Packaging Trends – North America
End-Use Markets Summary
The folding carton end-use markets can be grouped into three broad categories: growth markets, mature markets, and declining markets.
We classify three end-use markets as growth markets, which are those that can expect tonnage shipments to grow at a pace of more than 1% per year during the next five years. These markets are: pharmaceuticals, beverages, and frozen foods. All of these markets have encountered extremely rapid growth in consumer spending during the past decade, and consumer spending in these segments should remain strong during the next five years. This growth will be sufficient to override the trend toward product substitution, whether that comes from overseas imports of those consumer goods or an increased use of alternative packaging materials. These markets are also served to a high degree by the virgin (bleached or unbleached) boxboard grades, which are not facing as much pressure on the cost front as the recycled grades.
The mature markets are those that can expect tonnage shipments to grow between 0% and 1% annually during the next five years. The list of these markets is quite long: biscuits and crackers, dry foods, retail carryout, perishable baked goods, cosmetics and toiletries, dairy products, and converted paper products. The five-year growth profile for all of these markets is relatively flat. The main trait that these markets share is relatively slow growth in consumer demand, and even slower growth on the manufacturing front
due to the influx of imports of these goods. Many of these markets are also expected to face increased competition for market share from packaging materials such as plastics during the next five years.
The declining market classification is reserved for the seven markets that are expected to record a downward trend in shipments during the next five years: confections, meat products, recreational products, soap and other cleansers, hardware, tobacco, and the broad miscellaneous goods category. These markets have faced challenges from shifts in consumer spending patterns, rising imports and losses in market share in the past. These trends will likely continue in the near future.
End-Use Markets Overview
As with the previous year, this past year has been a volatile time for the Consumer Packaged Goods (CPG) industry in the United States. Some of the significant developments influencing CPGs were:
- Developing programs to meet RFID requirements as companies and the Department of Defense dictate their needs
- New labeling standards for foods in development including trans fats and allergens including the possibility that allergens used in packaging (soy inks, starches) may need to be labeled as well
- Changing demographics and consumer needs
- Increasing competition from China and other developing nations
- New nutritional standards, diet fads and obesity – the switch from no carb to low carb to whole grains and the continuing search for the “holy grail” sugar substitute
- Continued consolidations of the retail and converting industries
- Price pressure from suppliers and customers
These challenges have put intense pressure on both food and non-food manufacturers. In spite of these challenges, many of the end-use segments are growing strongly and a good number of the mature markets are expected to remain steady. Packaging is a primary vehicle for meeting many of these challenges successfully.
Three of the end-use markets, pharmaceuticals, beverages, and frozen foods, remain the most successful markets for converters. These markets have experienced rapid growth in consumer spending during the past decade while continuing to be strong folding carton markets. Consumer spending in these segments should remain strong during the next five years and, while there is strong competition from other substrates, cartons remain very competitive.
There are also a large number of mature markets that we can expect relatively flat growth in the next five years. Those include confections, retail carryout, recreational products, dairy products, converted paper products, cosmetics & toiletries, perishable baked goods, biscuits and crackers, meat products, and the broad miscellaneous goods categories. The main trait that these markets have in common is relatively slow growth in consumer demand, and even slower growth on the manufacturing front due to the influx of imports of these goods.
Last year, retail carryout, and cosmetics & toiletries were considered growth markets for cartons, and now both are labeled as mature markets. They have dropped into the mature market due to slowing growth forecasted for the next five years. The trend of eating at home seems to have slowed; perhaps the aftereffects of 9/11 have finally faded. Additionally, consumers may be buying packaged foods in lieu of spending on entertainment and dining out due to high gas prices according to a recent study.1 There are several reasons that the prospects for cosmetics and toiletries have dropped including import pressure and competition from other substrates. Cosmetics and toiletries sales also suffer during times of economic uncertainty.
Four segments have exhibited the strongest and most consistent downward trend during the past decade and are forecasted to continue along this line during the next five years. The declining markets are dry foods, hardware, soap and other cleansers, and tobacco. These markets have faced challenges from shifts in consumer spending patterns, rising imports, and losses in market share in the past.
Changes and innovations in packaging are, and will be, a crucial method of meeting the CPG industry’s challenges. For instance, packaging has been targeted as the most effective place to put a RFID tag. Single-serving snack packaging is being used to promote smaller portions with single-serving packs. Multi-packs have been key in meeting the needs of the retail “super stores.” Updated packaging has also been key in meeting the needs of consumers in regards to convenience. In general, the marketing capacity of packaging has increased as consumers spend less time seeing ads due to technological innovations like TiVo and ad blockers for the Internet.
Source: Paperboard Packaging Council Trends Report 2005
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