The annual State of the Flexible Packaging Industry Report, recently released by the Flexible Packaging Association (FPA), provides industry converters, suppliers, investors, and analysts with insights into the U.S. flexible packaging industry’s performance over the past year. This definitive source of data and information also examines several other aspects of the industry, including:
- Performance (growth, revenue/volume expectations, profitability, capital spending)
- Materials and processes (printing, expected material usage)
- End uses (end-use forecast, U.S. Census Bureau retail segments data)
- Structure and consolidation (merger and acquisition activity)
- Imports and exports (trade outlook)
- Industry vision, challenges, and critical issues
The report covers the entire flexible packaging industry, including the segment of the industry that adds significant value to the flexible materials, usually by performing multiple processes. This segment of the industry is estimated to be $34.3 billion in 2022 and does not include retail shopping bags, consumer storage bags, or trash bags.
The total U.S. flexible packaging industry is estimated to be $42.9 billion in annual sales for 2022, an increase of 15.3% from $37.2 billion in 2021.
U.S. Flexible Packaging Industry Performance
Flexible packaging represents 21% of the total $180.3 billion U.S. packaging industry and is the second largest packaging segment behind corrugated paper. Over 80% of survey respondents experienced higher growth in 2022 than in 2021—with 86% expecting higher revenue in 2023 and 100% looking forward to 2026.
In data captured from survey respondents, the weighted average shows expected sales revenue up 4.3% going into 2023 and over 6% by 2026. The 4.3% anticipated for 2023 may be low, however, as continued inflationary pressures in 2023 could drive higher revenue and costs.
Industry Structure
The flexible packaging industry comprises approximately 506 converters. The “Top 5” account for 42% of revenue, and the “Top 10” account for 57% of revenue. The “Top 25” converters comprise 69% of total industry revenue.
The year 2022 saw 47 domestic transactions completed, down from 2021’s historic high of 62. This year’s survey asked respondents if their company was planning to pursue or undertake a domestic acquisition in 2023, as well as in the next three to five years. For 2023, 29% of survey respondents said their companies plan to pursue an acquisition, down a bit from 36% this past year. When asked to project three to five years into the future, 76% of survey respondents said their company would pursue an acquisition. This is up from the 69% noted in the past year’s survey and considerably higher than the 41% who anticipated a longer-range acquisition in the 2017 survey. This seems to indicate more converters are looking to acquire new capabilities and scale in the industry.
Materials and Processes
Flexible packaging companies utilize several materials and processes to produce flexible packaging. Films and resins accounted for the largest spend for converters with the two categories making up over two-thirds of material purchases—films are 47%; resins are 23%. Within films, polyethylene (PE) remains the dominant material, with 96% of converters responding to the survey saying they use PE. Polypropylene and polyester are the next most frequently used categories.
Bag/pouch making, printing, laminating, and stand-up pouch production are the most common processes implemented by converters, with over 75% of respondents saying they perform those processes. Other processes such as coating, extrusion, and labeling, among others, help converters differentiate from their competitors.
Flexo printing remains the dominant print technology, accounting for 72% of shipments. Converters continue to add digital printing capabilities; in 2022, the share of converters who said they had digital printing capability was around 23%. However, sales figures for converted products do not reflect a similar growth—digitally printed substrates accounted for less than 1% of shipments.
Issues and Vision
Converters saw “Labor Pool” as the industry’s biggest issue for 2022, while suppliers ranked “Sustainability/Green Initiatives” and the “Economy” as their largest issues. The converter rankings stayed similar to this past year’s survey. Also in 2022, the supplier rankings were largely aligned with converters. For this year, however, there was a large difference between converter and supplier rankings. One example is that suppliers listed the “Economy” as tied for their largest concern, while it didn’t rank in the top 10 for converters. Suppliers also seem more concerned about “Plastic Perception/Backlash” as that was ranked 8th on their list. But it also did not rank in the top 10 for converters.
Economic Analysis
Again this year, FPA partnered with the economic analysis group, Inforum, to look at the economic contribution of the flexible packaging industry. The study focused on the industry impact in 2021, which represents a coronavirus-impacted business environment. More time is needed to determine how the COVID-19 pandemic will affect the industry and related stakeholders in the long term.
Flexible packaging manufacturing activity directly contributes nearly $11 billion toward the U.S. gross domestic product. The industry employs 85,500 people. And flexible packaging manufacturing employees earn $7.2 billion in labor income, which equates to a labor income of nearly $83,000 per worker. The aggregate flexible packaging manufacturing industry generates over $380,000 in economic output per worker, which is approximately 83% greater than the U.S. economy’s average output per worker at $208,000.
Data Sources
FPA gathers the information contained in the report through several reliable industry sources, including the FPA members’ State of the U.S. Flexible Packaging Industry Survey; the FPA nonmembers’ Industry-Wide Converter Survey; the Annual Survey of Manufactures, published by the U.S. Census Bureau; the U.S. Department of Labor; the U.S. Department of Commerce; industry analysts; and investment banking reports. Data collected from these sources provides a more complete picture of the U.S. flexible packaging industry and helps to cross-check information regarding industry size, structure, market segments, and key packaging products. The report is available to all members and is available for purchase by non-members.
Dani Diehlmann is FPA vice president, communications.