Europe’s flexible packaging market has broadly maintained growth at 1.4% in 2014. Stabilising demand in France, Italy and Spain following previous declines, a sharply slowing Russian market and decline in Ukraine, together with continuing lack of inflationary pressures, are the principal factors behind growth in Europe's flexible packaging market according to PCI Films Consulting. Report author Paul Gaster, says, “For the second year running there have been few inflationary pressures with European flexible packaging consumption growth in volume terms tracking that of value at 1.4% during the year at around 51 bln square metres.” Europe’s €12.9 bln flexible packaging market remains one of the largest and most sophisticated in the world, accounting for just over 20% of the global total. However, in spite of the ongoing trend towards the wider use of flexible packaging, underlying long term volume growth in the region as a whole at less than 2% pa has been modest. In comparison, global demand for flexible packaging been growing by around 5% pa, led by rapidly increasing demand in large emerging markets in Asia, especially India, China and Indonesia. PCI identifies the following characteristics, trends and developments in the European flexible packaging market in 2014:
- A mature market in Western Europe in which flexible packaging demand grew by 1.2% in both value and square metres.
- Previous relatively rapid growth in Eastern Europe stalled in 2014 following sharply declining growth in Russia and decline in Ukraine, resulting in regional growth down by more than half compared with 2013. Of the leading flexible packaging markets in the region, only Poland continued to grow strongly.
- End use markets in Europe exhibiting above average growth in 2014 included sugar and chocolate confectionery, coffee (primarily from continued rapid growth across Europe of coffee pod and capsule systems), fresh produce, ready meals, pharmaceuticals and pet food. Offsetting these were large but broadly stable markets such as bread, biscuits & cakes, dried foods & cereals, and fresh meat, fish & poultry.
- In Europe as a whole, a key factor influencing slow flexible packaging demand growth has been demographic: Europe’s population is growing by only 0.2% pa compared with 0.8% pa in the US and 1.1% pa globally. Throughout Eastern Europe and also in Germany populations are in real decline.
- A unique feature of the European flexible packaging industry is its importance as a global exporter: around 10% of production of mostly sophisticated higher added-value products is sold outside the region. Exports from other global regions are typically less than one-third of this. European imports of converted flexible packaging, although growing, continue to account for only around 2% of demand in the region.
- Growth in flexible packaging demand for coffee applications, boosted by changing consumer drinking habits, has been another driver of the market in 2014. While the volume of coffee consumed in most European markets has been broadly stable or in slow decline, new added-value formats has boosted flexible packaging usage. Examples of this positive trend include increased usage of coffee pod and capsule systems using aluminium lidding and associated outer bags; also of VFFS bags of ground coffee and beans in some national markets; and the adoption of refill bags for instant coffee.
Industry consolidation continues, mostly with the backing of private equity, but many smaller regionally based short run, lower cost, and niche converters supplying both major brand owners and smaller packers continue to prosper. However, the industry continues to be very fragmented. While the top 20 players, led by Amcor and Constantia, account for around 65% of the market, there continues to be at least 700 companies operating from more than 900 production plants throughout the region. This is in stark contrast to the metal can, glass and paperboard packaging industries in which a few very large producers dominate, both at the European and global level. Looking forward, PCI forecasts that flexible packaging demand will pick up slightly in Western Europe in 2015 as struggling economies continue to recover. However, this is expected to be offset in Eastern Europe where demand growth is expected to fall below 1% due to declines in Russia and Ukraine. As a result, European market growth is expected to continue broadly unchanged at 1.4% overall in 2015. Thereafter, PCI is forecasting European flexible packaging CAGR of 2% to reach €14.2 bln in 2019.
Flexible packaging demand in Poland achieved solid growth of 5% during 2014, compared with 1.4% for Europe as a whole, according to PCI Films Consulting. Other national markets that PCI identified as having significantly outperformed the European average were Turkey, the Czech and Slovak Republics, and Romania. Report author Paul Gaster said, “Poland has stood out as the one major market where demand has continued to grow strongly, underpinned by robust domestic demand and a successful focus on packaged food exports.” According to the report, Poland’s flexible packaging industry has achieved its success by supporting the high levels of inward direct investment made by multinational food brand owners in recent years, keen to take advantage of growing packaged food markets in Eastern Europe and of lower production costs available in the Polish market. “Their converted flexible packaging needs have been able to be supplied by a sophisticated domestic flexible packaging industry in which leading multinational converters Amcor, Constantia and Mondi, along with Polish converter Alupol are the major players,” Gaster said.
Flexible packaging is a non-rigid method of packaging. Packaging products are made of flexible or easy-yielding materials that can easily change shape based on the nature of the product being packaged. Flexible packaging materials include plastic, aluminum, and paper. These materials undergo a detailed conversion process such as printing, lamination, coating, and extrusion to form different types of flexible packaging products such as plastic bags and pouches, lidding films, foil bags, and sachets. Technavio's analysts forecast the flexible packaging market in Europe to grow at a CAGR of 5.62% over the period 2014-2019.