The annual “State of the Flexible Packaging Industry Report” recently released by FPA provides industry converters, suppliers, investors, and analysts with insight into the performance of the U.S. flexible packaging industry 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 comprised approximately $26.2 billion in 2019, and that does not include retail shopping bags, consumer storage bags, or trash bags.
U.S. Flexible Packaging Industry Performance
The total U.S. flexible packaging industry is estimated to have brought in $33.6 billion in annual sales for 2019. This includes packaging for retail and institutional food and nonfood, medical and pharmaceutical, industrial materials, shrink and stretch films, retail shopping bags, consumer storage bags, wraps, and trash bags.
Flexible packaging represents 19% of the total $177 billion U.S. packaging industry and is the second largest packaging segment behind corrugated paper. It is just ahead of bottles and miscellaneous rigid plastics packaging. Flexible packaging’s solid long-term strength, coupled with flexibles’ ability to replace other packaging formats, has resulted in the growth of U.S. flexible packaging, increasing from 17% in 2000 to 19% in 2019.
The U.S. flexible packaging industry is projected to increase to $33.9 billion in 2020, which reflects the impact of the COVID-19 pandemic on top of the recovery from the decline in 2015 and the effects of the economic recession of 2009.
Over the period of 2009–2019, flexible packaging’s compound annual growth rate (CAGR) has been 3.8% percent per year due, in part, to the severe impact of the economic recession of 2008–2009, which was partially offset by the 11.7% percent surge in 2012. Year-to-year growth rates in the flexible packaging industry have shown significant variations. From 2009–2019, annual growth rates fluctuated between a positive 11.8% and a decline of 12.9%.
Industry Structure
The U.S. boasts approximately 453 converters/manufacturers, with the top five companies accounting for 45% of industry revenue. The top 50 companies account for 75%, and the top 100 companies account for 81% of total industry revenue.
Over the past 10 years, the flexible packaging industry has become more consolidated. In 2019, large companies (over $500 million revenue) accounted for over half (52%) of industry revenue. Small- and mid-sized companies’ share of industry revenue has declined from nearly three-quarters (72%) in 1996 to less than half (48%) in 2019.
In 2019, there were 29 domestic merger and acquisition transactions completed, versus 33 the previous year. The estimated dollar value of flexible packaging companies acquired in 2019 was approximately $6.1 billion compared to $9.7 billion in 2018.
There were four purchasers with multiple flexible packaging acquisitions in 2019 including Fortis Solutions Group; Huhtamaki; PPC Flexible Packaging, LLC; and Sealed Air that accounted for 28% of the domestic acquisitions. The report includes a complete list of 2018 and 2019 domestic mergers and acquisitions, as well as a summary of 2001–2019 domestic acquisitions. Survey respondents were asked whether their company was planning to pursue/undertake an acquisition. Of those, 29% said they were planning to pursue an acquisition for 2020, and 50% of respondents said they are planning to pursue/make an acquisition within 3–5 years.
The total U.S. flexible packaging industry is estimated to have brought in $33.6 billion in annual sales for 2019.
In looking ahead for domestic acquisitions, dealmakers expect the economic impact of the COVID-19 pandemic to depress 2020 merger and acquisition activity. For longer-term activity, many expect “normal” levels of merger and acquisition activity. Other factors that could help to facilitate solid merger and acquisition activity in 2020 include large cash reserves held by many companies, opportunities in emerging markets, rising consumer confidence levels, and a further improvement in equity markets.
On a worldwide basis, 2019 saw a slight decrease in growth in merger and acquisition activity from 2018 levels. Merger and acquisition activity has been affected by the COVID-19 pandemic, and activity in early 2020 has been dampened by the economic impact of the pandemic. Thus, expectations for future merger and acquisition activities are somewhat pessimistic, particularly in the short term.
Materials and Processes
Flexible packaging companies use several materials and processes to produce flexible packaging. Film and sheet and plastic resins account for 70% of the materials used in the U.S. flexible packaging industry. Inks and paper account for 6% each; foil and coatings and adhesives account for 4% each.
The report details that polyethylene (PE) film is used by 91% of survey respondents, and it accounts for 59% of total film use. Survey results show that PE resin is used by 94% of respondents and accounts for 83% of total resin use.
Survey data shows that converters print from two to 10 colors, with an overall average of 7.9 colors. The total number of presses is estimated at 3,000, including flexographic, gravure, in-line, offset, and other simple presses. Nineteen percent of survey respondents said they used digital printing in 2019, up from 8% in 2018.
FPA gathers the information contained in the report through several reliable industry sources, including FPA members’ “State of the U.S. Flexible Packaging Industry Survey” responses, FPA nonmembers’ Industry-Wide Converter Survey, the Annual Survey of Manufactures (ASM) 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 crosscheck information regarding industry size, structure, market segments, and key packaging products. The report is available to all members and is available for purchase by nonmembers.
Dani Diehlmann is communications director at FPA.