Consolidation has been the major ongoing trend in the European flexibles sector, with the 20 players now accounting for around 60% of the market – valued at around €11.6bn in 2011. Amcor is the clear leader of the packaging pack with a 25% market share, dwarfing its nearest rival Constantia which holds a stake of less than 10%.
Repercussions for brand owners
One of the key consequences of this is that following the Amcor takeover, many brand owners were left with only one major flexible packaging supplier rather than two, especially for high volume contracts, said Gaster.
Brand owners have sought to diversify their packaging supply sources and have been partially successful in doing this.
“If you have a high volume account it does take time to find alternative suppliers with sufficient capacity to deliver cost effectively across all brand owners’ European plants,” he said.
Shifting landscape
Gaster said he has identified two major trends that suggest the market has found its own way to adjust to the new reality.
On the one hand, Amcor’s dominance has seen it pick up more business as its scale and reach means it is better able to guarantee the pan-regional delivery that brand owners desire.
“A number of years ago, the national subsidiaries of multi-national brand owners had the ability to buy packaging locally but the current position means that major purchasing decisions are now mostly made at a European level,” said Gaster.
While this has clearly not been good news for smaller flexible packaging players, new opportunities have arisen precisely because Amcor’s dominant position has allowed it to become more selective in the contracts it accepts
“Amcor has bottom-sliced its contracts - foregone business that its sees as unprofitable or not profitable enough. And this has created opportunities for SMEs to pick up new business,” he said.
Companies such as Ultimate Packaging, and Excelsior in the UK, Maria Soell GmbH and Maag GmbH in Germany, and Italy’s Di Mauro Officine Grafiche have been able to carve out profitable positions at the regional and national level by supplying short run, low cost and niche offerings to both large and small consumer goods packers, explained Gaster.
The analyst forecast there would always be a place for players like these not least to provide a strong competitive alternative to the major flexible packaging suppliers as the larger groups continue to reduce brand owners’ sourcing options.
Continued growth for Amcor?
Ongoing consolidation in the European flexible packaging sector has also been accompanied by more robust competition concerns. However, Gaster said he was convinced that leading players such as Amcor and Constantia would continue to grow – even within the region.
“Amcor continues to make acquisitions - such as recent takeovers in Australia and India – and I am sure more opportunities will present themselves in Europe, although these may likely be of more niche players,” he said. “Venture capital companies have made a number of packaging acquisitions in recent years and at some point they will want to realise a return on these. And as these firms appear on the market, Amcor may well consider them a sound investment.”
