Every time resin prices bounce around, Larry Goldstein sees an opportunity to walk out the door.
As executive vice president of resin purchases at Berry Plastics Corp. - the Evansville, Ind.-based firm that ranks as America's largest maker of injection molded packaging - Goldstein is responsible for buying almost 800 million pounds of resin every year. But the unpredictable nature of prices for those materials is preventing the industry from growing at a faster pace, Goldstein said at Chemical Market Associates Inc.'s World Petrochemical Conference, March 21-22 in Houston.
Goldstein described resin price volatility as ``a major factor in destroying resin demand growth'' in polyethylene and polypropylene. According to the American Plastics Council, annual U.S./Canadian PE demand growth was 6.3 percent from 1995-99, but cratered to less than 0.1 percent from 2000-06. In PP, annual demand growth was 6.5 percent from 1995-2002, but slowed to 0.7 percent from 2002-06.
``Consumer packaged goods firms want cost certainty,'' Goldstein said. ``If they don't know what it's going to cost, they might not buy your product.''
Goldstein - who joined Berry in 1997 and has been in the plastics industry since 1984 - cited several examples of material selection that went against plastic in the last several years.
In 2003, raisin maker Sun-Maid Growers of California relaunched its paper canister for the export market into a squared-off PP container, which was reusable and easier to ship. But in 2005, the firm put its domestic canister product into a squared-off paperboard unit.
``In that case, there would have been growth for our business, but price volatility prevented it,'' Goldstein said.
Several yogurt makers also have eliminated PP yogurt lids in favor of a film covering. A major supermarket chain also stopped using 10-pound PP containers for salad, in favor of a plastic bag inside a cardboard box. In the ice cream market, Goldstein said a major supplier recently switched from half-gallon PP tubs back into paperboard - even though consumer studies showed a preference for plastic because of its ability to preserve taste and reduce yellowing and freezer burn.
``That [ice cream] decision went against what the company's marketing department wanted to do,'' Goldstein said.
For its part, Berry - which sells to big-name firms such as McDonald's, Kraft and Yoplait - is working with its major resin suppliers and with financial institutions in an attempt to reduce price volatility. The firm - with 2006 sales of almost $1.5 billion - also is using plastics futures that have been introduced by the London Metal Exchange.
``Volatile pricing causes volatile resin demand,'' Goldstein said. ``That doesn't sound like a winning strategy.''
Goldstein also emphasized the industry's need to ``improve resins regardless of feedstock.''
``We need resins that will run faster, with increased mold cavitation and reduced part weight in order to take cost out,'' he said. ``We also need to look at nonhydrocarbon-based resins and improve our recycling infrastructure.''
``Companies that are doing nothing to reduce price volatility are out of business because they couldn't pass on costs.''
Goldstein added that although imports of finished plastic products from overseas markets also played a role in lowering resin demand, it was ``hard to quantify the impact'' of those imports.
``My dad had an injection molding business, and he was losing business to overseas markets in the 1970s,'' he said. ``I'm not sure if there's a larger headwind now than there's always been.''