Volume growth of flexible packaging is highly dependent upon the growth of consumer products, particularly non-discretionary products such as food. Value growth is dependent upon volume as well as pricing which has been under pressure in 2009 as the inputs associated with oil have dropped in price forcing packaging producers to pass on much of the decrease. Value will likely be down this year but volume will not, as per Michael Brown.
The global volume demand for flexible packaging is largely driven by consumer spending, making the flexible packaging industry less susceptible to economic cycles. The Flexible Packaging Association (US) estimates that the largest market for flexible packaging is food (retail and institutional), accounting for about 54% of shipments. Other markets for flexible packaging include retail non-food at 9%, industrial applications at 9%; consumer products at 10%; institutional non-food at 3%; medical and pharmaceutical at 8%; and retail poly bags at 7%.
Historical global growth rates, once high single digit, have slowly converged on GDP rates as the conversion of other packaging types (paper, glass, metal) to flexible packaging has slowed. This conversion allows the industry growth higher than the "organic" growth associated with GDP growth. Best estimates put the difference in 2009 at 1.5% above global GDP, with higher growth in emerging economies where the conversion remains more robust. This difference will be more apparent as we cycle through the unusual year-over-year comparables for 2008/2009 where destocking effects have had some impact on demand. Value demand in Europe is down 4-5% largely due to prices falling as a result of the drop in oil prices in late 2008. Oil derivatives such as polyethylene and polypropylene are a primary inputs to flexible packaging. Flexible packaging is generally less affected by economic conditions. However, the unusual circumstances of 2008/2009 have had an impact, primarily on value.