Giancarlo Caimmi, Phd
Managing Director – Americas
Global Marketing Manager – Packaging Solutions
Flexible Packaging: How was business for your company in 2014? Did it meet/exceed/fall short of expectations/projections/forecasts?
Masse: 2014 was an interesting year for Coveris, as it was technically our first full year in operation as a combined entity. Of course, our multiple divisions have decades of industry leadership, but we had a tremendous amount of opportunity going into the year and, along with the packaging market as a whole, we performed well and generally to expectation. Our success was in no small part due to formalizing and activating the Coveris Business System (CBS), which has helped us realize synergies and capitalize on global alignment across our diverse business. Moving forward, we will continue to rely on the CBS to drive acquisition strategy, talent acquisition, commercial and operational excellence.
Caimmi: 2014 marked a record year for us. On a global scale, but specifically in North America. Our forecast growth of 10 percent was exceeded marking a total 20 percent growth versus 2013. Reasons are multiple. The market, especially flexible packaging, kept growing, even if at a lower rate than the one of our growth. The extra growth can be explained through what happened in the past few years once investments, especially on the high performance line of machinery, have been slowed down by concerns about the economy. In 2013 and even more in 2014, those capital equipment investments came back to life, marking our growth.
Schlotthauer: Kodak is a leading supplier of flexographic prepress solutions to the flexible packaging industry and 2014 has been another excellent year for our business. We’ve seen installations of our flagship solution, the Kodak Flexcel NX System continue to grow significantly on a global basis, supporting a business that is maintaining growth rates of 30 percent per year. That’s an incredible achievement in today’s market and one that we plan on repeating in 2015.
D’Angelo: Once Goss brought our Packaging Technology Center online in Durham, NH in April, we really hit our stride. Honestly speaking, we should have had this finished in Q4 2013. But we did complete the project and having the Vpak 500 packaging web offset machine available for customers, prospects, suppliers and industry entities to run jobs/tests on makes all the difference in the world. It is one thing to sell the virtues of web offset printing for packaging on the basis of cost to print models that show a definite return on investment, but printers/converters want to see their work done in offset to compare with existing processes. Once Goss could show what the machine can do, the Vpak proved to be very popular with a worldwide base. The continued growth of the flexible packaging and the label markets makes for a very strong environment for equipment suppliers with solutions. We completed 2014 on target and more importantly, with momentum going into 2015.
FP: What were some unanticipated challenges in 2014? Do you see that happening again in 2015?
D’Angelo: The biggest challenge in 2014 was the reluctance of some companies to invest, despite their acknowledged need to do so. Whether it was uncertainty about their place in the market, the election cycle in the US and in Brazil, concern about the recovery overall or simply the mood of their banker, many printers kept their capital spend low. In the market for which I am responsible, North and South America, we see more capital investment in technology flowing into the market in 2015 relative to the year just closed. We have had several conversations with the investment community along with customers and there seems to be growing comfort with where the suppliers are heading with their solutions and what this can mean to printers and converters in terms of gaining reliable market advantages and making a necessary rate of return to themselves and their funding partners.
Masse: The packaging industry as a whole, and we’re certainly no exception, faced unanticipated challenges associated with the devaluation of European Currencies and complexities stemming from fairly drastic reduction in oil prices. As a global company, though, Coveris is well positioned to take advantage of positive market conditions in individual regions, and did so throughout 2014.
It is hard for anyone to anticipate the impact of currency fluctuations or the uncertainty around the price of a critical feedstock like oil. For the latter, it comes down to a lack of insight into the correlation between the cost of a barrel of oil and the cost of the produced resin. Ultimately converters get squeezed and retailers and customers feel the pressure of this volatility. Moving forward, I’d expect this to continue throughout the next year.
Schlotthauer: We attribute the growth to two major market factors – both of which will continue to be important over the next year. Kodak technology focuses on enabling brands to realize true design intent with flexo printing for new product introductions, and on enabling printers to operate with greater consistency and efficiency to deliver what the brands need at an affordable cost. We firmly believe that inconsistency and complexity are two of the biggest barriers to cost control in the print production process and that 2015 will see increased demands for simple, elegant technology solutions.
Caimmi: While we were surprised by the size of the growth, 2014 was well within our expectations on product trends, therefore we have been able to comply with the increased demand on multi-layers laminator and high performance machines in general. However, the compact coaters-laminators product line has been on a positive trend in years and we have been able to provide for increased demand while complying with our stringent quality standards. We do project similar trends in 2015.
FP: How do you see 2015 shaping up for the flexible packaging industry?
Caimmi: There are not reasonable reasons to justify for a negative forecast in 2015. The market will grow globally and North America will be no exception. It is the challenge for Northern American converters to be prepared to fight the aggressive politics of foreign converters. I can learn every year out of the FPA data, the surprising import rate of the high level packaging from Europe and other competitive markets. In order to fight competitively, that market segment, Northern American converters, will have to continuously improve on R&D, productivity and quality.
Masse: This is a great time to be in the packaging business. Despite the ongoing challenges that everyone is facing – emerging economies, currency fluctuations, unstable political climates, etc. – I anticipate continued, even rapid consolidation across the industry, and continuing maturity of the market. This had led, and will continue to lead, to some truly revolutionary innovations, improved collaboration between companies and their customers, and ultimately higher value-added products.
The advancement of external technologies like 3D printing and nanotechnologies will pressure the industry to be more innovative, which can be positive for everyone.
FP: What outside factors do you see affecting/impacting the business and the industry overall (outside factors meaning things that occur beyond your business or flexible packaging industry)?
D’Angelo: Naturally, the political and economic situation in the regions of the world plays a big role on the behavior of the industry. The growing sense of a strengthening economy in the US is reassuring, but most companies, just as Goss does, look at a world view and positives are often balanced by negatives in other regions. Europe has been slowing economically and China could see slowed growth in 2015. I suppose the preceding comments must be considered on a macro basis.
The fundamentals of the flexible packaging business, in our estimation, remain positive and provide the basis for continued investment in technology that reduces cost and increases up time, productivity and quality. Flexible packaging will continue to grow as consumer markets throughout the world grow. Flexible packaging will continue to innovate and create value added solutions for consumer product companies, food suppliers and end users.
Caimmi: Flexible packaging is and will remain the most cost effective, energy friendly and waste limiting packaging technology. What can affect the industry then? Bad press. Our industry has been passive to illogic aggressions for decades. Aggressions motivated by completion from other packaging technologies as well as from the simple reason that blaming “plastics” with no analysis of sort (energy consumption, emissions, waste volume and weight) is a very simple way to impress consumers. It will be our fault if eventually we will see some sort of negative effect. A part that is the only risk I see for North American converters is foreign competition – being foreign competition sharpened by natural selection in very competitive markets.
FP: What will 2015 be the “year of”? (Innovation, status quo, M&As, etc.)?
Schlotthauer: Amongst other things, 2015 will continue to be the year of ‘variant proliferation’ especially in primary flexible packaging. New SKUs, product extensions, new pack types, more frequent promotions, to name just a few, will continue to reduce print production run lengths and place increased pressures on time to market. The trend is not going away and over time will drive the entire supply chain to re-examine how frequent design changes are handled and how the process can become more ‘automated.’ It’s something that we’ve seen happen in the commercial, direct mail and transactional print market and will in turn happen in packaging. That’s why it’s so important for printers and prepress professionals alike to continue to develop robust, predictable, consistent design-to-print processes and for suppliers to bring technology to market that reduces, rather than adds, complexity.
D’Angelo: 2015 will be the year web offset becomes established as a process of choice among flexible packaging printers. Not only does the web offset process offer a great value proposition when compared to flexography and rotogravure printing, it is also the most digitally competitive process that there is, starting with the cost of the image. Digital printing remains the process of greatest interest in the market, in part due to a very strong p.r. campaign, but falls short in most measures to be considered a leading process. While there have been many digital presses purchased, none have proven to be an industrial solution for the everyday printer/converter, but rather a niche market solution. We believe that there is a place for digital and today it involves a “hybrid” approach where offset does what it does well, high speed, quick change, high quality print, while digital embedded in the press in combination does what it does well, provide specialized, selective content printing.
Caimmi: In general, in North America, the awareness on nature-related issues is growing. Consumer perception of the importance of pollution reduction and energy saving is scoring the highest rates ever. This will influence converters on how new investments are selected and on how packaging is developed. Therefore, I may reply to this question: 2015 will be the year of Innovation in our industry in pollution and energy consumption reduction. And I cross fingers for that to really happen.
FP: What’s the next hot product or innovation for our industry?
Masse: I think there are a number of innovations that will be transformative to our industry. Primarily, Coveris is focused on increased partnership with our customers to create solutions that can help them realize the benefits of value-added flexible packaging – barrier resistance, durability, lower costs, reduced spoilage, etc.
Collectively, the industry should be focused on packaging solutions that address the significant issue of food waste, which can’t be separated from the important and ongoing dialogue about sustainability. Flexible packaging provides the opportunity to address both issues. This year, Coveris introduced a product, the Versaflex™, that creates custom-length, barrier safe bags for meat products. As simple as it sounds, reducing the need to stock pre-made bags and allowing for on-site customization provides flexibility for a variety of purposes while also eliminating a significant amount of waste. This is the type of win-win innovation we’ll be focused on in the future.
Caimmi: Retort packaging. Improved shelf life and consumer needs will force the growth of that technology in North America as well.
D’Angelo: Color management and standardization technology. Print quality, especially with offset, has become so good that the next step is to incorporate tools to match customer expectations and standards requirements. This needs automated and calibrated tools to optimize printers’ files for the output printing process and to calibrate and maintain the press-print conditions on an ongoing basis. The web offset process, with its associated ink key ability to control is a perfect match for this approach. Goss has partnered with Alwan Color Expertise and we are currently bringing this capability to the Vpak 500 machine in the Goss Packaging Technology Center. This will be a major step forward for printers in terms of reducing waste due to color inaccuracies and ensuring greater consistency of color, not just throughout a run, but from run to subsequent run. Allowing customers to meet G7 Master Printer and ISO requirements will be a major breakthrough and Goss is proud to be involved in the process, the discussion the solution.
FP: Are you planning on making any investments or purchasing of new equipment?
Masse: Coveris invests significantly in value added markets and those structures that deliver significant value to the ultimate consumer. Coveris has historically invested ~3 percent of revenues into the business.
FP: Just as sustainability has become a part of the everyday business landscape, do you believe food waste is the next thing the industry will need to address? If not, what will be?
Caimmi: That is the hot topic and has been in years. Twenty-one percent of municipal solid waste in the US is food. Savvy use of packaging and higher barrier for longer shelf life will definitely contribute to limit that. Flexible packaging will have a great role being the best solution to actively contribute to waste reduction.