The Protective Packaging segment of the packaging industry includes manufacturing and consumer uses of packaging material designed to protect the enclosed contents from damage, preserving the integrity of a product within. The Protective Packaging market (flexible, rigid, foam) was sized by PMG in 2012 at US$20.5 bln. PMG forecasts the overall protective packaging market will increase at a CAGR of 4.7% annually between 2012 and 2017, to reach a total market value of US$25.8 bln by 2017. This growth comes following the severe economic downturn, with modest acceleration of global economic growth predicted by the World Bank between 2013 and 2015. PMG forecasts the Flexible Protective Packaging market to increase by 4.3% annual (CAGR) between 2012 and 2017, to reach a total market value of US$11.4 bln (up US$2.1 bln).
Air pillows are forecast to be the fastest growing flexible protective packaging material at 6.4%, with protective mailers following at 5% growth. Flexible Protective Packaging includes protective mailers, bubble packaging, air pillows, paper fill, and dunnage bags. For purposes of this report, it does not include protective film. The Rigid Protective Packaging market is forecast to increase by 5% annually (CAGR) between 2012 and 2017, to reach a total market value of US$8.1 bln, from US$6.3 bln in 2012. Insulated shipping containers are forecast to grow the fastest at 5.9%, followed by molded pulp products forecast to grow at 5.2%. The faster than average expected growth of insulated shipping containers is due to the global growth trend of direct shipping of medicines, vaccines and other temperature-sensitive items in a cold chain (a temperature-controlled supply chain). Rigid Protective Packaging includes insulated shipping containers, paperboard protectors, and molded pulp. For purposes of this report, it does not include corrugated shippers. It is forecast that the Foam Protective Packaging market to increase by 4.8% annually (CAGR) between 2012 and 2017, to reach a total market value ofUS$6.3 bln, from US$4.9 bln in 2012. Foam in place and polyolefin rolled foam are both forecast to grow at 5.4%, followed by molded foam growing at 5.1%. Higher than average expected growth in the use of foam through 2017 is partially due to the increasing demand for cold chain shipping, given foam's dimensional stability and thermal and moisture resistance. Foam Protective Packaging includes molded foam, foam-in-place, polyolefin rolled foam and loose fill.
Asia and the Rest of the World are both forecast to be the fastest growing regions for the Protective Packaging industry at more than 7%. Growth in the United States is expected to increase from previous years, which were slower due to the recession and global economic slowing. Europe will trail globally with less than 2% market growth. The diverse Protective Packaging products serve an equally diverse set of markets. A brief list includes:
promotional and palletized distribution, household appliances, sensitive electronic components, fragile items, pharmaceuticals, automotive parts, furniture, jewelry, moving and storage, publishing and aerospace.
Industry growth is being driven by several consumer factors. The internet shopping boom with consumer expectations for direct shipping of fragile items, especially electronics, is driving growth. Specialized handling requirements for pharmaceuticals and temperature-sensitive items are growing rapidly, requiring specific performance features from Protective Packaging products, and driving growth especially in the rigid and foam segments. The Protective Packaging industry can expect to see an upward trend, especially in the rigid protective packaging category, due to increases in transporting construction materials and household appliances. Looking back to 2009, the recession in housing and the associated downturn in appliance manufacturing had a significant negative effect on rigid protective packaging. As the housing market continues its recovery, this segment can expect to experience steady growth. Manufacturers are facing cost management challengers due to energy, transportation and raw material costs, which are widely believed to be the most significant driver for Protective Packaging companies. Retailers are also influencing growth in the industry by setting performance specifications for protective packaging products to avoid new product delivery failure because of poor package design or product loss in transit. The split between manufacturing and consumer uses of protective packaging historically totals about 40% vs. 60%, respectively. PMG forecasts less than 1% shift between the two segments through 2017, totaling 40.6% vs. 59.4%, respectively.
Raw materials used in the Protective Packaging industry include both plastic and paper. Plastics (polyolefin, polystyrene (PS) and foam) are the dominant materials in the industry segment, with paper materials (paper, paperboard and molded pulp) steadily declining in percentage of the market. Paper-based materials are forecast to continue to decline, holding 22.2% of the Protective Packaging market by 2017, down from 23.1% in 2012 and 24.6% in 2007. Material design trends in both plastic- and paper-based protective packaging products are being driven by sustainability concerns. Manufacturers are shifting toward the use of recycled, recyclable and biodegradable raw materials in the Protective Packaging industry. Source reduction, bioplastics, alternative pulp materials, and advancements in paper technology are growing trends in the industry.
The fragmented industry is split between these 11 firms, accounting for about 20% of the global market, with many smaller, niche players around the world totalling about 80% of the market. Three of the companies operate in multiple segments: Sealed Air Corp. in all three segments, Sonoco Products Co. in all three segments, and Pregis Corp. in the flexible and foam segments. Manufacturers are diversifying their product mix in order to deliver expected product performance to their customers, without limitations on material choice. This factor is also driving industry consolidation, with the pace of mergers and acquisitions, as well as divestitures and targeted expansions expected to continue
World demand for protective packaging is expected to approach US$27 bln in 2018 as per Freedonia. Global demand for protective packaging is expected to register healthy growth, as manufacturing activity around the world continues to grow, particularly in the world's developing regions. Additionally, Internet-based retail continues to post double-digit growth in many countries, including many of the largest and/or most affluent nations. Suppliers and users alike will continue to seek ways in which protective products can reduce package weights while assuring high performance; and reduce overall logistical costs. Such efforts have led to the evolution of supply chains, as third-party logistics (3PL) and fulfilment service providers are now a major outlet for protective packaging products.
Due to the size of its manufacturing sector, and its growing middle class, the Asia/Pacific region will offer the best opportunities for growth through 2018. However, developed areas, such as USA, Canada, Western Europe, and the affluent Asian nations, will also post healthy gains, due largely to growth in Internet-based retail and accelerated manufacturing activity. Internet shopping and other e-commerce outlets currently account for about four percent of global retail sales, and will continue to register robust advances. Consumer purchasing via PCs, and, increasingly, mobile devices such as smart phones and tablets (aka, m-commerce), has increased at remarkable rates, even in countries with fairly developed, mature retail sectors. Sales of books, recorded music, personal electronics, and other items via the Internet and traditional catalog/mail order channels have boosted demand for air pillows, loose-fill, paper fill, bubble packaging, and protective mailers.
Manufacturing accounts for the largest share of protective packaging demand. Protective products such as molded plastic foams, paperboard edge protectors, and foam-in-place polyurethane are used to secure products from damage during shipping. The Asia/Pacific region, already the largest regional market for protective packaging in manufacturing applications, will increase its share of this segment, as more of the world's manufacturing capacity for appliances, electronics, and other products shifts to countries such as China, Thailand and Vietnam. Foamed plastics and paperboard protectors will continue to be the largest product types. However, other products -- including bubble packaging, protective mailers, and air pillows -- are expected to post faster growth. This is due mainly to their use in shipping products sold via the Internet directly to consumers. Environmental factors are also a factor in the product mix. Efforts to reduce resin volumes and to use recyclable materials will favor thin-walled air pillows and thinner gauge, recyclable films. Paper fill made from reclaimed fiber will also see increased use due to regulatory standards requiring use of recycled paper and consumer preference for more sustainable packaging options.