Consolidation, globalization and a strong U.S. economy will help plastics packaging continue to grow in 1998, both in existing segments and new niche markets.
``Packaging follows the economy directly,'' said Bill Pflaum, executive director of the Institute of Packaging Professionals in Herndon, Va. ``If the economy stays healthy, packaging stays healthy. Plastic packaging has overcome some environmental business; it has proven its value in the field and continues to do so.''
If 1997 was any indication of what is to come, mergers and acquisitions will influence the plastic packaging industry. This year the wild card is BTR plc and its U.S. blow molding unit, Continental PET Technologies Inc. in Florence, Ky.
BTR of London expects to sell Continental PET by the end of the year — analysts in Britain said Owens-Illinois Inc. of Toledo, Ohio, is among about 20 firms vying for the prize. Continental PET has North American sales of about $600 million, and operations in Hungary and Brazil, making it attractive to globally minded firms.
``We see an increasingly global marketplace. Our customers and suppliers operate multinationally,'' said Dennis Kester, senior vice president of plastic packaging at American National Can Co. in Chicago.
``There is a more global focus in the industry,'' said another packaging industry spokesman. ``U.S. producers are buying international assets and vice versa.''
Industry leaders like Crown Cork & Seal Co. Inc. of Philadelphia, Schmalbach-Lubeca Plastic Containers of Manchester, Mich., and Ball Corp. of Muncie, Ind., have customers that are already looking beyond the mature U.S. market to pursue faster-growing international business.
According to the Flexible Packaging Association in Washington, the flexible packaging industry continued to consolidate at record levels in 1997. Twenty-nine transactions were expected to be completed, and several involved international companies.
``We expect the flexible packaging business to remain very competitive in 1998 as industry consolidation continues in North America and Europe,'' Kester added. ``This environment creates both challenges and opportunities for growth and, at the same time, requires very efficient operations.''
Pflaum disagreed with assertions about how consolidation and globalization will affect the industry.
``I don't think consolidation will affect packaging,'' Pflaum said. ``The games that are played at a corporate level, consumers don't care as long as the product is delivered. Overseas competition is not very important to the marketplace. Most markets around the world are growing and absorbing the local energy.''
``The trend will be sideways with acquisitions or growth from within in one area,'' said Gregory Auth, vice president of sales and marketing in the specialty products group at Tenneco Packaging of Lake Forest, Ill.
As in recent years, PET will command attention in packaging markets, replacing glass and other plastics. However, polyethylene naphthalate is beginning to find use in niche markets.
``PEN will not be a significant contributor to growth in bottles,'' said Frank Mechura, president of Constar Inc., a unit of Crown Cork & Seal. ``At its current cost, it is not economical.''
These include films, alcoholic beverages and cap liners. As well, variations of PEN/PET blends are becoming more popular as packagers look for inexpensive materials with good barrier qualities.
Raw material costs may be more of a driving force this year than in the past with higher aluminum prices and low PET costs.
``It's hard for customers to comprehend the ups and downs of PET resin pricing,'' said Shelly Steele, spokeswoman for Schmalbach-Lubeca. ``We see more stable pricing in 1998; we'd like that because it is unsettling for everyone.''
Mechura expects to see double-digit growth in PET carbonated soft drink bottles with increased use of single-serve sizes. And, he added, there is no end to the very rapid growth in PET water bottles. New companies are entering that market and the leaders are growing.
Other package innovations to keep an eye on are stand-up pouches, pouches with zippers, modified atmosphere packaging and home meal replacement packaging.
``There continues to be a shift from rigid to flexible packaging and some companies are packaging their products in both,'' said Susan Dorn, spokeswoman for FPA. ``Companies are trying to increase the shelf life of products. Now there are breathable bags for veggies, and firms are still striving for better barrier performance.''
Processors are now looking at what happens to a package when a consumer discards it.
``1998 will be a year when recycling of PET will become an even more important issue,'' said Mechura. ``In the long run, we have to look at supply and demand on resin. Consider the effects of potentially reusing post-industrial or post-consumer waste. It has to happen, the issue is when and how will it be recycled.''