The corrugated box business has been ultra-competitive for years, but lately, it's gotten even more cutthroat, reveals a recent Packaging-Online.com survey of independent box makers. These independent plants are reporting stiffer competition from integrated companies, who are now pursuing all kinds of business—no matter how small. Integrateds are more aggressive than ever before because the U.S. box market has been shrinking since 1999 as more corrugated boxes are produced overseas.

According to the Fibre Box Association (FBA), 2003 corrugated shipments totaled 379.9 billion square feet—that's a 6.2% decrease from the 405.1 billion square feet reported in 1999. Overseas production accounts for most of the lost 25.2 billion square feet of corrugated boxes. In short, box plants based in the U.S. now have to compete for a smaller piece of the pie.

As a result, integrated companies have adopted a markedly different approach. "Ten or 15 years ago integrated companies would price themselves out of orders that were less than 50,000 square feet," Ken Rohleder, president of the Rohleder Group, a Kentucky-based industry consultant, tells Paperboard Packaging. "Now most integrateds are happy to get regular, reoccurring monthly business of 10,000 square feet. That has dramatically changed the landscape for independents. Integrateds are carrying inventory; they didn't use to do that. They're savvier about design and boutique equipment, which used to be the venue of independents only."

In short, integrated box plants are pursuing business that not too long ago they would have left to independent converters. Also making things tougher for independents are distributors, who were not even a factor as recently as five years ago, notes Rohleder. "Independents will tell you that they've lost business to the integrateds, they won't tell you they lost it to a distributor," he tells Paperboard Packaging. "The distributor is taking the requirements of three or four independent customers and leveraging them to get a better price with an integrated. The integrateds now have a logistics partner called the distributor."

Surprisingly, however, the market share claimed by independents (when only independents and integrateds are compared) has remained mostly unchanged at 24% since 1996 with last year's figures slipping slightly to 23.2%. That's because independent box makers are learning to diversify, says Mark Mathes, president of Missouri-based independent Vanguard Packaging.

Take his company for example. "If I had never started making displays, my box shipments would be down and I would probably not be in business," he tells Paperboard Packaging. "My displays are funding my box side right now. A lot of independents have gotten into point of purchase and specialty packaging to keep their heads above water."

In order to stay in business, independent converters have to find customers who seek more than an attractive price quote and pay attention to the "total invoice," says John Kell, chief executive officer of Wisconsin-based Kell Container, an independent sheet plant that marked its 40th anniversary this year and was recently acquired by Great Northern Corp., an independent box and display maker. "I ask myself, ‘How can I be innovative in this account to show them price savings besides jus the cost of the box?'" he tells Paperboard Packaging. "‘Can I design them a package that they can set up faster and save themselves labor costs?'"

Indeed, in this climate of intense competition, independents have to focus on service. Kell, for instance, mulls this question everyday: what will make my customers even more satisfied?

Source:

Box Market Share Showdown
Mark Arzoumanian
Paperboard Packaging, October 1, 2004
www.packaging-online.com/paperboardpackaging/article/articleDetail.jsp?id=127405