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T h eF i n d i n g s o f a nE n dU s e r Ma r k e t R e s e a r c hS t u d yt h a t E x p l o r e s t h eI s s u e s o f P a c k a g i n gi nt h eB e v e r a g eI n d u s t r y
2009 Beverage Industry Market Packaging Machinery Manufacturers Institute 4350 N. Fairfax Drive Suite 600 Arlington, VA 22203 (703) 243-8555
Research Study
Publication Date: December 2009 Director of Research and Surveys: Paula Feldman, PMMI The Business Intelligence Committee hopes that you find the results of this study valuable in managing your business. Jack Aguero, Chairman, Business Intelligence Committee, Pro Mach, Inc. Randy Bell, Pearson Packaging Systems
Leo Petrokonis, Rockwell Automation
Gregory Berguig, Packaging Aids Corporation
Neal F. Nordling, Multifeeder Technology, Inc.
Randy Cotteleer, EPI Exact Packaging, Inc.
Adam Rosenthal, Bosch Packaging Technology
Len Dube, Omega Design Corporation
Gary L. Saunders, Magnum Systems, Inc.
Ginny Fox, 3M
Keith Schafer, Nordson Corporation
Ben Garvey, Garvey Corporation
Alan Shuhaibar, BellatRx Inc.
John A Gray, PIAB Inc.,
Chuck White, Econocorp, Inc.
Greg S. Levy, ARPAC
Steve Windham, Omron Electronics LLC
Barry Meyer, Wexxar Packaging Inc.
© 2009 Packaging Machinery Manufacturers Institute, Inc. All rights reserved. The information contained herein shall not be distributed or shared by the recipient. No part of this document may be reproduced without the express written permission of PMMI. © 2009 Proactive Worldwide, inc. All rights reserved. Proactive Worldwide, PWW, Out in Front, 20/20 insight, Powersource, ci navigator, and Business intelligence taskforce are trademarks, registered or pending, with the United states Patent and trademark Office. Product names mentioned herein may be trademarks and/or service marks of their respective companies.
Table of Contents Perspective
Report Findings
Appendix
5 Beverage Packaging Industry Trends
13 Size of the U.S. Beverage Packaging Market
33 PMMI’s Competitive Situation
6 Lessons Learned by Beverage Manufacturers and Expectations of Packaging Manufacturers
14 Future Growth Projections by Package Type
33 Project Scope
17 Future Growth Projections by Material
7 Supply Chain Issues 7 Regulatory and Standards Issues 10 Overall Concerns, Threats and Opportunities 11 Beverage Segment Priorities
19 Beverage Industry Trends
20 Beverage Packaging Trends
22 Trends in Specific Beverage Categories
36 Methodology 37 Demographics
39 Code of Ethics
23 Concerns Facing Beverage Manufacturers
23 Segmentation of Beverage Manufacturing Needs
24 Beverage Manufacturer Mistakes
24 Beverage Manufacturers’ Expectations of Packaging Manufacturers
26 Economic Impact on the Beverage Packaging Industry
27 Beverage Manufacturers’ Supply Chain Issues
28 Supply Chain Issues in the Alcohol Segment
28 Secondary Packaging Issues
29 Issues with Specific Packaging Components
30 Regulatory & Standards Issues
31 Safety and Traceability
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37 Profile of Respondents
Executive Summary and Perspective • Executive Summary and Perspective
Executive Summary and Perspective
E x e c u t i v e Summar y a n d P er s pe c t i v e
The beverage packaging industry in North America is estimated to be $22.8 billion in 2009. The most popular material at present and for the foreseeable future is plastic, with over 40 percent of the market. Bottles are the most popular packaging type with over 55 percent of the market. Plastic as a packaging material and bottles as a packaging type will provide the vast majority of incremental sales increases of beverage containers over the next 10 years.
Beverage Packaging Industry Trends The beverage packaging industry is experiencing increasing innovation in design, materials and efficiency to meet cost and environmental concerns while trying to entice splintering consumer groups. The top trends in the industry are the following: • Beverage manufacturers are increasingly trying to attract consumers with eye-catching single serve packaging.
- Increased competition in the beverage market has resulted in an attention grabbing arms race which is expected to fuel new packaging innovation concepts specifically within single serve containers. Profitable sales from single serve containers, which typically offer high margins, will help fuel innovation efforts.
• Costs and environmental impact concerns are pushing manufacturers to innovate cost effective “green packaging”.
- Most respondents expect upcoming regulations to be much stricter in reducing the carbon foot print of each package type.
- Beverage containers of the future are forecasted to openly advertise sustainability and environmentally-friendly ratings that consumers will increasingly consider within their purchasing decision criteria.
• Plastic is the material of choice in many beverage segments because of its future of cost effective, rapid innovation into lighter, more eco-friendly packaging. • The packaging materials of glass and aluminum have limited innovation opportunity. • Beverage manufacturers want beverage packaging companies to more quickly develop machinery that supports the latest container technologies. • Pouch containers hold the most opportunity for rapid growth as new manufacturing technologies place cost and speed of pouch beverage production in line with high speed glass bottle production.
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E x e c u t i v e Summar y a n d P er s pe c t i v e
- Compared to glass, pouches are very space efficient and offer significant savings in transportation and storage. Environmentally, pouches use far less landfill space than plastic. Some pouches are 100% biodegradable.
• Aside from alcoholic beverages, most beverage manufacturers are trying to minimize secondary packaging to cut costs and reduce the overall carbon footprint. Retailers also want streamlined secondary shelf ready packaging that saves time and money in stocking shelves The implications of these combined trends are the following: • Fast responding packaging providers who focus efforts on single serve green packaging will help beverage manufacturers gain a first mover advantage in the industry as consumer preference incents beverage manufacturers to offer innovative green packaging concepts with environmentally friendly ratings. • Secondary packaging manufacturers will be under increasing pressure to provide solutions with a smaller environmental footprint. Those that are the first to provide green solutions are expected to gain a significant customer base of beverage manufacturers trying to capitalize on new green package ratings.
Lessons Learned by Beverage Manufacturers and Expectations of Packaging Manufacturers Beverage manufacturers admitted that the biggest mistakes they have made are being slow to understand shifting consumer preferences. These companies are now racing to catch up and are pushing beverage packagers to innovate and respond quickly. To mitigate this in the future, manufacturers are looking to their packaging suppliers for more aggressive time frames in delivering the equipment necessary to provide the latest container innovations. In response to the market demand for beverages in many different package types and sizes, beverage manufacturers are asking for flexible machines that can work with several types of packaging options and sizes. Where beverage manufactures seem most dissatisfied with packaging manufacturers is in service and support. Service was seen by a number of respondents as barely adequate and often lacking in many areas. The key takeaways are: • Developing and offering versatile packaging equipment may be key to gaining sales. The ability to handle multiple designs, sizes and materials presents beverage manufactures with the benefits of reduced production line changes, greater space utilization, and reduced downtime and change outs. • Packaging companies offering superior service and support would be able to address an unmet need of many beverage manufacturers.
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E x e c u t i v e Summar y a n d P er s pe c t i v e
Supply Chain Issues One supply chain issue affecting respondents across all ary packaging. Although it enables safe transport and quick age manufacturers and retailers are looking for innovations and unnecessary waste (particularly in light of environmental
beverage categories is secondand easy in-store displays, beverthat will reduce the weight, cost, concerns) of secondary packaging.
A key takeaway is: • As beverage manufactures work to reduce secondary packaging, they are seeking innovation assistance from suppliers and packaging providers. Respondents from some smaller companies noted their significant challenges in acquiring raw materials in time for production needs. Large beverage manufacturers can lock out smaller manufacturers through large raw material contracts.
Regulatory and Standards Issues Not surprisingly, further regulation of the beverage industry is expected to increase costs for manufacturers to meet any new requirements. Costs are therefore becoming more of a concern than in previous years and fear of regulatory changes is driving a new amount of pressure on vendors to reduce costs. As the leader in U.S. environmental initiatives, the state of California has the attention of most beverage manufacturers. Pending legislation would require that each beverage container retain its cap is expected to be difficult to achieve. New standards regulating the amount of packaging relative to the amount of product is also causing concern. Additionally, upcoming nutritional label requirements are causing many companies to postpone any label changes and in general have beverage manufacturers concerned that the label will consume too much of the package. A key takeaway is: • Overall, vendors who keep tabs on the industry and its future challenges, as well as provide solutions quickly, will be viewed as front runners in the packaging world. Carbonated Soft Drinks Some carbonated soft drink respondents see their industry responding to health concerns by developing a wide variety of healthy niche products that align with the consumer preferences of “fun” and “good for you.” Across all segments, nearly all respondents talked about the upcoming green packaging as a trend, but carbonated soft drink respondents differentiated themselves by stated that their segment will more quickly be moving away from glass and aluminum in favor of bio degradable plastic. For enhanced safety measures, respondents expect the traceability of products to be greatly bolstered, to the point where each primary ingredient will be traceable. While traceability of primary ingredients was a growing challenge from the safety point of view, there is far less if any mention about traceability related to packaging.
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E x e c u t i v e Summar y a n d P er s pe c t i v e
The key take-aways for carbonated soft drinks are: • The increasing emphasis on health is expected to fracture the carbonated soft drink consumer group into many niche groups. This will drive packaging innovation as the manufacturers seek to differentiate products. • Consumers in this segment are expected to migrate the fastest to green packaging. This will offer significant growth opportunities to packaging suppliers that are the first to serve beverage manufacturers with green packaging options. • Traceability of primary and secondary packaging does not appear to be a concern among respondents. Water A concern within the bottled water industry is that the secondary packaging most often used on multipacks was too flimsy and did not provide adequate protection to the water bottles. Respondents were mixed on whether or not to prioritize green packaging so that it becomes a marketing advantage or to simply be compliant in future regulations. In regards to standards, many respondents believe that sanitation will be the center of attention to ensure water supplies and bottling processes are safe. The key takeaways for the water segment are: • Packaging suppliers should develop more robust secondary packaging applications for bottled water manufacturers. • Some bottled water companies may miss an opportunity to improve the bottled water industry image through superior green packaging solutions. Non-carbonated Soft Drinks Diverging from most other areas, respondents in the non-carbonated soft drinks category see packaging shifting towards a “less is more” philosophy. Packaging is expected to be focused on simplicity with fewer frills in labeling. Some even believe that containers will be designed to be reusable to minimize the carbon footprint. Cost is definitely a concern for nearly all respondents but non-carbonated soft drink companies specifically stated that they want help acquiring new packaging equipment through better financing options from packaging suppliers. Some of the new packaging equipment purchases will be made to upgrade labeling equipment as some non-carbonated soft drink manufacturers complained that they are having problems correctly placing labels on bottles in exactly the right place. Beer / Wine / Spirits Respondents as a whole in this segment believe that there is a trend to create a more premium image of their products. For beer manufacturers, the establishment of microbrewery-type products and innovation in the varieties of beer have created a demand for packaging to better distinguish brands. This is resulting in a faster label and packaging innovation. There is also an expected resurgence of aluminum bottle packaging which helps reduce weight while continuing to protect the product.
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E x e c u t i v e Summar y a n d P er s pe c t i v e
On the wine/spirits side, the move toward premium is a major race. This is creating a resurgence of unique bottle types and premium closures which represent a notable challenge to packaging suppliers. This trend has no major sign of slowing. Looking to the supply chain, the largest concerns are with the quality of glass that beverage manufactures are receiving. For beverage manufacturers that use glass containers, providing a more durable product could trump the demand for lighter product. A nuance for the spirits industry is that a wide majority of respondents believe that taxes through government regulation are going to change the beverage packaging industry by forcing smaller beverage manufactures out of business. The key takeaways are: • Companies that can innovate quickly from a packaging point of view will stand out as more and more companies are unable to provide solutions to complex bottle demands. • While many believe that the new taxes are inevitable, most believe they can stave them off through aggressive lobbying. Energy Drinks Energy drink manufacturers see their corner of the beverage industry as a hyper competitive market driven by a young consumer group on an endless quest for something different for the sake of being different. In response to this perspective, energy drink manufacturers stood out from the pack in that they appear to hold the most innovative vision for beverage packaging. Respondents in this segment see packaging as a way to not just differentiate from other beverages but differentiate to the level of being exotic and a fashion statement for its drinkers. An unutilized way to offer value and appeal to consumers with more of a fresh face multiple times a year is through seasonal packaging. Juice Similar to energy drink manufacturers, those in the juice segment were much more vocal in seeing packaging as an area to be very different and stand out from the pack with truly innovative packaging. This segment also believes that they will buck the trend of reducing package sizes by developing larger consumer packages to differentiate and demonstrate value. Juice manufacturers are expected to drive for packaging solutions that increase shelf life of juices and offer a premium drink appearance. A key takeaway is: • Both the energy drink and juice segments offer leading edge beverage packaging suppliers the most opportunity to sell innovative technologies.
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E x e c u t i v e Summar y a n d P er s pe c t i v e
Overall Concerns, Threats and Opportunities The graphic below lays out the most significant concerns of beverage manufacturers, the threats to the beverage packaging industry, and the top opportunities for packaging manufacturers. While a majority of the concerns and some of the threats were discussed in interviews, the opportunities were developed by the research team.
Largest Concerns
Top Opportunities
• Packaging equipment is not flexible enough to handle different packaging types and sizes.
• Develop equipment that is flexible and can be modified for different package type and sizes.
• Lack of packaging manufactures’ assistance in driving down cost of succeeding with costumers. • Insufficient financing options. • Quality of glass bottles going down. • Warranties with insufficient length and coverage on manufacturing equipment. • Poor technical service from equipment providers.
• Partner with large beverage manufacturers to help innovate new green packaging options and green manufacturing processes. • Help develp primary packaging designs and streamlined secondary packaging options that require much less protective secondary packaging to support beverage manufacturers in cost cutting and carbn footprint cutting initiatives.
Threats • Industry consolidates because increased costs and taxes drives smaller beverage manufactures out of business. • Increasing consumer awareness of carbon footprint of beverage packaging drives down consumption of single serve beverages and gives birth to a practice in which quick service restaurants provide beverage “fill and go” refilling service of beverage container bottles. • Protracted green packaging legislation beverage packaging equipment purchases.
• Provide consulting services to customers to help them best lay out manufacturing plants for the greatest efficiency.
stalls
• Offer premium technical service to customers willing to pay extra. • Develop more efficient manufacturing equipment that enables beverage manufacturers to save on energy costs and reduce their carbon foot print. • Develop beverage manufacturing cost reduction expertise and provide consulting services to beverage manfacturers to help them cut costs out of their manufacturing systems.
Supplemental consulting services would not only provide additional revenue streams and help a packaging manufacturer stand out, but also could provide more in-depth relationships with beverage manufacturers that could translate into greater brand loyalty and more responsive packaging development teams. To succeed in the future, packaging suppliers will need to be highly responsive to beverage manufacturers’ needs and requests. Packaging manufacturers who take advantage of the top opportunities, particularly by
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E x e c u t i v e Summar y a n d P er s pe c t i v e
providing more kinds of improved services and who can meet other self-identified needs of the beverage manufacturers will be the ones to succeed.
Beverage Segment Priorities Below is a table that grades a number of different packaging factors across the beverage industry. (Grades are as follows: A means most important, B means less important, and C means least important.) Based upon the research team’s findings and the limited number of interviews, the research team believes this table effectively reflects and compares the priorities of different beverage industry segments. These grades reflect how each segment generally differentiates itself from other beverage segments. For instance, energy drink companies differentiate themselves by prioritizing convenience though multiple sizes, uniqueness of packaging and speed of innovation. Packaging providers can use this chart to more appropriately frame conversations around needs of customers within each industry segment.
Importance of Packaging Factors across Beverage Industry Segments All Beverage Manufacturers
CSD
Water
NonCSD
Energy
Beer / Wine / Spirits
Juice
Cost Savings
A
A
A
A
B
A
B
Green
B
A
A
B
B
B
B
Convenience
A
A
A
A
A
B
A
Durability
B
B
A
B
B
A
B
Uniqueness of packaging
B
B
C
B
A
B
A
Speed of innovation
B
A
B
B
A
C
A
The beverage packing industry is evolving and this is stimulating significant competitive behavior and consumer attention. While increasing costs are a major concern, beverage manufacturers are willing to pay for product, service and packaging solutions that help them differentiate and capture consumer segments.
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