Flexible packaging demand grows despite recession
Private label products deliver value beyond pocketbook
Back to basics for U.S. consumers

Flexible packaging demand grows despite recession

Report confirms private label, converting trends seen here are also at work on the other side of the Atlantic Ocean.

In spite of the economic challenges that have plagued markets everywhere in the last twelve months, sales in European-converted flexible packaging grew nearly 1.6% in 2008 and totaled €10.3 billion (US$14.75 billion) according to a recentreport from PCI Films Consulting.

“The flexible packaging industry has shown steady long term historic growth with its prospects only recently being significantly affected by the global recession,” says study author Paul Gaster. Industry sales growth in the first half of 2008 were largely offset by steep declines in the second half of the year when affects of the global economic crisis became more readily apparent.

While demand in most major food applications saw growth overall-a trend mostly associated with demand growth in Eastern Europe-some non-food sectors such as pharmaceuticals and pet foods grew more strongly. Like in the U.S., European consumers are switching to private label brands or shopping in discount stores.

PCI forecasts that tough times will remain in 2009 with European flexible packaging demand contracting between 4% and 5% in value, a change attributed largely to declines in raw material prices; these savings are then reflected in lower converted flexible packaging prices to customers. The report also suggests that a decline in real year on year volume (area) in 2009 is very likely as the recession continues to wear on consumer spending and sales of packaged foods.

The report forecasts that European flexible packaging demand will stabilize in 2010 and subsequently return to historic growth trends of 1%-2% annually.

Private label products deliver value beyond pocketbook

Private label food manufacturers are now focused on quality, convenience and health benefits.

Mintel GNPD reportsthat even as private label products provide consumers with cheaper food alternatives, food manufacturers are staying current with the latest food trends and are using premium ingredients, portability and health benefits to attract shoppers.

So far in 2009, Mintel GNPD has seen nearly 1,800 new U.S. private label foods appear on retail store shelves, representing 27% of all food products introduced this year. By comparison, private label foods comprised only 13% of new food product launches in 2005.

“Not only have private label introductions increased, but product innovation is reaching unprecedented highs,” states Krista Faron, senior analyst at Mintel. “Retailers no longer only launch ‘me-too’ products to compete against major national brands. Instead, private label lines are hotbeds of creativity, driving markets and establishing themselves as trend leaders.”

With so many Americans trying to spend less at restaurants, Mintel reports that private label retailers are creating premium in-home meals that boast restaurant quality and fresh ingredients. Likewise, private label foods are making their mark in the portable, high-quality lunch segment as convenience remains a key driver for private label prepared foods.

As the recession causes more Americans to cut down on food spending, both at home and by dining out less, Mintel has noted that private label has benefited. In 2008, the U.S. private label market grew 9.3% (compared to 4.5% for branded food sales), a trend that Mintel estimates will grow another 8.1% by the end of 2009.

Back to basics for U.S. consumers

Basic foods and food preparation items lead return to fundamental needs.

Data from marketing information firm Nielsenindicates that consumers are sticking with basic purchases in categories like fresh meat, pasta and packaged dinners, along with baking mixes and supplies consumers are enjoying their meals back to home. Increases in purchases of wine and alcoholic beverages indicate that consumers are opting to consume their favorite beverage at home, too. In contrast, consumers continue to avoid discretionary items.

Sales of non-edible products made the largest contribution to an overall 1.2% unit sales decline at food, drug and mass-merchandisers during the 52-week period ending July 11. General merchandise categories suffered most with a decline of 7.9%, while non-foods dropped by 3.8%, and health and beauty aides 3.5%.

In a further nod to fundamental food preparation, canning and freezing supplies experience unit sales increases of 18.1%, followed by seasonal merchandise (8.3%), fresh meat (6.2%), wine (5.6%) and dry mix prepared foods (5.2%). The vitamins category also saw a 3.7% unit sales increase, a category that Nielsen notes does well during periods of recession as consumers focus on maintaining their health.

Chemical Market Associates Inc.
DeWitt & Co. Inc.
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