FPA State of the Industry Report: Imports &amp; Exports and Industry Challenges/Vision

The State of the Flexible Packaging Industry Report is a definitive source of information regarding the flexible packaging industry size, structure, market segments, and key packaging products. Data in the report is primarily based on research conducted by FPA, which includes surveys of FPA converter and material/equipment supplier members. Secondary data, sourced from the U.S. Census Bureau, U.S. Department of Labor, U.S. Department of Commerce, industry analysts, and investment banking reports are also included within the report. Several aspects of the industry are examined within the report, including performance; materials and processes; end-uses; industry structure; imports and exports; and industry vision and challenges.

The 2019 report provides an overview of the performance of the U.S. flexible packaging industry in 2018 and focuses on the value added segment of the U.S. flexible packaging industry, which enhances flexible materials by performing multiple processes such as extrusion, lamination, and printing.

FPA continues its review of the 2019 report within this issue of the FPA Update. This month, the “Imports & Exports” and “Industry Challenges/Vision” sections of the report are highlighted.

Imports & Exports

Flexible packaging exports have accounted for a relatively consistent share of domestic production over the past 10 years. U.S. flexible packaging exports were up slightly 3 percent to $1,821 million versus $1,768 in 2017.

China and Canada are the top two countries importing flexible packaging into the U.S., far outpacing Mexico, Thailand, and Germany. China’s import levels have grown by more than 1.5 times since 2008, and for 2018, China was not only the top country importing flexible packaging into the U.S., but singularly accounted for over one-third (approximately 35.7 percent) of total flexible packaging imports.

Canada and Mexico are the two largest purchasers of U.S. flexible packaging exports, followed by the United Kingdom. The U.S. exported $679 million of flexible packaging to Mexico during 2018, around 9.3 percent higher than the previous year. Aluminum foil flexible packaging values continue to play a significant role in Mexico’s export picture, accounting for approximately 53 percent of all U.S. flexible packaging exports to Mexico.

The U.S. flexible packaging industry’s trade deficit, the difference between exports and imports, increased significantly in 2018, rising 20 percent to over $3.3 billion, compared with $2.8 billion in 2017.

Global commerce in flexible packaging is expected to continue its solid growth for the foreseeable future. In four of the past 15 years, exports of U.S. flexible packaging have seen double-digit increases, while import growth has seen double-digits in five out of the 15 years. Over the past 15 years, U.S. exports have grown at an annual rate of 4.6 percent, while imports have grown at a 7.8 percent pace, resulting in a steady increase in the trade deficit. Exports still represent a solid share of total U.S. industry shipments. In 2018, 5.4 percent of total industry shipments were exported.

The larger trade imbalance is attributable to the dollar’s continued weakness, the attractiveness of the U.S. market, and increased levels of international activity. Current and proposed duties and tariffs by the U.S., as well as retaliatory tariffs on the U.S. by impacted countries, will impact trade going forward.

Industry Challenges/Vision

A comparison of the top challenges facing the flexible packaging industry for converters and suppliers indicates that labor/talent is the top primary concern for converters (and the third concern for suppliers).

In an open ended survey question, FPA converter and supplier members were asked their vision of where the flexible packaging industry is headed over the next three to five years. The responses included:

Consolidation

Consolidation will continue with large/multi-national converters acquiring smaller ones, impacting primarily the small to mid-sized converters, their customers, and suppliers
Private equity firms are attracted to flexible packaging by the industry’s record of consistent growth

Industry Growth

Short term overall industry growth is expected to outpace GDP, averaging
2 percent-4 percent per year
Steady growth, based on continued improvement in U.S./global economic conditions
Expect packaging formats to continue conversions to flexible packaging (from rigid to flexible)
There are opportunities for companies that embrace packaging innovation, sustainability, recycling, new manufacturing technology and push to find ways to meet or exceed customer expectations

Financial Challenges

Significant challenges continue in attracting, developing, and retaining a skilled workforce
Profitability squeeze continues to be a challenge due to price pressures from global competition, volatile energy prices and government regulation (i.e. tariffs) — impacting converters’ resin, film, and aluminum foil costs/availability, and the difficulty of passing along higher costs

Trends in the Marketplace

Expectations for greater demand for convenience, ease-of-use (opening and resealing), consumer friendly packaging, high-value applications, and enhanced packaging graphics with smaller targeted audiences
Enhanced focus on sustainable/green packaging/sustainability issues in North America will impact on packaging/converters — could spur innovation and opportunities, expect to see more environmentally friendly (recyclable/biodegradable) products and greater awareness of the need to reduce food waste
Increased emphasis on consumer value as converters utilize technical improvements (including advancements in film barrier properties) in aseptic, retort, shelf stable, anti-counterfeit and child resistant packaging. Smart packaging will continue to evolve by addressing consumer concerns, including product safety, tamper resistance, freshness, nutrition, and consumer health issues
Competitive industry environment with market pressure from offshore packaging/foreign competitors and sources (Far East/Asia and China), as well as domestic customers looking for ways to cut costs

For More Information

For more information on the FPA 2019 State of the Flexible Packaging Industry Report, contact FPA’s Business & Economic Research Division, at fpa@flexpack.org or 410-694-0800, or visit www.flexpack.org.