Plastic packaging is primed for growth in China, according to several sources who presented data at China Pack.
``The plastics [packaging] market is underdeveloped,'' said Graham Cox, head of international and strategic consulting with Pira International Ltd.'s consulting group in Leatherhead, England. ``But growth in that material will be double-digit.''
Cox spoke at the Chicago conference, hosted May 23-24 by IntertechPira.
Factors driving growth include rising gross domestic product, trends such as the rising middle class and aging population, increased consumption of prepackaged foods and growth in big retailers like Wal-Mart Stores Inc. and Europe's Carrefour Group and Tesco plc.
Other factors include increasing concern about the environmental and recycling issues. There's also more focus on personalization, more demand for smart and secure packaging, and brand protection issues, he said.
There is potential growth for cosmetics packaging, especially in skin and hair care. Food and beverage packaging is forecast to grow because of improving living standards, and the use of PET bottles for beer is a huge opportunity, Cox said. China, for example, is the largest global market for cigarettes and beer.
Overall, rigid plastics will be the fastest-growing sector and metal packaging will lose market share to plastics in beverage markets. There will be a sharp increase in demand for PET bottles, fueled by growth in bottled water and soft drinks and high density polyethylene in dairy.
The flexible packaging sector will benefit because of increased consumption of packaged food, especially meat, fish and ready-to-eat meals. The market will experience a decline in market share of food cans.
Japan, China and India are the three largest packaging markets, Cox said, with Japan leading in per capita consumption in Asia, followed by Taiwan, Singapore, South Korea and Hong Kong. The sector is forecast to rise at a compounded average annual rate of 6 percent during the next five years. China and India are expected to lead the charge in terms of growth rates. The packaging sector will grow faster than GDP in most countries in the region.
Still, to do business there, Western companies must understand the factors influencing how companies in the Asia region operate. In China in particular, the business mantra is ``Observe, imitate, overtake,'' Cox said.
But he urged Western companies to invest or become active in China. The reasons include the need for companies to create new revenue streams, follow customers, find new customers, access lower-cost raw materials and take advantage of lower-cost manufacturing bases.
``There's also the risk of the threat of doing nothing,'' Cox said.
Main barriers or obstacles to entry include financial and political risks, lack of knowledge of the local market, lack of skilled resources, legal issues, weak intellectual property enforcement and brand protection, and a high level of complexity and change.
Christian Rommel, managing director with Rox Asia Consultancy Ltd. in Hong Kong, said companies entering China have to be aware of cultural differences, including the attitudes among workers they might employ.
``The word loyalty doesn't exist,'' he said. ``There is a high degree of job hopping that you can't even imagine.''
Still, many companies want a presence in China, noted Tom Schneider, a certified packaging professional and past president of the Institute of Packaging Professionals in Naperville, Ill.
Western companies may want to consider export and/or distribution via third parties, establishing their own sales, marketing or distribution networks, joint ventures with local partners, acquisitions or majority shareholdership, building a plant or licensing technology, he said.