA, PET bottles are now also being tested for packaging beer.
Another application for PET which will gain in significance is food (such as preserves) that is hot-filled. Growth is also expected in the use of injection moulded polypropylene for large tubs and buckets that will gradually replace metal containers. PVC, which is under pressure from other materials in the food sectors, holds a strong position in 'bubble' packaging of pharmaceutical tablets and in 'display' packaging of products such as tools, ironmongery and hardware.
In terms of product areas, food packaging - which is the largest single product area in the whole packaging industry, accounting for 54 % of total production(6) - will be the major growth market for plastics packaging. The growth of the market is assisted by demographic developments in Europe, such as the steady increase in single and two-person households and the growing number of elderly people, which is fundamentally influencing consumer purchasing habits.
The market demand today is for practical, time-saving ready or deep-frozen meals in small microwaveable easy-to-open packaging or packaging that can be resealed. The trend towards these convenience products is enhanced by the fact that more and more people can now afford them. The flexibility of plastics, in protective properties and processability, has given them an excellent position for fulfilling the specific packaging requirements of this market.
Another new and growing special market is the packaging of pharmaceutical and medical products. Again, there is a strong and growing demand for these products in industrialised countries, where considerable consumer expenditure is available for healthcare. These products, such as medicines, prostheses and hygienic products place particularly high demands on packaging, for sterility, protection, appearance and security, which can well be met by plastics. This sector offers many exciting commercial opportunities for plastics. But here too, the plastics packaging industry is coming under pressure as governments around the world try to minimise their costs in the health sector.
Medical packaging requires high invest-ment, high quality expertise and above all patience. Development of primary medical packaging takes at least three or four years before it can be tested in detail and licensed by the authorities. This is the only way to ensure that the demanding requirements on the integrity of the product can be satisfied in full. It also raises the price threshold at which companies can enter this sector, and ensures that only those with high technology, a long-term outlook - and strong financial resources - can play a role.
The flexibility of plastics makes them particularly suitable in the field of medical packaging for moulded packaging with sealing systems for controlled dosage, child-proof packaging and tamper-proof/tamper-evident packages. There is also very large use of plastics in transport packaging - for moulded crates, shrink and stretch film pallet-wrapping - and moulded plastics pallets themselves. This all saves weight and fuel in shipping products between manufacturers, wholesalers and retailers, and is light and readily collectable at the store. The interest of the European packaging industry is therefore high in this market, and a number of significant companies are active. We anticipate also that the growth in the Far East will be in double figures.
2. Globalisation needs co-operation
The increasing level of the globalisation of business processes has led to structural changes for raw material suppliers and customers of the packaging, which have far-reaching effects on plastics packaging companies. As for all large companies, it is essential for large purchasers of packaging today to have a global presence. They expect that packaging manufacturers will be capable of providing local deliveries to them, wherever they may be located. Those who manufacture products in China assume that their packaging supplier will also build a factory there.
Increasingly raw materials suppliers, such as BASF and Shell, are merging in full or part to remain competitive in the global market. The trend is moving towards raw materials supplies being restricted to pure plastics without any additives, in order to streamline production. Plastics processors will need to purchase additives such as stabilisers, pigments and lubricants separately and then mix them themselves to obtain the correct blend.
This means that the raw material suppliers will shift responsibility for raw materials to the plastics processing industry. If this trend becomes established it will be essential that the plastics processors acquire the necessary expertise and invest in new specialised machinery to meet this challenge. It is also unavoidable that small and medium-sized companies will have to join forces to form larger groups and operate on a European or global level.
This means that, on the one hand, they will form a counterbalance to the raw material suppliers, while on the other they will only be able to offer their customers a comprehensive range of packaging through consolidated purchasing with other plastics processors.
At the same time, wide-ranging joint ventures between companies will allow small and medium-sized companies to gain better financial control. On a political level, too, co-operation is urgently required. There is a whole series of very professional national and sector associations, such as the Plastic Packaging Industry Association in Germany, the British Plastics Federation and La Federation de la Plasturgie in France, to name but a few.
It is important that the industry speaks with one voice to ensure that it does not splinter. Already there is fruitful cooperation at European level with the European Plastics Converters Federation. This activity needs to be intensified and is particularly important in the fields of environmental protection and recycling. The European Commission together with the Packaging and Packaging Waste Directive of December 1994 imposed far-reaching regulations, including those for the reduction of packaging material and a high level of recycling. In Germany the packaging industry has suffered a loss of competitiveness on a European level as a result of the expensive waste separation system of the Dual System. Regulations need to be standardised in all countries of the EU to prevent this imbalance.
The collective force of the plastics processing industry in the EuPC is therefore important and has to be expanded by more effort from the plastics industry.
3. Future prospects with innovation
Innovation is a major factor in success. Companies in the plastics packaging industry which use their expertise to develop user-friendly new products for the market will enjoy a strategic advantage over their rivals. If they also concentrate on market niches, their long-term commercial potential will be even better.
The plastics packaging industry in Western Europe is using its extensive expertise for opening new markets, both in the packaging sector and in similar areas. This means that skill in medical packaging or chemical applications can be used to develop products that go beyond simple packaging, for example, for the computing, aviation and automotive industries.
Packages can even be produced in shapes to relate to the product and assist marketing. A current pet food industry, pack, for example, is a plastic bag for cat food, shaped like a cat. Another is a chocolate pack shaped like a rabbit. Both have dramatic point-of-sale impact and have boosted sales of the product.
There is great scope also for technical innovation. Salad goods when unpackaged have only a very short life in the supermarket. But, when they are packed in a foil bag with a protective atmosphere, their shelf life can be increased by up to ten days. A film for meat packaging, for which a new barrier layer has been developed, now allows steaks to be kept in a special controlled atmosphere for over a month.
In addition to traditional packaging, the coffee industry is now demanding packaging without an aluminium layer. Packaging manufacturers have been asked to develop a film with the same barrier properties as films that contain aluminium, which preserve the aroma of coffee for over a year. Another example is beer in flexible plastic bottles sold in football stadia. Cold-resistant films that remain flexible and impact-resistant in a deep freeze at a temperature of minus 30°C also provide excellent opportunities. Such solutions to problems provide the basis for market-success. In development of new products, those companies offering ever-lighter and easier to recycle packaging will have a competitive edge. The reason is the growing demand from consumers and legislators for less waste, greater material savings and more environmental protection. At the same time, less material helps to preserve valuable resources and reduce transport costs. Consequently the industry is reducing packaging weight by using thinner and thinner films and thin-walled plastics containers. Between 1988 and 1997 there has been an average reduction of 28 % in the volume of plastics used for packaging, with films for palletisation decreasing over the same period by 78 % and containers for yellow fat products by 27 %.
There are many ways to create new applications for flexible and rigid packaging, and solve technical problems. Apart from new and modified polymers, one method is composite films, combining the benefits of individual layers to tailor-make the properties for the application. There are several processes:
Co-extrusion - three, five or even seven layers of different polymers are combined in a molten state and extruded by the cast or the blown film process;
Adhesive lamination - the adhesive, which may be solvent-based, water-based or solvent-free, is applied to the surface of one film;
Extrusion coating - molten polymer is cast-coated onto the surface of another film with a higher melting point;
Water- or solvent-based coating - the coating is applied to a film and the solvent or water is removed using heat;
Vacuum coating - the latest technology is to apply a very thin layer of an inorganic material such as aluminium to a film in a vacuum chamber.
Nano-composite technology is also being applied to the production of films with barrier properties. By incorporation of mineral particles in nano size (less than the wavelength of light), it is possible to create a form of "labyrinth" within the structure of the film, which physially retards the passage of molecules of (for example) gas. Already, nylon films have been commercialised with improved gas barrier properties by nano-scaleadditives, reducing the volume of material in the package and also simplifying recycling.
Barrier properties in other package forms are achieved by co-injection and co-extrusion of blow mouldings. To improve the gas barrier of PET bottles for the vast beer packaging market, coatings of PVDC have been used, but the latest developments use plasma technology to deposit a barrier inside the bottle, integrated with the bottle production line.
Looking to the future, there seems little doubt that the efficiency of multi-material processes will enable plastics to continue to make inroads into areas such as breathable packs for food packaging.
As a result of their multiple-layer composition, composite films also make heavy demands on recycling. The best solution for their disposal is to incinerate them properly and use the heat energy they generate. Recyclable composite films and biopolymers made of regenerative materials will gain in significance in the long term.
Protecting the environment is also becoming increasingly established for printing the films - in addition to solvent-based printing inks, water-based ones are now becoming more common.
4. Becoming a "service" industry
If a packaging manufacturer offers complete solutions, the customer can transfer entire responsibility for the production process to the supplier. This outsourcing opportunity is increasingly used by customers.
It also includes innovative advice on packaging problems and reliable, fast deliveries, up to "Just-In-Time" supply. The packaging industry is looking to cooperate more closely with suppliers of raw materials and machinery.
The packaging industry, raw material suppliers and machinery manufacturers are already cooperating globally in Europe, USA and in Japan. Fast methods of communication by e-mail and computerised design ensure that this cooperation is even more effective.
For example, the food industry needs re-sealable peelable packaging allowing products such as vegetables and meat to be removed, resealed and removed again later.
Laminates are another example of inter-sector cooperation, and here the packaging industry is working with manufacturers of adhesives and machinery to develop eco-friendly solvent-free laminates with a shorter curing time.
In other sectors, the potential of PET for high-quality clear rigid containers is still only at its beginnings: wide-mouth, hot-fill, high barrier solutions are moving from laboratories to production lines.
The 20th Century has correctly been described as the Century of Plastics. In view of current developments, I am confident that this Century will also be a Century of Plastics.
If we use all our expertise and imagination to develop new products that can do more than just "pack", we believe that we can all look forward to a successful future.
EuPC's mission is to create a good trading environment for Plastics Converters in Europe.