PET PACKAGING ON RISE, DESPITE TOUCHY PRICES

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NEWARK, N.J. — In the packaging materials race, PET, having made gains at the expense of glass, is picking up speed in its quest to overtake metal cans.

While PET resin costs and availability are presently very good for packaging conversions, PET's pricing volatility actually adversely affects its appeal, said Tim Burns, managing director of research at McDonald & Co. in Cleveland.

``With resin cheap and plentiful we can assume a PET growth spurt in 1997,'' Burns said. ``PET resin capacity is under scrutiny and prices are below sustainable levels at the present. Wholesale conversions for PET from glass or metal are unlikely. 1997 will see 10-15 percent growth in PET containers.''

Burns spoke at Polyester Packaging: ``The Critical Path Ahead,'' held May 28-30 in Newark. The conference was sponsored by Packaging Strategies Inc. of West Chester, Pa.

However unlikely wholesale conversions may be, PET offers many packaging benefits, including continuing improvements in production that are dwarfing glass, metal and paper, he said.

But competition from metal and glass is intense, Burns added. Those materials are fighting to maintain market share. In addition to recyclability issues, PET packagers must choose the right markets in which to compete. Wine, liquor and specialty food sauces may stick with glass because of consumers' preferences.

According to Burns, PET's target markets are carbonated soft drinks, beer, food, milk, and health and beauty products.

Carbonated soft drink consumption will grow about 2-3 percent a year. In North America alone, carbonated soft drinks are a 110 billion-unit market, Burns said.

``Glass is gone; the beverage can is the target,'' he said. He predicted that PET will not have success going head-to-head with 12-ounce, single-serve bottles.

Burns had strong opinions concerning packaging beer in PET and questioned whether plastic packaging is a requirement for success in marketing beer. Consumers, who like the cool feel of aluminum or glass, may not like the warm feel of plastic even though it keeps the liquid cooler inside.

``Plastic will emerge in the beer packaging mix as the niche for the `gutter bottle','' he added.

Although competition from glass and metals is well-established, many opportunities remain for PET packaging in hot-fill and select, large serving-size specialties, said Burns.

``Food is a more problematic market for PET,'' said Gordon Bockner, president of Business Development Associates Inc. of Stamford, Conn.

``There are 12 end-use markets of 200 million packages or more, which can reasonably be considered target markets for PET within the next five years. Taken together, these 12 market segments represent a total current market of 6.5 billion packages, of which a bit more than two-thirds are traditional glass markets,'' Bockner added.

Products already converting to PET include peanut butter, edible oil, ketchup, pourable condiments and barbecue sauce. PET represents 74 percent of the packaging of these products, while glass holds 26 percent. Some reasons for the switch to PET include durability and squeezability.

Several significant food markets have not significantly converted to PET. These include spoonable condiments, pickles, instant coffee, spaghetti sauce, salsa and taco sauce, jam and jelly and applesauce. This yet-to-be-converted segment is 30 percent bigger than the segment that already is converting.

Business Development's study did not include baby food and beer.

Bockner sees no performance issue preventing the conversion of spoonable condiments.

Reformulations and repackaging will take center stage as PET wins milk shares. Whereas dairies are at ease with high density polyethylene and self-manufacturing, dairy consolidation and success in the market require unique products that PET can deliver, he said.

Health and beauty products demand special service and attention. Competition with PVC, HDPE and polypropylene is stiff, he said.

``The clear packaging thrust is running out of gas,'' he said.

Burns added that machinery makers like Husky, Sidel and Krones AG will be the biggest beneficiaries from positive PET growth trends.