Tim Burns, principal of Cranial Capital of Solon, Ohio, delivered an ominous warning to plastics packaging makers at the recent Packaging Strategies conference:
``Plastics is entering the sunset phase of its life,'' said Burns, a financial analyst who has followed packaging companies for 19 years and before that worked seven years for several packaging firms.
Burns hastened to add that plastics won't disappear - it's just that growth is no longer a given.
``Take it into context, please. Plastics will no longer just, you know, without care, destroy metal, paper and glass. Plastics will start to chew on its own leg. And that changes the ballpark and playing field quite dramatically, if you're in that industry.''
Asked to elaborate in a March 13 telephone interview, Burns stood by his words. Plastics no longer will constantly grab market share.
He compared the plastics situation to beverage cans, a sector where growth disappeared, and manufacturers had to restructure to improve profitability and return on invested capital.
``The plastics industry needs to learn from that experience. The growth doesn't go on forever. People ought to wake up and realize the free ride in plastics is no longer. The growth rate of plastics has been two, three, four times that of glass and paper, largely due to better features and cost performance,'' he said. ``Plastics has fed at the trough for a long time. A lot of that tail wind is not going to be there.''
He said plastics processors have to keep it simple and focused. For instance, instead of five business units that are bleeding to death, a company should shed nonproductive units and focus on areas where they can add value.
A panel of experts at the conference, held in Ponte Vedra Beach, touched on other trends, including consumer-driven packaging design; top-floor to shop-floor connectivity; collaborative focus in packaging machinery; and a need to emphasize the supply chain. Panelists came from outfits including Georgia-Pacific Corp.; Packaging World magazine; several consulting firms; and the Packaging Machinery Manufacturers Institute.
Despite Burns' remarks, several experts believe plastics can and will take market share, including replacing glass and metal in markets like the baby food and diced fruit markets.
``It [Burns' commentary] probably was meant to evoke discussion as much as anything,'' said Jeff Wooster, senior value chain manager for Dow Chemical Co., based in Midland, Mich., in a March 16 telephone interview.
``It's a little premature on his part to say plastics is about to enter a downward spiral,'' Wooster said. ``We think that there's a huge amount of opportunity.''
Wooster pointed to several areas, including flour sacks, and emphasized the need to look at the opportunities in modified-atmosphere packaging, including fresh fruits and produce.
Megaretailers and time-constrained consumers will continue to influence market needs.
``I think the retailers want to have the produce prepackaged,'' Wooster said. ``It helps them to have something washed and ready to use. Time-hurried consumers are interested in something that helps them make time. The continuing evolution of materials will facilitate greater use of [modified-atmosphere] packaging.''
In the panel discussion, one official emphasized that materials won't change the future. Citing examples like the Domino's sugar bag that has been converted from paper to a plastic container, Dan Abramowicz, executive vice president of technology and regulatory affairs for Crown Holdings Inc. in Philadelphia, said consumers ultimately will drive changes.
``This is a package that has been around forever, the bag of sugar,'' he said in his Feb. 27 presentation. ``No more mess, no more ripping. This isn't a new plastic. But no longer do I have to pour, spill, and clean up. It's a design feature. I'm not saying that materials aren't important. I'm not saying that technology isn't important. But the drivers are meeting the customer needs. The customers are the consumers, retailers and the brand owners.''
According to Ed Lerner, senior manager of packaging and materials for Georgia-Pacific Corp. of Atlanta, the primary focus should be on the supply chain.
``A couple years ago, I was quoted in Packaging Strategies as saying that consumers don't know the difference between polyester and Pollyanna. That was accurate, by the way,'' he said. ``What I'm going to tell you today I also believe strongly is true ... I think we really need to focus on the supply chain.
``True package innovation can be duplicated in 12 months to 18 months. There is a minimum of $1 billion in savings to be gained in the consumer products industry by focusing on supply chain damage reduction, cube utilization, racking quality, all the other things that we don't spend our time as packaging engineers and a consumer industry, focusing on. The keys to our success need to be damage reduction, packaging standardization, data synchronization, and standardizing, standardizing, standardizing.''
Expect to see more remote diagnostics, maintenance and control features and network systems on packaging machinery, said Charles Yuska, president of the Packaging Machinery Manufacturers Institute of Arlington, Va.
``Why? Because our customers are demanding it,'' he said. ``They are looking for flexibility. Again, their customers are putting tremendous pressure on them to be more flexible. Speed to market is becoming more and more important to them.
Pat Reynolds, editor of Packaging World magazine, emphasized top-floor to shop-floor connectivity based on Web-based technology.
``When this kind of interconnectivity becomes more of a reality, it will mean that manufacturers can much more aggressively go into what you might call a respond-to-demand model as opposed to a produce or inventory model,'' he said. ``And these days, as we've seen already, with speed to market being so important and margins being so thin, there just isn't time for any other model these days.''
Lynn Dornblaser, director of consulting services for market research firm Mintel International Group Ltd. in Chicago, spoke of changing demographics.
``It is in fact all about us baby boomers,'' she said. There are 77 million U.S. baby boomers turning 60. Tomorrow's older consumers, she said, will demand packaging to meet their physical needs. Virtually no packaging exists for the physical needs of the older consumer.
Folgers, for instance, has done a great job with its plastic canister, which is approved by the American Arthritis Foundation. More of that type of packaging is needed to address the market needs of these consumers, she said.
Opining on what he thought of each panelist's focus, Burns said there's no one-dimensional fix. Companies can't cost or price their way out of problems.
``You can't innovate your way out of problems, solely. You can't acquire other companies and mask your difficulties that are simmering beneath the surface. You can't just geographically expand away your difficulties,'' he said.
``What you can do is all of those all of the time. Successful companies today are doing every one of those facets day in and day out. It's not just low-cost; it's innovative. It's not just Florida; it's Finland.''