Gleukos Performance Beverage, produced by Ampac Flexibles – A Division of Ampac Packaging, received the Flexible Packaging Association’s 2006 Highest Achievement Award Winner in Packaging Excellence as well as a Gold Award Winner in Printing Achievement. The Gleukos custom stand-up pouch is the first performance drink package that has been designed to mold to the body when placed in an athletic apparel pocket. The hourglass shape makes it easy for the consumer to hold and drink. Additionally, the pouch features Ampac Flexibles’ Smart Spout fitment/valve combination, which makes accessing Gleukos spill and leak proof.
For the first six months of 2006, that trend is continuing, as the year-to-date volume and sales data for packaging ink looks fairly good, with one notable exception. Overall, according to the National Association of Printing Ink Manufacturers (NAPIM), U.S. packaging ink sales rose 1.1 percent by volume and 5.6 percent in terms of dollar value, indicating that price increases driven by higher raw material costs have gone through.
In particular, solvent-based flexo ink volume has risen 3.6 percent, and sales have risen 12.8 percent, reflecting the higher raw material prices faced by ink manufacturers. Solvent-based gravure volume increased dramatically by 6.6 percent, and sales rose 9.7 percent.
Sheetfed packaging also did quite well, with volume rising 2.1 percent and sales up 5.3 percent.
The one disappointment came in water-based flexo, which witnessed a decline of 6.2 percent in volume in the first half of 2006. Overall, water-based flexo ink’s sales declined 1.8 percent. That may in part be the result of more corrugated jobs going offshore.
The economic improvement worldwide has spurred solid growth in packaging.
Nestle Hot Chocolate Syrup Bottle, 90 Oz., produced by Alcoa Flexible Packaging, is FPA’s 2006 Silver Award Winner in Printing Achievement. It is an eight color, reverse printed 50 micron PETG shrink label.
For the most part, packaging ink manufacturers said the past year has been a good one for them.
“The overall packaging market in North America is stronger than the previous year,” said Jim Ross, head of flexible packaging – NAFTA for Siegwerk Ink Packaging. “The large printer/converters continue to add capacity through acquisitions or equipment installations. Consolidation continues in North America with increased activity through financial investors. We are optimistic about the balance of the year as customer backlogs appear to be full of orders.”
“The packaging market was OK, and we’re doing a little better than last year,” said George Sickinger, chairman, CEO and president of Color Resolutions International.
“The overall market was stable with increases in growth due to a favorable mix of price and volume,” said Bryce Kristo, CFO and senior vice president, general affairs at INX International Ink Co. “This blend is a welcomed change compared to more recent trends of prices erosion while faced with raw material cost increases.”
“Wikoff participates primarily in the North American and Central American markets, with selective
Cryovac Simple Steps for Produce, by Cryovac Food Packaging Division, Sealed Air Corporation, is the FPA’s 2006 Gold Award Winner in Technical Innovation. It is an easy open microwaveable package designed to steam cook fresh and frozen vegetables in two minutes or less, while offering a healthy and convenient meal solution.
Macro indicators in the market show the actual package is increasingly becoming an important element of a consumer packaged goods product’s success, especially in North America, according to Richard Pettifor, president, Sun Chemical North American Packaging Inks. He also pointed out that although he expects to see the growth in packaging continue, the total market for packaging inks in North America is beginning to flatten due to the movement of packaging offshore.
Mr. Pettifor said that flexible packaging and rigid plastics continue to show the greatest strength because they allow use of eye-grabbing graphics, extended shelf life, re-closability and convenience-sizing that American consumers demand. At the same time, however, both ink makers and converters are facing steadily rising costs that force them to seek new efficiencies in their processes, he said.
Outside North America, increased domestic demand and exports to developed countries are fueling packaging growth in a number of rapidly developing regions, such as Asia and Latin America.
“We do see more consolidation, with a lot of business moving to Latin America and Asia, and we also see more companies within the U.S. moving from brown box into graphics,” said Rob Callif, vice president of operations, BCM Inks, which specializes in water-based flexo and digital corrugated inks for multi-color graphics. “Latin America is growing exponentially for us.”
The Flexographic Technical Association’s (FTA) 2006 Best of Show and Gold Medalist in Graphic Design Entry is this DelMonte Fruit Medley – 19 fl. oz. packaging submitted by Renaissance Mark.
“Some types of packaging are being affected by the loss of manufacturing North America has experienced over the last several years,” Mr. Impastato said. “As manufactured products are moved out of the country, the packaging moves with it. Therefore, the packaging market is seeing a very high growth rate in some developing areas of the world fueled by both relocated manufacturing from North America and a hot domestic growth cycle. But, net of the migration of manufacturing overseas, the North American packaging market has had a good year.”
While the packaging industry is faring better than the publication and commercial printing segments, it is still struggling to make money. Still, there are plenty of new opportunities for growth due to new applications.
“Although the packaging industry is growing, there is a lot of change going on,” said Mitch Baker, president, American Inks & Coatings (AIC). “There is some shift from folding carton to stand-up pouches, and some multi-wall bags such as those used for dog food packaging are moving to woven polypropylene. You also see some shifts in frozen food packaging, with more and more stand-up pouches. It’s an exciting market, with all of these different substrates and structures, and those product changes give AIC opportunities we didn’t have before.”
Flexible Packaging, Corrugated
And Folding Carton Markets
Flexible packaging, corrugated and folding carton are key packaging markets. According to the Flexible Packaging Association (FPA), the North American packaging market is a $127 billion business, and flexible packaging in the U.S. accounted for $21.8 billion in sales in 2005. North American corrugated packaging sales are estimated at $25 billion by the Corrugated Packaging Alliance.
Ink manufacturers noted that flexible packaging is faring the best of the three, with folding carton also doing surprisingly well. The corrugated market is fairly flat.
“Flexible packaging has definitely been the best area of growth, especially with the increased interest in irregularly shaped packaging,” Mr. Sickinger said. “There is much interest in specialty inks for specialty packaging, which helps products stand out on shelves. Corrugated is flat overall, although some independent companies that are getting into high-end graphics are experiencing good growth. The folding carton market seems to have more growth than in recent years. There also seems to be more foreign alliances with domestic flexible packaging and folding carton printers, and that’s been good for us.”
“With the strong economy we have enjoyed over the last couple of years, flexible packaging, folding carton and corrugated have all turned in positive growth,” Mr. Impastato said. “I believe most manufacturers have been happy with the relative growth of these markets. But there is still a significant amount of excess capacity in the industry, which makes for a difficult competitive situation.”
“The flexible market is a growing market, with moderate growth between 2 and 3 percent. This counts therefore also for flexo and gravure,” said Thomas Bastian, director of marketing flexible packaging for Siegwerk Ink Packaging.
Still, the corrugated market has faced some serious challenges, primarily with manufacturing moving toward Asia. This partially accounts for the present decline in U.S. water-based flexo ink shipments.
While the corrugated market has remained fairly flat in 2006, there has been some increased activity in special demand areas for product promotions, said Jim Wegemer, director, paper packaging products for Sun Chemical. He also noted increasing impact from offshore imports of corrugated materials. Statistics reported by Paperboard Packaging magazine show that in 2005, corrugated production in North America grew only 0.3 percent, while in Asia it increased by 7.8 percent.
There has been considerable consolidation in the folding carton market, where the top 10 converters now produce nearly 70 percent of that segment’s product, according to Paperboard Packaging Council estimates. Despite the consolidation, market forecasts indicate folding carton will see a slight growth over the next three years.
“The corrugated market is depressed,” said Gilles Faure, director of marketing paper, plastics and labels for Siegwerk Ink Packaging. “By contrast, folding carton is developing nicely in the high end sub-segment through innovation.”
Flexo and Gravure
Flexo and gravure remain the two key printing processes in packaging. While flexo’s share in North America is larger, each process has its advantages, and there are constant efforts to improve quality and performance.
“While both flexo and gravure processes are commonly used in the packaging market, flexo has a
Day Saver Ice Enemy, by Flex Pack USA, Inc., is FPA’s 2006 Gold Award Winner in Packaging Excellence. This pouch is a home run for any granular product that has to be distributed evenly in a small to medium size area. Simply cut and spread, zip close and store for later use.
“Both flexo and gravure have seen major improvements in recent years, but flexo print process, aided in part by the technology advancements in ink systems and the installation of high speed flexographic presses, have seen a significant improvement in delivering the high quality print demanded by the market,” Mr. Pettifor added. “The technology provided by the ink maker is vital to the converter to ensure he can be competitive against overseas competition.”
Mr. Impastato noted he has seen particularly strong growth in gravure.
“In packaging, both flexo and gravure have done well over the last year,” Mr. Impastato said. “In fact, I have been somewhat surprised by the strong growth we have seen in gravure. Several years ago, most new presses were flexo presses, but over the last year or so, we have seen new gravure presses installed. This shows that gravure will certainly continue to play an important role in the packaging industry.”
Technology is critical to future growth, whether it is through new products or processes such as digital printing.
“The greatest opportunities may not come from organic growth, as most of our markets are plateauing,” said Mr. Faure. “Siegwerk is putting a lot of emphasis in technology watch and innovation. New technologies and new raw materials are regularly being developed to match printers’ and end-users’ requirements. We can mention UV inline varnishing over conventional offset inks, with enhanced properties matching market requirements such as high and constant gloss, good adhesion and low cost of use versus current systems.
“Another example is the liquid food packaging market with its constantly growing requirements,” Mr. Faure added. “As a market leader in this segment, Siegwerk has to keep up with the pace of change and also anticipate and even provide the printers with solutions that are ahead of forthcoming regulations.”
Alcoa Flexible Packaging’ Fancy Feast received top honors in the Packaging Label Gravure Association’s (PLGA) Heat Shrinkable – More Than 13% category. It featured eight colors reverse printed on PVC. Due to the nature of the contour, a shrink sleeve label was required to achieve the 360° graphics. The use of metallic purple ink contains actual metallic flakes that can tend to fracture or cause color alterations when shrunk.
Mr. Impastato noted that growth is greater in certain parts of each market.
“We have not necessarily seen even growth across any market segment,” Mr. Impastato said. “There are higher growth sub-segments in each type of packaging. For example, shrink sleeves is a high growth part of the flexible market, while bakery is a lower growth sub-segment. The key is to find and focus on these strong sub-segments, or at least diversify your product portfolio so some of these strong growth areas can support an overall positive growth strategy.”
The fastest growing packaging markets are flexible packaging and rigid plastics, Mr. Pettifor said. Within flexible packaging, retort and shrink wrap continue their rapid growth, he said, while shrink sleeves and innovative labeling techniques present growth opportunities for use with rigid plastics.
Wide format offers some good opportunities.
“Wide format digital presses are picking up in the POP market, and some of our customers have installed wide format presses, which is a good complement for their business as well as for ours,” Mr. Callif said.
“It is obvious that digital will play an ever increasing role in packaging as package converters learn how to implement digital into their processes,” Mr. Kristo said.
Food packaging seems like an excellent opportunity for growth. For example, at e|5, Color Resolutions International introduced an alliance with Ashland and Mark Andy’s UVT group for a turnkey system for food packaging that eliminates the use of photoinitiators.
“There is far more attention being paid to environmental and health and safety aspects,” Mr. Sickingersaid. “Consciousness has been raised with the issue of ITX in Europe, and I think consumers will drive the emphasis on the environment and health.”
“The only changes we have seen with the water-based packaging inks is that our customers and prospects seem to be asking more about FDA compliance than ever before,” added Scott Reese, vice president of sales for Premier Ink Systems. “I believe our customers want to make sure that their finished products are compliant for their customers, and that all components fall under approval with the appropriate FDA regulations.”
To best meet the needs of customers, ink manufacturers are developing a wide range of new technologies.
“Wikoff feels there are some recently introduced offset machines and color separation technologies
Amcor SelfVent Stand-up Pouch, produced by Amcor Flexibles, was the FPA’s 2006 Gold Award Winner in Packaging Excellence & Technical Innovation. An ideal solution for adding value to microwave-ready fresh vegetables, consumers benefit from great tasting, perfectly cooked vegetables with increased vitamin retention.
“High-strength products are generating a great deal of attention,” Mr. Impastato said. “Printers are finally understanding that although a high-strength ink may cost more per pound, it can yield a lower applied cost. Our high-strength inks in both water and solvent systems are solving production problems in the pressroom and doing it economically.”
“Siegwerk is in the late stages of trialing 1331, a water-based solventless adhesive to be used in extrusion lamination applications,” said Lothar Schaffeler, director of technology Flexible Packaging – NAFTA for Siegwerk. “All testing and trialing have shown very promising results.”
“Siegwerk has developed a system of UV inks for shrink labels to be printed on PETG or PVC substrates,” noted Manuel Rivas, director of technology Paper, Plastics, & Labels – NAFTA for Siegwerk. “This system consists of a high opacity white along with high density colors.”
Sun Chemical has been active on the R&D front. WetFlex, its patented flexo printing process designed to significantly improve print quality and efficiency for flexible packaging and using the UniQure energy curable ink technology, had its worldwide commercial launch in Girona, Spain. More than 500 customers from around the world flew to the headquarters of press-manufacturer Comexi for a live demonstration of the innovative technology that involves the inks being wet-trapped on a common impression (CI) cylinder press and cured instantly by an in-line electron beam at the end of the press.
Duratort, the one-part retort ink system from Sun Chemical’s SunStrato line of lamination inks, gives printers the options to capitalize on the fast-growing retort packaging market. This high performance ink system, using ground breaking technology offers converters the versatility to print retort packaging either gravure or flexo, using the same ink system, as well as offering the high bond strengths and heat and temperature resistance needed for retort.
Understandably, rising costs of raw materials are impacting the packaging ink business. Ink companies are utilizing a wide range of approaches to try to offset these higher prices, although they have found it extremely difficult to raise their own prices fast enough to keep up with these increases.
“Raw material prices and manufacturing costs have been rising steadily due to a myriad of factors,” Mr. Pettifor said. “Ink manufacturers have not been able to raise prices at the same rate, so margins are being squeezed because we have not been able to keep pace.”
“The rising raw material costs are having a negative impact across all our product lines and industry as a whole, reducing profitability,” Mr. Hambrock said. “This has created a very unstable environment where internal efficiencies and cost reductions only have a very limited impact on mitigating our overall increased material costs.”
“Raw material prices are still increasing,” Mr. Callif said. “For the most part, 2006 has been more stable than 2005, although resins, copper used for gold metallics, and phthalo pigments are moving up. We’ve had to seek price increases on a select few items such as metallics, and our customers understand.”
Raw material increases have been a challenge for ink manufacturers, particularly on the solvent side.
“Pricing on the solvent ink side hasn’t kept up with raw material increases,” Mr. Baker said. “Ultimately, the market sets the price. However, in the current situation of higher cost raw materials and lagging ink price increases by the major ink companies, we are successfully offering the prices that make sense to us.”
One way to try to minimize some of the impact of these raw material price increases is through cost reduction. Mr. Hambrock said that Wikoff is dealing with these pressures by continuing with cost reduction efforts through more effective product processing and delivery, improved materials sourcing and pricing where possible along with product price increases.
“We are combining this with a commitment to our customers to reduce operational inefficiencies from the print department back through the ink supply chain,” Mr. Hambrock added.
Mr. Pettifor also noted that some suppliers are leaving the ink market altogether.
“Some raw material suppliers are moving to other markets that are more profitable for them,” Mr. Pettifor said. “Where we can, we have identified alternative sources and substituted materials, while maintaining quality and performance levels. We also continue to do all we can to streamline our processes using Lean and Six Sigma initiatives, although these productivity improvements have been underway for a number of years.”
Ultimately, ink companies will have to continue to seek price increases to help meet their own higher costs.
“Raw material price increase have badly impacted our costs,” Mr. Faure said. “There is evidence that this trend will continue. This is clearly calling for more regular and more significant price increases for inks and varnishes.”
“Last year’s increases shocked the industry into moving toward passing these costs on which was vital to the health of everyone,” Mr. Kristo said. “However, they continue to creep past the strength of the adjustments in price made at the end of 2005. We continue to seek alternative materials with lower costs as long as quality is not impaired.”
“We have seen significant raw material cost increases that have further squeezed already thin margins,” Mr. Impastato said. “The key for the future will be the ability to balance those increases with a reasonable pricing structure. They cannot simply be absorbed any longer. Raw material prices are driven by both the cost of feedstock and market conditions. Flint Group has a very comprehensive purchasing strategy to protect our customers from short-term market variability. But, Flint Group, like all other companies, is impacted by larger market conditions and longer-term trends, and the longer-term trend is upwards.”