What's Next for the North American Packaging Market?
April 15, 2014
The North American packaging market has steadily rebounded from the Great Recession slowdown, with Mexico showing promise as a growth region. There is a shift to retail-ready packaging, and macroeconomic trends will affect the direction of the industrial and transport packaging markets. North America is one of the world's largest consumers of packaging and is characterized by such packaging giants as International Paper, Tetrapak, Reynolds Group, Ball Corp., and Owens-Illinois. Since a brief dip in 2009, the North American packaging market has been growing steadily. Although market sentiment was still cautious in the region in 2013, sales increased by 2.3 percent in real terms for the full year to $179.4 billion. Going forward, annual growth of 2.3 percent in real terms is anticipated over the period from 2013 to 2018, with sales set to reach $200.9 billion. There are four key factors affecting this growth for the North American packaging market in the next four years. 1. Mexico to Continue Impressive Growth Of the three North American countries, Mexico is forecasted to have the highest percentage of growth in the packaging market in both the short term and mid-term. Between 2013 and 2018, Mexico is expected to grow at a calculated annual growth rate of 5.8 percent, reaching $18.4 billion in sales. One of the key short-term economic concerns for Mexico is the competition of cheap exports from manufacturers in China. On the other hand, wage inflation in China is helping Mexico retain some ground. Particular areas of growth in the Mexico packaging market include soft drink beverage packaging that meets the needs of customers seeking both versatility and sophistication from packaging. 2. Flexible Plastic Packaging to Continue Success According to The Future of Global Flexible Packaging to 2018 3. Industrial and Transport Sectors to Recover Uncertainties still remain concerning the North America economy -- specifically the impacts of the European economic crisis and political uncertainty in oil-exporting countries. The United States has also been significantly affected by falling real estate values and difficulties in securing financing for future investments. However, the industrial and transportation segments have been in recovery since a sharp downturn in demand in 2009. Real estate values are now also starting to show recovery. Growth rates of industrial and transport packaging are showing the similar forecasted growth rates as those in consumer packaging in coming years. Industrial and transport packaging is expected to increase on average by 2.3 percent per annum above inflation levels to reach $67.4 million by 2018. 4. Growth in Retail-Ready Packaging Retail-ready packaging (RRP) refers to packaging delivered to a retailer in a self-contained unit, which is immediately ready for on-shelf product display without the need for assembly or unpacking. This type of packaging provides an attractive structure that both advertises and displays a product, cutting down on operation costs as the shipping package itself arrives basically shelf-ready. Retail-ready packaging is continuing to gain popularity and traction in North America, as a number of retailers consider its implementation and others expand use. This is due to better customer understanding of RRP and the ever-growing penetration of RRP across categories. According to a survey conducted by Packaging World, 57 percent of suppliers in North America stated that they had received an increased number of requests for RRP in the last 12 months from their retail customers. Smithers Pira is the worldwide authority on packaging, paper and print industry supply chains. Established in 1930, the company provides strategic and technical consulting, testing, intelligence, and events to help clients gain market insights, identify opportunities, evaluate product performance, and manage compliance. To learn more about the packaging market in North America, download Smithers Pira's full comprehensive report, The Future of Packaging in North America to 2017