ave enjoyed the biggest growth of any packaging material over the last decade, as they have increasingly innovated to add value while capturing a share of new end use segments. Guido Aufdemkamp, director of communications at Flexible Packaging Europe, the association representing the European speciality films and laminates industry, spoke to Tim Sykes about the conditions in the market today.A key narrative in the industry over the last decade has been growth in the turnover and market share of flexible packaging - a trend that has continued in the face of poor growth in the general economy. A recent report by MarketsandMarkets forecasts annual growth of 3.9 per cent for the speciality flexible packaging industry in Europe up until 2018. Another, by PCI Films, projects two to three per cent annual growth over the same period, predicting the market will reach around 14 billion euros in value in 2018.
"Speaking of added value and high converted flexible packaging films, the market outlook is good," said Mr Aufdemkamp. "As everybody knows, eastern Europe is performing better than western Europe, as it is a less mature market. However, it is a significantly smaller market overall, so absolute growth of around two per cent in western Europe will account for a greater proportion of total growth in the market than four or five per cent growth in the east."
In terms of its international dynamics, there is not a major global trade in speciality flexibles, with the continents and major regional markets relatively insulated from one another and limited exports between Europe and China or Europe and North America. However, Europe as a whole is a very open marketplace, and Mr Aufdemkamp notes that he cannot think of a single member company of FPE which only serves its domestic market.
Growth during downturn
How food and beverage consumption might be affected by an economic downturn is always hard to predict. However, the post-2008 recession has not been unkind to flexibles.
"We have seen that an economic crisis can benefit the packaging industry," Mr Aufdemkamp remarked. "One reason is that people visit restaurants and bars less frequently, and therefore consume more at home. In these cases, visits to restaurants are often substituted by buying premium level ready meals from supermarkets - such formats tend to gain from an economic crisis. In addition, Unilever for example has reported that people have been spending less money on individual shopping trips. When you spend just €30 or €40 per shopping trip, you cannot afford to buy larger packs. This leads to an increase in the purchase of smaller units, which of course means more primary packaging."
The converse, according to Mr Aufdemkamp, is that when economic times are good, packaging can also benefit because there is higher demand for premium packaging with features which add value.
Migration from rigids
Another factor underpinning healthy growth rates in flexibles has been the continuing encroachment on markets until recently dominated by rigid containers, in areas such as sauces, pet food and baby food. This is a phenomenon which Mr Aufdemkamp expect to continue:
"In theory the only products that cannot be packaged by flexibles are carbonated beverages," he said. "Otherwise there are almost no limitations. There is always a potential flexible solution for just about any product you can think of. However, whether there is really latent demand in a particular market depends on many factors. Consumers in different countries act differently and have their favourite packaging formats for different products. Often the market requires a choice between different packaging materials: in certain consumption contexts rigid packaging is more suitable, in others people might prefer flexible."
Similarly, from a marketing point of view, brand owners seek differentiation on the shelf. Therefore, if all of the products are in pouches, one means to achieve this would be to switch to a different packaging solution. Sometimes a marketing department will choose to spend its budget on more expensive packaging rather than on advertising. Thus while in theory the possibilities are endless, in practice market conditions dictate where the opportunities are and often impose a natural limit to penetration of a particular market by any particular packaging material.
"Brand owners will always look for a balance between the benefits of the packaging and cost considerations," observes Mr Aufdemkamp.
"Generally, take up of flexible packaging in a particular market is a case of evolution, rather than revolution as brand owners assess the merits from all angles. The move away from tin cans in the pet food segment was, for instance, a gradual process. Growth in speciality films is driven not so much by whole market segments as by tailor made solutions which meet the needs of a particular brand owner. The market is looking less for standard formats and more for the speciality attributes that can help deliver differentiation or better functionality. It can often be that when a product is moving from a rigid container to a flexible solution, a speciality film is required to deal with particular properties and requirements (whether shelf-life or migration issues) of the contents."
Often the migration towards flexibles in a particular market takes on added velocity where, in addition to the cost benefits and the novelty factor, flexibles can add new functionality. For example, in Germany there has been a shift in the market for Frankfurter sausages, which used to be usually packed in glass jars, towards using a plastic container with a flexible lid and without the liquid inside. This has facilitated a wider range of consumption situations. Now consumers can conveniently take this product on a hike or a picnic, which would rarely have taken place when it was in a glass jar filled with liquid."
Shifting supply chains
A significant change in retail which is affecting the entire packaging supply chain in many ways not yet codified is the rise of e-commerce and home delivery. What this means for the flexibles industry is equally an open question.
"I'm not sure how it is impacting on flexibles," said Mr Aufdemkamp. "We don't know whether food packaging will fundamentally change due to e-commerce. Personally, I doubt that it will. There are people saying that we will have a future of plain packaging, because when people shop online they usually see a picture of the product without packaging. However, if brands want to engage with their customers, packaging remains an ideal medium through which to do this, when they open their cupboard at home. Therefore, I don't foresee many changes or threats to packaging with regard to printing, etc."
Perhaps a more intriguing questions is whether there are opportunities for flexibles to develop a serious presence in the market for secondary packaging in home deliveries. "This remains to be seen," said Mr Aufdemkamp. "It will probably depend on the levels of automisation as e-commerce grows bigger. If you look at the pharmaceutical segment, for instance, packers have a high level of automisation, with everything done by robots. In a world where a robot can grab a biscuit without crushing it, I don't think it is a problem to develop one that can handle a flexible pack."
New properties
Inevitably, as films move into markets traditionally dominated by rigid containers, flexible packaging formats must innovate to replicate the functionalities of the containers it displaces.
"Tailor-made packs are now offering a huge range of capabilities," remarked Mr Aufdemkamp. "In terms of shelf-life, with flexibles everything is possible from zero barrier to absolute barrier. There are lots of innovations around the area of easy opening and reclosing packs, from zip locks to spouts. In addition, there is a huge variety of pouch formats these days, not just rectangular but all kinds of wavy shapes and appearing in multipack formats."
Representing the industry
The core roles of Flexible Packaging Europe are to facilitate communication within the industry on important issues that affect all of its members and to represent the common views of the industry to the regulatory community.
The FPE's Technical Committee is the focus of much of the activity dealing with regulatory affairs such as food contact legislation. Experts from member companies sit on the committee to discuss industry-wide issues and act as counterparts to other stakeholders in the discussion: suppliers, customers, other packaging manufacturers and regulators.
"We are a well known partner to the Commission because we speak for our industry as a whole. When you take into account all the various materials involved flexible packaging, FPE acts as a consolidator of their views, meaning a third party such as the Commission doesn't always need to contact each material segment individually. They know that when FPE states an opinion it has already extensively discussed the matter with the stakeholders."
In addition, the Technical Committee, run by John Dixon, supplies FPE members several times a week with information emerging from its activities. Such information feeds into a members' library listing all of the regulations with which members have to comply - a particularly valuable resource to FPE's small and medium sized members.
"An important asset for FPE is that our membership consists not only of manufacturers but also national flexibles associations," said Mr Aufdemkamp. "They are able to feed us information about what is going on at the national level, enabling us to understand what is going on and engage not only on a European basis. This is particularly useful since, as I said, our members are supplying into multiple markets throughout Europe. For such manufacturers, one of the biggest challenges is when new national regulations, such as the Swiss ink ordinance, differ from others."
Environmental case
Discussions about the environmental credentials of flexible packaging usually revolve around the reductions in weight and material usage offered by films on one hand, and their low recycling rates on the other.
"I'd like to reinforce the fact that in the Packaging and Packaging Waste Directive the stated first target is prevention of waste, something that flexibles contributes to by reducing packaging volume," Mr Aufdemkamp pointed out. "This in turn leads to resource efficiency, and one of the overriding targets of the EU Commission is a resource-efficient Europe. It therefore concerns us that recycling always seems to be the focus of discussion, rather than prevention, which is actually higher up in the hierarchy of priorities. Even though recycling rates are comparatively low for flexibles, compared with some rigid materials, the use of flexible packaging leads to greater resource efficiency. Part of our industry's task is to increase the amount of Life Cycle Analysis carried out in order to better demonstrate the factual basis of this case."
However, Mr Aufdemkamp detects a welcome shift in approach to sustainability:
"It is no longer an isolated topic, but included in the everyday thinking as part of the business," he said. "In such a climate people become more realistic and educated about what is possible and what is important, which is a good thing for us."
