At a recent plastics industry conference, I had the pleasure of watching a presentation by a senior manager of a rapidly growing manufacturer of plastics packaging. He shared numerous insights, and I was particularly interested in his outlook for future market demand for plastic products and how this outlook shaped his company's competitive strategy.
His forecast called for total market demand of plastics packaging in the United States to increase at a rate no faster than the growth in the overall U.S. gross domestic product. The packaging industry is large, diverse and mature; therefore, demand for packaging products is dependent on population growth and the underlying health of the macroeconomy. This outlook corresponded with the trends that I have observed in the industry for the past few years.
His company's strategy for the future was to use this moderate rate of growth in total demand as a tailwind. He went on to explain that his company expected significantly greater rates of internal growth that would be achieved through innovation and gains in market share. In other words, the external conditions that currently prevail are conducive to good, old-fashioned competition. His strategy is to be one of the winners.
Given current market conditions, I cannot offer better counsel than that.
With that in mind, I offer a chart with my forecast of the rate of growth in U.S. consumer spending on food. The Commerce Department defines this as expenditures on food products purchased for off-premise consumption. This is spending on food products at grocery stores, not at restaurants. It is the biggest end market for plastics packaging products such as film, bottles and caps and closures.
I like this data series better than overall GDP as an indicator of trends in the packaging sector. The differences are subtle, but there are times when the trends in food spending and in the overall economy will vary.
The chart shows that spending on food products has been steadily chugging along at a 2 percent rate throughout the entire year. This is a little better than the average rate in 2016, and it is noticeably slower than the average rate we enjoyed in 2014 and 2015. If you calculate the average annual growth in this category since the recession ended in 2009, you get a rate of 2.5 percent. Keep in mind I have created this chart to show the rate of growth in the data, not the actual spending levels.