It seems that the temperature of the flexible packaging industry is warm, and continuing to be warm. But our industry is not without its concerns and challenges. Our respondents explain what they’re seeing from their customers and the industry overall.

The Respondents:

Susan Stansbury
6 years with the company
Converting Influence LLC and Converters Expo
(920) 265-6407
www.ConvertingInfluence.com and www.ConvertersExpo.com

Richard I. McDonald
President and Founder
8 years with company/30 years in industry
PPC Technologies & Solutions LLC (PPCTS)
(262) 695-7536
www.ppcts.com

Joe Tremper
Vice President of Sales
1.5 years with the company
Polymount US LLC
(678) 489-2194
www.polymount-int.nl

Flexible Packaging: The economy has been at the forefront of business decisions. There are talks of a continued growth for flexible packaging, but how do you see the economy doing this year? What does that mean for your company and/or the industry as a whole?

Stansbury: We expect that the converting industry will continue to strengthen in 2012 following some solid gains last year. Some of the areas that have the strongest manufacturing and converting industries show lower unemployment rates, for example, than their states as a whole. So in area where converting is robust, the unemployment rate has been running almost one-half percent below the state rate of 7.3 percent.

McDonald: From a capital equipment supplier perspective, as we also serve other industries, we have seen real strong growth in flexible packaging, as well as continued stagnation in others. Overall, slow economic growth has not been an issue for the flexible packaging industry, as consumers continue to focus their spending on necessities rather than wants. With a reasonably healthy flexible packaging industry, we should continue to see investments in equipment through 2012.

Tremper: While there has been a general improvement in the performance of based companies in the forth quarter of 2011 compared to the first 3 quarters of 2011, it is critical to recognize that we function in an environment impacted on a daily basis by international events and markets. Our industry competes against Chinese imports and Central and South American competitors with significantly lower overhead and labor rates than we have here in the U.S.
While I anticipate a modest improvement in the performance of the U.S. economy in 2012, given the fragility of the European Union with regard to stability caused by banking and debt issues, it would not take much to draw the U.S. back into a minimal to negative economic performance in 2012. Any profit or performance enhancing products providing a strategic competitive advantage should be reviewed and adopted in an effort to increase profitability and performance.

FP: What do you think will be the biggest asset in this industry for 2012?

Tremper: The North American converters’ capacity to innovate, adapt and quickly deliver is by far our greatest asset. Quick turnaround, just in time deliveries continue to dominate the majority of the converters that I interact with regularly. Over the years, increased print quality expectations, cheaper prices and faster deliveries have dominated our industry. While it has not been easy or painless, we as an industry have routinely met these expectations.

Stansbury: Getting back to more capital investment could be a great asset to an industry that has to compete nationally and globally.

McDonald: The biggest asset of the flexible packaging industry is its ability to evolve, develop and create new packaging solutions that continue to take market share from other packaging mediums.

FP: What do you think will be the biggest challenge in 2012?

Stansbury: In some cases, companies will be battling with competitors for market share in markets where growth continues to be flat-to-slow.

McDonald: The biggest challenge will be to find cost savings in design, equipment and manufacturing, to offset increased costs in raw materials.

Tremper: Maintaining our leadership position in the Western market will be an ever increasing challenge this year and for the foreseeable future. The trend of the Mexican Maquiladora with based management offices and south-of-the border manufacturing made popular in the 1990’s has been replaced with converters partnering with , Central and South American converters. An enormous amount of capital equipment investment has taken place in these markets over the past years with sales of capital equipment exceeding 24 placements over the past 18 months. These are not low-end, second-tier supplied equipment, but the leaders of the industry supplying state-of-the-art equipment to well trained and well organized competitors with significantly lower overhead and labor expenses. By selling into the , or to former customers of Canadian and American converters, these companies are able to obtain market share, increase free capital and reinvest in more equipment at accelerated rates.

FP: What do you think will be the biggest concern in 2012?

Stansbury: One of the major concerns is the ability to compete with imports. The efficiency of converters has kept many out front, but staying ahead is a real challenge. However, sometimes we forget our exports are sought after too. Also, certain products that are commodities or not high-value items tend to be produced and sold regionally.

Tremper: Every converter needs to carefully consider their position within the market. Having equipment that is paid for and off the books is a comforting feeling and financially prudent in many ways in this turbulent economy. Conversely, losing production capacity or market share to competitors willing to invest in equipment able to run anywhere from 50-100 percent faster at lower energy rates with dramatically improved set-up times needs to be evaluated against internal capital preservations trends with regard to market share and profitability. Any products or improvements able to address any or all of these issues should be carefully explored.

McDonald: The biggest concern will continue to be the economy, as well as erosion of consumer’s disposal income, as necessities, fuel, food and health care cost continue to increase.

FP: What was the biggest surprise or the most unexpected affect on business in 2011? Do you see that happening in 2012?

McDonald: The number of new printing, converting and peripheral equipment purchases, as well as new company start-ups and existing company expansions were surprising and a testament to the health of the flexible packaging industry. Current activities and outlook point to this trend continuing in 2012.

Stansbury: One nice surprise was the amount of manufacturing "trials" that occurred last year. Rather than just pulling back, reducing inventories, many converters looked forward and fostered new business developments. I do expect this proactive effort to continue through 2012. Aggressive sales efforts will be even more so, as companies look once again to beef up its forces.

FP: Do you see sustainability as the continuing trend to hit in 2012? What other trends do you see around the bend?

Stansbury: Sustainability, when it is related to efficiency, from reduced waste in startup and in-process, or higher output using less energy, will continue to be a focus. Sorting out customer needs, regulatory changes and strategic approaches to doing sustainability that's right for an individual process is taking on more focus.

Tremper: The hot topic buzzwords of 2011: Sustainability, efficiencies, green initiatives and standardization will continue to drive efforts of North American converters in 2012.

McDonald: Sustainability will continue to evolve as we identify new methods, systems and materials that won't deplete resources, harm the environment and will contribute to stewardship and responsible management of resource use. Sustainability is not new to flexible packaging, as the industry is continuously driven to reduce material usage and increase equipment performances.

FP: There has been lots of talk about the cost of materials going up. Are you concerned with these changes in price, and if so, how do you plan to accommodate it?

McDonald: The costs of manufacturing materials are on the increase and since in many cases, these increases can’t be passed on to customers or consumers, manufacturers have to find cost savings through their manufacturing processes to keep profits from eroding. There are untapped cost savings in every manufacturing facility I visit; many with justifiable ROI’s, manufacturers that continuously reinvest in its manufacturing capabilities, will outperform their competitors and be in a stronger position to handle potential cost increases.

Stansbury: Certain raw materials price increases are forcing the industry to look for other ways to be economical such as qualifying alternate materials. Along with pressure by customers to keep prices stable, pricing and materials reviews can benefit everyone.