Demand for converted flexible packaging is projected to increase 3.8 percent annually to $18.2 billion in 2015, according to a recent study conducted by The Freedonia Group. The demand for flexible packaging is expected to continually grow.

Gains will be similar to the pace of the 2005-2010 period based on the now more well-established presence of pouches in a number of food and nonfood markets, coupled with overall deceleration in raw material price growth. Volume increases, however, will accelerate from the previous five-year performance as a result of real growth in consumer nondurables as the economy rebounds from the 2007-2009 recession.

In addition, gains will be supported by cost, performance and source reduction advantages over most rigid packaging formats. Converted flexible packaging’s source reduction capabilities will be increasingly advantageous in light of initiatives by major retailers and packaged goods firms to evaluate their packaging in terms of eco-friendliness and cost reduction.

Bags and Pouches Outlook

Pouches will experience above-average advances, with demand expected to increase 4.6 percent yearly to $8 billion in 2015. Growth will be driven by continued conversions to stand-up pouches and healthy gains for flat pouches in a number of markets, along with a smaller environmental footprint due to light weight and reduced material use, which also holds down shipping costs. Additionally, the aging of rigid packaging equipment will create openings for replacements by pouch packaging equipment over the coming decade.

Gains for bags will be moderated by the maturity of many applications along with competition from pouches and rigid packaging. Still, advances will represent an improvement from the 2005-2010 performance based on the expected recovery in the economy. Plastic bag demand will outpace that of paper bags due to cost and performance advantages, along with widespread usage in baked goods, produce, meat, frozen food and grain mill product applications. However, growing efforts by packaged goods firms to demonstrate their commitment to sustainability will lead to some degree of renewed interest in paper, which possesses such qualities as renewability, recyclability and compostability. While overall gains for other converted flexible packaging (primarily wrap products) will lag the market average, above-average prospects are anticipated for pharmaceutical strip packs and specialized film packaging with meat products.

Flexible Packaging in Food Applications

Demand for converted flexible packaging in food applications is projected to climb 4 percent per year to $12.9 billion in 2015. Gains will slightly outpace the nonfood average, though advances will decelerate from the 2000-2010 performance due to growing saturation in some markets and more moderate material price increases.

Nonetheless, advances will be driven by rising demand for convenience-oriented and other further processed food items, which often use more costly higher barrier packaging materials for extended shelf life.

Demand will also benefit from demographic trends such as increased numbers of single-person and empty nest households and households where all adults work. These trends will boost demand for food in smaller package sizes and more convenient foods designed to reduce food preparation time. Trends toward healthier eating and increased “on-the-run” eating will spur food manufacturers to expand their offerings of products, especially snacks, baked goods and beverages, in single-serving packages. Such products require more packaging than standard packages of similar items.

Meat and related products, baked goods, snack food, grain mill products and produce were the largest food markets for converted flexible packaging in 2010, accounting for a combined 60 percent of food packaging demand. Through 2015, the fastest advances are anticipated in beverage, meat and related products, and snack food applications.

Advances in beverage uses will be fueled by expanding applications and greater competitiveness with rigid containers due to improved dispensing and reclosing features.

In meat and related products applications, prospects will benefit from growing demand for convenience-type products that require value-added packaging materials (e.g., pouches and bags employing barrier films) for longer shelf life and protection from puncturing during shipping and handling.

Opportunities in the snack food market will be driven by heightened demand for single-portion items and the popularity of snack foods that are positioned as healthier alternatives to traditional salted snacks.

Nonfood Applications

Demand for converted flexible packaging in nonfood applications is projected to increase 3.2 percent per year to $5.3 billion in 2015. Advances will be led by above-average gains in the pharmaceutical and medical product markets based on heightened barrier requirements, cost and convenience advantages, and adaptability to growing unit-of-use requirements. Gains will also be aided by a rebound in the chemical market based on a recovery in the broader economy following the 2007-2009 recession.

While other markets, such as paper and textile products, agricultural and horticultural products, and rack and counter products will post slower gains, opportunities will arise from converted flexible packaging’s cost, performance and source reduction advantages.

Meeting Demands Means Growth

Continued growth for converted flexible packaging will also be based on the ability to meet a wide range of packaging needs, including barrier protection, cleanliness, product visibility, theft protection and product unitization.

Converted flexible packaging demand in nonfood uses will benefit from performance improvements in plastic films and laminations of paper, film and foil in terms of strength, barrier properties and amenability to high-quality graphics. Other factors that will propel gains include the increased prominence of sustainability issues, which will fuel expanded activity aimed at reducing packaging waste via the use of thinner gauged materials, and greater use of recycled content materials.

The influence of large retailers in the development of more efficient packaging among their vendors will also support further conversions from rigid to flexible packaging. Growth will be constrained by the maturity of large markets such as paper and textiles, and chemicals, along with the shift to offshore production in many consumer products markets.

In addition, with the exceptions of pharmaceuticals, medical products and some chemicals, there are less stringent requirements for packaging materials for nonfood products compared to food products, since most nonfood products are nonperishable. The largest nonfood markets for converted flexible packaging are pharmaceuticals, medical products, paper and textile products, and agricultural and horticultural products, which together accounted for 61 percent of total demand in nonfood markets in 2010.

Demand for primary materials is projected to increase 1.3 percent annually to 8.3 billion pounds in 2015, an improvement from the pace of the 2005-2010 period.

However, material consumption growth will be restrained by ongoing downgauging of materials and packaging design efforts aimed at material reduction in order to meet sustainability and cost control goals of major retailers and packaged goods companies. Plastic film will experience above-average volume growth due to performance and weight reduction advantages.

The Freedonia Group, Inc.
(440) 684-9600