The cost of plastics, aluminium, paper and liquids materials used in flexible packaging reached new, record levels in the first quarter of 2022, maintaining the strong upward surge in prices seen throughout 2021, according to Flexible Packaging Europe (FPE). Continued pressure from soaring energy costs, as well as other external factors, means the dramatic increases seen in the last half of 2021 have now been exceeded.
In particular the cost of 20micron BOPP film shot up 45 % during January to March 2022 and has now doubled in price since the first quarter of 2021. Thin aluminium converter foil also jumped by 67 % in the same three months and is now 75 % higher than the end of 2020. Elsewhere, 12micron PET added 47 % in the same period to stand 50 % higher than just over a year ago, while 15m micron BOPA film added 33 %, marking a 44 % increase in 15 months.
LDPE and HDPE prices are still well above the price levels seen at the end of 2020, being 75 % and 54 % more. Both are still well above the price levels seen at the end of 2020, being 75 % and 50+ % more. All figures have been complied by Wood Mackenzie and ICIS.
Commenting on the figures, David Buckby, Senior Analyst at Wood Mackenzie said, “Substrate prices across the board continued to rise sharply in Q1, driven primarily, in many cases, by energy surcharges. Limited availability of materials also propped up prices, made worse by ongoing global logistics challenges. The high cost and unpredictability of offshore sourcing means that European producers were generally busy, with some fully booked and not accepting new orders.”
“Lead times for aluminium foil in Q1 were as long as five months compared to two months previously. For paper, they were often two to three months, up from four to six weeks. The extent of price increases from supplier to supplier depended heavily on the scope of previous hikes – timings do vary. Some producers which pushed through substantial energy surcharges and price rises in Q4 pushed for only moderate hikes or even rollovers in Q1,” he added.
“Russia’s invasion of Ukraine added further uncertainty to an already highly clouded outlook,” Buckby believes.
FPE sees continued strong demand for all flexible materials as growth indices for the markets its members serve all remain positive. However there has been a general slowdown in the pace of growth, which may take some pressure off already stretched supply shortages of raw materials and ancillary products, such as adhesives and inks. Logistics and utilities pricing increases had and will continue to have a large effect on conversion costs to flexibles packaging converters. After a brief pause oil prices are now increasing again, so this may weigh on any respite from continued flexible material price hikes.
Guido Aufdemkamp, FPE’s Executive Director thinks it is difficult to forecast the direction of the market in current circumstances. “Growth in demand in Europe for flexible packaging is almost certain. While the price increases could have an impact on the levels of demand this is unlikely as non-flexible packaging applications are faced with higher absolute increases per pack as more material is used. Add the continuing supply chain disruption and major energy issues to the equation and the outlook is uncertain. The conflict in Ukraine and the economic consequences of it across Europe were not something we could predict or anticipate. However flexible packaging producers have proved resilient in the past, most recently with the pandemic, so we are confident the sector will continue to be able to meet demand for its products.”
Energy and raw material prices were already on very high level but surged even further after the beginning of the war in Ukraine. Those increases combined with availability issues have serious financial impacts on the flexible packaging supply chain. All main substrates used for flexible packaging such as plastics, paper and aluminium are concerned but also adhesives, lacquers and inks. The industry is confronted with the high energy prices in their direct operations manufacturing flexible packaging and logistics.
Even though the cost share for logistics is less than in other packaging sectors due to the low product to packaging ratio of flexible packaging and very efficient transportation (usually on reels) the absolute increase is very significant. Reports from forwarder associations even show the risk of reduction of available logistic capacities as companies will have to give up their operational business due to high diesel prices.
“The level of cost increases due this situation for manufacturers of the flexible packaging industry cannot yet be assessed completely but we are convinced that the peak is not reached yet,” commented Guido Aufdemkamp, Executive Director of Flexible Packaging Europe the situation.
“Main difficulties for our membership are the high uncertainty of serious pricing to their customers as many suppliers to the industry change their rates even after fixed delivery confirmation. Non-acceptance of such increases is often penalised by non-delivery or non-availability of the next order. Compared to the supplier and customer industry our sector is in a certain sandwich position. Furthermore, liquidity issues are of growing concern in particular for small- and medium-sized companies. That is combined with insufficient credit insurance lines due to high raw material prices.”
Almost half of the Fast-Moving Consumer Goods (FMCG) in Europe, excluding beverages, are packed with flexible packaging.
Scholle IPN, a leading global supplier of flexible packaging solutions, announced that they have completed the purchase of Bossar, a global supplier of flexible horizontal form-fill-seal packaging equipment.
The new business combination will leverage the combined capabilities of both businesses to provide one stop shopping for vertically integrated, sustainable solutions for the global flexible packaging market.
The company will retain the Bossar brand and will continue to utilize Bossar’s operational headquarters in Barcelona, Spain, and their manufacturing facility in India. The combined business has operations across Europe, Russia, China, India, Australia, Brazil, Chile, Canada and the United States.
Yakult launches its first aseptic food and beverage products on the Korean market, in Ecolean® Air Aseptic lightweight packages. The first two launches match health-oriented products with convenient and unique packaging, elevating the Korean consumers’ experiences.
“The Ecolean package is the perfect fit for us, since it is lightweight and flexible, yet extremely durable. We have already seen a huge interest from consumers,” says Ms. Jeonghyeon Hong, Marketing Manager, Yakult Korea.
Yakult is a well-established global food and beverage manufacturer, and the first beverage on the Korean market for ambient distribution, marks a move into the aseptic segment with new opportunities to follow. Hyfresh ready-to-drink tea launched in Ecolean® Air Aseptic 125ml package, is developed with Pyunkang medical institute and Hyfresh ready-to-drink vegetable soup, in Ecolean® Air Aseptic 200ml, is a nutritious vegetable-based creamy soup.
“This also marks Ecolean’s first launch in Korea and we are looking forward to showing consumers the benefits of our lightweight packages – being microwaveable and easy to use. Brand owners using lightweight packaging are not only reporting cost savings but also an improved environmental profile and brand image among other advantages”, says Johnny Sajland, Global Sales Director, Ecolean. “This will be a great match, with both the Yakult products’ added-value offering and with consumer’s everyday lives.”
Yakult puts one trillion packages on the market each year and has high standards when partnering with packaging suppliers
“We are developing food and beverage products responding to health concerns in typical modern lives. Marking the launch of our health-oriented ready-to-drink tea, we are addressing the need for self-care. The same can be said about our launch of Hyfresh vegetable soup, bringing an end to health concerns derived from vegetable-poor diets,” says Ms. Jeonghyeon Hong, Marketing Manager, Yakult Korea. “This is so important to us, to be able to make a difference in the consumer’s everyday life and we feel that with Ecolean that promise is strengthened.”
There has been a 14 % average annual growth in food and beverage launches with a snacking claim (Global, CAGR 2014 – 2018), according to Innova Market Insights. For most consumers, snacking is a part of daily life and always has been. What is changing is the way people think about snacking and what is considered to be a snack.
“Fundamental changes in eating patterns largely driven by increasingly busy lifestyles mean that the traditional pattern of three meals a day has been giving way over some years to a less formal eating pattern,” says Lu Ann Williams, Director of Innovation at Innova Market Insights. “This is shifting to a more fragmented and flexible eating style, encompassing multiple small meals or snacks, often eaten alone or on the go,” she adds.
This rise in the so-called “fourth meal” culture has increased demand for quick and convenient yet healthy solutions for busy consumers. This is creating opportunities for wholesome, satisfying and sustaining snacks to fulfill the role of mini meals and play a more meaningful role in contributing to refueling and nutritional needs throughout the day.
Healthy snacking choices are seeing the fastest growth rates for NPD overall, with nutritious options gaining ground. This is led by vegetable-based snacks, with an increasingly high profile for on-trend ingredients such as more unusual nuts, ancient grains, hummus, avocado, seaweed, hemp and baobab, for example. On the go and lighter options such as miniatures, bites and puffs are also increasingly in evidence, as is the search for the right balance between health and indulgence.
There are also regional differences in preferred snack types, with Innova Market Insights consumer research indicating that nuts & seeds, chocolate and yogurt/drinking yogurt are the top three choices in the US, for example, while chocolate leads from potato-based snacks and sweet biscuits/cookies in the UK.
“As traditional meal times and occasions disintegrate and people seek quick, convenient, yet healthy solutions for busy lifestyles,” Williams notes. “We are continuing to move away from the traditional three-meals-a-day norm,” she concludes.
Huhtamaki inaugurates its new, state-of-the-art flexible packaging unit in Egypt today. The investment marks the company’s entry into manufacturing flexible packaging in Africa.
The greenfield is located in the greater Cairo area and will serve Huhtamaki’s flexible packaging customers in Egypt as well as export its products into other African countries and Europe. The manufacturing unit is built on a land area of almost 37,000 square meters, with ample space for future expansion. Production has started this spring and the facility is expected to employ approximately 250 employees.
“The Egyptian market is sizeable, and with the rapid population growth in Africa we expect future growth opportunities both for us and our customers. Until now we have served flexible packaging customers in Egypt from our units in the United Arab Emirates and India. With the new plant we can offer our current and new customers – both in Africa and Europe – the same top quality with shorter lead times,” says Olli Koponen, EVP Flexible Packaging.
The new manufacturing unit is owned and operated as a joint venture of which Huhtamaki owns 75 %. The remaining 25 % is owned by Mr. Ayman Korra, who has been Huhtamaki’s joint venture partner in the Egyptian fiber packaging business since 2003. The current investment, including land purchase, facility construction and machinery, is expected to be approx. EUR 23 million with Huhtamaki share at approx. EUR 17 million.
Huhtamaki is a global specialist in packaging for food and drink. With our network of 78 manufacturing units and additional 24 sales only offices in altogether 34 countries, we’re well placed to support our customers’ growth wherever they operate. Mastering three distinctive packaging technologies, approximately 17,700 employees develop and make packaging that helps great products reach more people, more easily. In 2018, our net sales totaled EUR 3.1 billion. The Group has its head office in Espoo, Finland and the parent company Huhtamäki Oyj is listed on Nasdaq Helsinki Ltd.