The annual State of the U.S. Flexible Packaging Industry Report, published by the Flexible Packaging Association (FPA), provides industry converters, suppliers, investors, and analysts with insight into the performance of the U.S. flex-ible 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 U.S. flexible packaging industry, including the segment of the industry that adds significant value to the flexible materials, usually by performing multiple processes. This segment is estimated to be $26.3 billion in U.S. sales for 2020 and does not include retail shopping bags, consumer storage bags, or trash bags.
Tracking U.S. Flexible Packaging Industry Performance
The total U.S. flexible packaging industry brought in an estimated $34.8 billion in annual sales for 2020. The industry includes packaging for retail and institutional food and nonfood, medical and pharmaceutical needs, industrial materials, shrink and stretch films, retail shopping bags, consumer storage bags, and wraps and trash bags.
Flexible packaging represents 19% of the total $183 billion U.S. packaging industry and is the second largest packaging segment behind corrugated paper, and 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, which increased from 17% in 2000 to 19% in 2020.Sales for the U.S. flexible packaging industry are projected to increase to $35.9 billion in 2021, and this number reflects the impact of the COVID-19 pandemic on top of the recovery from the decline in 2015, while also taking into account the effects of the economic recession of 2009.FPA estimates the total annual growth rate for U.S. flex-ible packaging industry to be 3.6% when comparing 2019 data with 2020 data. The estimate is based on a long-term historical model of industry growth, though the estimate for 2020 may be impacted by the COVID-19 pandemic. A sharp contrast emerges when comparing the 3.6% flexible packaging industry growth against a –3.5% figure to the U.S. gross domestic product for the year.
FPA gathers the information contained in the report through several reliable industry sources, including the FPA member State of the U.S. Flexible Packaging Industry Survey.
Industry Structure
Over the past decade, the U.S. flexible packaging industry has become increasingly consolidated, though the pace of consolidation is slower than in the period from 1997 to 2007 when the percentage of medium-sized companies in particular was reduced as larger companies were formed.
In 2020, the percentage of large companies (bringing in more than $500 million in revenue) was 53%, up from 49% in 2007. The percentage of mid-sized companies was 26%, down from the 28% recorded in 2007. The percentage of small companies fell to 21%, down from 23% in 2007. In 2020, there were 40 domestic merger and acquisition transactions completed versus 29 the previous year. With many transactions taking place between private companies, fewer transaction costs were available in 2020. M&A activity was estimated at $6.1 billion in 2019 and $9.7 billion in 2018.A recent PMCF Investment Banking report said that “global packaging M&A activity was significantly impacted by COVID-19 in 2020 with only 234 total details announced or completed, representing the lowest level of packaging M&A activity in the last six years.” The report includes a complete list of 2019 and 2020 domestic mergers and acquisitions, as well as a summary of 2001–2020 domestic acquisitions. Survey respondents were asked whether their company was planning to pursue/undertake an acquisition. For 2021, 29% were planning to pursue an acquisition, and 71% of respondent companies are planning to pursue/make an acquisition within three to five years.The number of worldwide transactions was 45,652. The all-time high number of transactions was 52,740 recorded in 2017. The number of transactions has declined in each of the following years. Although the pandemic may have had some effect to dampen activity in 2020, the direction is consistent with the pattern seen following the 2017 peak. The number of 2020 transactions were 16% fewer than the number of transactions seen in 2019. The 2019 numbers were down 3.5% from 2018.
Materials and Processes
Flexible packaging companies use several materials and processes to produce flexible packaging. Film and sheet, and plastic resins account for 74% of the materials used in the U.S. flexible packaging industry. Inks account for 6%; paper for 5%; foil for 5%; and coatings and adhesives account for 4%.
The report details that PE (polyethylene) film remains the most dominant in flexible packaging. Of survey respondents, 100% said they use PE films. In terms of film value, PE commanded the largest share, accounting for 54% of film value.
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. Survey results indicated that 28% of respondents used digital printing in 2020, up from 19% in 2019.FPA gathers the information contained in the report through several reliable industry sources, including the FPA member State of the U.S. Flexible Packaging Industry Survey; the FPA nonmember 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 vice president, communications, at FPA.