Snapshot: The market for packaging sellers 2011

31 August 2011 (Last Updated August 31st, 2011 18:30)

The outlook for sales within the packaging industry is optimistic, with growth expected in almost every area. In this second segment of our Packaging Market Snapshot for 2011, Packaging Gateway draws on detailed GlobalData research to map prospects for packaging sales and sellers in 2011.

Snapshot: The market for packaging sellers 2011

Good news for packaging in 2011

Overall, 59% of respondents across the packaging industry are more optimistic about revenue growth for their company over the next 12 months than in the previous 12 months.

Reasons behind this trend include strong growth in emerging markets such as India and China, decreased global economic uncertainty, a rise in sales innovation, increasing production and process efficiency. Flexible packaging is expected to be one of the fastest growing sectors of packaging, driven by industry consolidation and sustainability initiatives. In addition, technological developments such as improved recycling techniques and the development of compostable packaging materials have helped increase the profitability expectations of industry respondents.

Market expansion, improved operational efficiency and new products expected for 2011

The top three future development expectations for packaging companies include expansion in current markets, the improvement of operational efficiency and the introduction of new products and services, as expressed by 74%, 71% and 68% of buyer respondents respectively.

Companies are looking to increase their product lines and expand facilities in their present locations. For example, Borealis, which provides chemical and innovative plastics solutions, introduced a new packaging film, BorShape, in 2010.

Key innovative packaging solutions planned for introduction across the industry in 2011 include:

  • Easy-peel packaging (Sealution peel polymers from Dow)
  • Easy-open aseptic cartons
  • Protective packaging (honeycomb)
  • Steam valve for easy dispersion of various product types
  • Adhesives (Technomelt SupraCool adhesives from Henkel)
  • Shrink sleeves

Packaging supplier marketing budgets are expected to rise by 6.2% in 2011

"Moreover, 37% of respondents expect their marketing budget to rise between 5% and 25%."

ICD Research's industry survey revealed, on average, the marketing budgets of packaging suppliers are expected to rise by 6.2% during the next 12 months.

Moreover, 37% of respondents expect their marketing budget to rise between 5% and 25%, which suggests recovery from the global financial crisis is fully underway and business confidence is being restored.

The average size of the global, annual marketing budget for packaging supplier companies in 2010 was US$3.2 million, but this has risen to US$5.4 million for 2011.

However, 75% of companies have a low marketing budget of less than US$250,000 for 2011. This implies companies intend to keep budgets low, spending less time and money on less effective marketing strategies, in favour of spending a larger share of the budget on more effective marketing strategies.

Online, email, newsletters and brand websites to dominate investment

Online content sites, emails, newsletters and corporate and brand websites are expected to achieve the strongest investment gain; conversely, sponsorship, newspapers and telemarketing are expected to show the least investment gain.

In the next two years, the global marketing budget will allocate a significant amount of funds to digital media, including the mobile, social, email, and display and search categories.

Market intelligence research, CRM systems and competitor intelligence research emerged as the three most important areas of investment amongst marketing and sales solutions activities for the next year.

Customer retention, acquisition and brand building dominates supplier marketing

Customer retention, customer acquisition and brand building and awareness were identified as key marketing aims for packaging suppliers, and were expressed by 62%, 42% and 37% of industry respondents as very important aims.

"Overall, 59% of respondents across the packaging industry are optimistic about revenue growth."

The most significant amendment packaging suppliers will be employing in 2011 is focusing sales efforts on generating new business; this was stated by 66% of respondents.

Other amendments expected to be included are trials of new and innovative products in the market, focusing sales efforts on existing markets, and adapting product portfolios and positioning.

Supplier respondents are expected to invest more on new media such as email promotions, networking through social media websites and educational email messages.

Mergers and acquisitions expected to increase in 2011

Executives from packaging buyer companies expect increased levels of consolidation over the next 12 months, with 49% of respondents predicting at least some increase. Due to margin pressure and high raw material costs influenced by rises in international oil prices, companies are switching to inorganic growth.

The reduction of operating expenses or costs is another major driver behind merger and acquisition activity.

The US, Germany, Singapore, China, South Korea and India emerge as top five growth regions

The top five growth regions in the packaging industry are the US, Germany, Singapore, China, South Korea and India. The stringent regulations enforced by the US government over the food and beverage sector have forced packaging suppliers to invest in research and development (R&D). Meanwhile, the strong demand for packaging materials for disposable beverage bottles has driven the market in Germany.

Furthermore, increased domestic and regional consumption, driven by strong economic growth, in the Asia-Pacific region has increased the demand for packaging in countries such as Singapore, while buyers and suppliers consider India and China to be the two most important markets for potential growth.

Ability to target audience and flexibility are leading success factors

The ability to target specific audience niches, flexibility and the ability to generate leads are considered by packaging suppliers to be the most critical success factors. At present, most companies prefer to focus their marketing strategy on a narrow target market of prospective customers instead of the total market.

Similarly, flexibility in customising services is identified as the most crucial factor for business continuity. Therefore, companies are trying to bring more flexibility, scalability, extensibility and integration across the distribution channels.

This encourages collaborative relationships with partners. Many companies have realised that customising the sales process ensures conformity with customer buying processes. Companies therefore look for value-adding products and services to attract customer attention.

Raw material prices, pricing pressures and cost containment remain leading concerns

Raw material prices, pricing pressures and cost containment are the most pressing immediate business concerns for the global packaging industry. This is largely due to recent volatility in the petroleum market, which has pushed up operational costs. Companies are therefore taking various measures to contain costs, including investment in sophisticated technologies such as robotics to increase efficiency.

Buyers expect reasonable prices, innovative products and improved customer service

"Flexibility in customising services is identified as the most crucial factor."

Buyers consider price reductions and product innovation to be the leading actions for suppliers to secure business from buyers, as expressed by 51% of respondents.

Improving customer service and the reduction of costs are also given high importance by buyers, with 45% of respondents giving a positive response to each factor.

Suppliers can also invest in R&D and develop unique IT solutions to enable buyers to optimise their processes and reduce costs.

One such example is the development of a cost optimisation packaging system (COPS) by the Singapore Institute of Standards and Industrial Research (SISIR's) packaging centre, that will help buyer companies minimise their  distribution costs by optimising use of space and packaging materials and rationalising logistical costs.

To purchase the full version of "Global Packaging Supplier Industry OutlookSurvey 2011–2012: Industry Dynamics, Market Trends and Opportunities, Marketing Spend and Sales Strategies" please click here.

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