The packaging report.
"Packaging is probably the most important part in point of purchasing consumer items," said Harvey Brice, president of Superior Printing Ink. "While volume and sales numbers, compiled by NAPIM, indicate that ink usage has been reduced, I think the packaging area and UV curable inks are holding up fairly well."
"Within the North American market we will see segments of the packaging market that will grow at a 6 to 7 percent rate while other segments may be nearly flat," said Michael Impastato, vice president, market development, packaging division, Flint Ink. "Higher growth areas are expected in labels and flexible packaging, while lower growth is expected in folding carton and metal deco."
"The packaging market closely mirrors the performance of the U.S. economy," said Bob Mullen, vice president, packaging sales, Sun Chemical Ink (GPI). "Over the last 10 years, packaging's compounded annual growth rate has been more than 4 percent per year yet the market's growth varied widely from year to year. In flexible packaging, for instance, industry data show the growth rate was 0.4 percent in 1996 and as high as 11.6 percent in 1995. Sun Chemical expects the general growth trend to continue."
"The packaging market is pretty stable. With the downturn last year it was a little bit down, but it is coming back up," said Kent Shah, vice president, technology, Color Converting Industries.
"Expected growth for packaging will be between 2.5 percent and 3.5 percent," said Bryce Kristo, vice president, finance and business development, INX International Ink Company. "Growth remains volatile as does the economy."
Flexography has been leading the way for growth. Industry data shows that flexography is the most widely used printing process in packaging, Mr. Mullen said. He added that gravure remains a solid choice in flexible and folding carton, while offset is still popular for folding cartons.
According to Tom Socha, vice president, business development -- packaging, SICPA North America, gravure is estimated to grow 1 to 2 percent and flexo 5 to 6 percent. "Flexo continues to slowly take market share from gravure due to continuing improvements in efficiencies and quality," said Mr. Socha. "Narrow and mid-web converters are positioning themselves to take on small run flexible packaging opportunities. These are usually the designs that are too small for wide web converters to produce profitably."
"In North America and Europe, over-all packaging is expected to continue to grow at levels equal to or slightly above GNP," said Mr. Impastato. In other parts of the world, where packaging has been used considerably less, Mr. Impastato said that growth will be significantly higher during the next decade. He speculated that growth in some of these areas could be in the double digit range.
When choosing a raw material supplier, ink companies time and time again choose quality, price and service as the top things they consider. While keeping costs down is certainly a priority, ink makers are not willing to sacrifice quality for cost.
"Our first requirement of a supplier is quality and consistency," said Mr. Impastato. "That being said, this is a very competitive industry. We have many partnership-level accounts that expect and trust us to provide a quality product at the lowest possible cost. Ultimately costs are influenced by the quality of feedstock, process control, scale and efficiency. Our choice for suppliers takes all four of these attributes into consideration."
"Price and quality are always considerations in choosing a raw material supplier," said Corey Soeldner, purchasing director, Sun Chemical Ink. "Sun Chemical also looks at other factors such as consistency, availability and traceability. As a company that employs Six Sigma methods, we expect our vendors to have data that proves the quality and consistency of their product."
"We look for quality, consistency, technical attributes and value," said Mr. Socha. "We look not only at the price per pound of raw materials, but also what they bring in terms of value. From a pigment perspective it could be ease of dispersion, rheology or color strength development. We look into each area to determine what our cost of conversion would be along with the positive impact at the customer.
"The first thing we look for is quality and to make sure it meets our customers' specifications," said Mr. Shah. "Then we see if the prices are competitive. Most of our customers prefer to have ink quality before the price. In most cases packaging inks are not considered to be commodity but rather a specialty product. Therefore, it has to meet demanding package exposure and processing requirements."
Raw materials used for formulating packaging ink have the largest impact on the final cost. These materials are generally petroleum-based and are affected by the same forces that impact the general chemicals markets, said Mr. Impastato. "While the ink industry used large volumes of titanium dioxide, the amount is small in comparison to the white pigment used in architectural coatings. In addition, [Ti0.sub.2] for inks is a special grade that is only made in certain facilities around the world, making the supply less elastic than if all [Ti0.sub.2] was interchangeable."
"This is the case for many different chemicals used in the ink industry," he continued. "Several years ago the supply of green pigment was tight, which pushed the prices for the green pigment up significantly. In researching the reason, we found the automotive industry has successfully marketed green as the designer color of the year, creating a high demand for the pigment and resulting in global supply problem. The good news is green is no longer as popular as it was, and availability of green pigment is back to normal."
"Raw material pricing remains virtually stable and has not had a significant impact on profitability," said Mr. Socha. "Pigment pricing has the biggest impact on an ink manufacturer's final cost, but due to the continuing influx of low cost, quality product from Asian sources, North America pigment prices have also remained stable."
There are always pressures on raw materials, according to Mr. Soeldner. He noted that many of the new ink formulations for packaging place an emphasis on functionality, such as lamination inks that provide improved bond strength or surface inks that increase scratch resistance and may increase the cost of a resin used in an ink, while lowering the overall cost of print by eliminating some elements of the production process.
In these uncertain economic times, it is hard to come to any solid conclusions. While all signs seem to point to growth, the future of the industry is still not clear.
"The economy has most people guessing right now," said Mr. Impastato. "All indicators show the economy growing. Last year some industries found themselves in serious over-supply positions. Due to a combination of the recession and over-supply, producers found it necessary to cut back on capacity. Now, as the economy picks up, we expect to see a rebalancing of supply/demand, which could cause some tightening of supply and corresponding price escalation. In the first half of the year, we have seen benzene, toulene and xylene -- basic feed-stocks for pigment intermediates -- increase 35 percent."
Propylene, used in water-based inks, has increased 25 percent and ethylene, used in solvent packaging inks, has increased 15 percent since January. A major global supplier of titanium dioxide has announced a 12 percent price increase, Mr. Impastasto said.
"Our expectation is that some white pigment, water-based resins and certain solvents will increase. We are watching crude oil indices," said Joe Cichon, senior vice president product and manufacturing technology, INX Ink International Co.
Prices for packaging inks have remained relatively stable for the year. SICPA has not had a price increase for almost four years. According to the company, this has been achieved through dedication to cost control, cost reduction and manufacturing efficiencies.
Scott Reese, VP of sales for Premier Ink, reported that pricing is stable this year versus last year, and Mr. Cichon, said that INX's prices have also remained stable.
This stability in pricing is about to change, according to some ink makers. Many in the industry foresee price increases for ink in response to elevated raw material costs.
"Where appropriate, Sun Chemical has increased prices based on increased raw material costs or added value," said Mike Murphy, senior vice president and general manager, Sun Chemical Ink. "However, our customers are under pressure to control costs, making price increases challenging."
"Prices have been stable through the first half of 2002, but with the increase seen in raw material it will be difficult to maintain prices at those levels," said Mr. Impastato.
"In general, there is pent up pressure to increase prices on these basic chemicals," said Mr. Impastato. "Over the last 18 months the economy has not allowed costs to be passed through, but as the economy begins a more robust growth cycle the pressure may rise to a point where price increase will be widely supported by all producers."
As with any business, keeping the customer satisfied is of primary importance. "Customer service should be based on communication, quick response and a professional goal-oriented partnership that controls and/or reduces unnecessary cost for both parties," said Mr. Socha. "Technical performance, consistency, price and innovation are the main criteria that customers look for. Some areas of the market are based solely on price. These are areas where the technology has gone as far as it can, and as such, is considered a commodity. Other high-end markets, i.e. flexibles, are driven by technology. Flexible packaging converters are always seeking new and improved products that will give them a competitive edge."
"Our goal is to be proactive, listening to the customer and developing innovation. We can troubleshoot, but troubleshooting is really the result of not being proactive," said Mr. Kristo.
Sun Chemical's goal is to become their customer's partner of choice," said Mr. Murphy. "This means that we endeavor to give the converters the high quality inks and coatings they need to do their job and meet their customers' expectations. In addition, Sun Chemical aims to give service and technology that adds real value to their processes by reducing the overall cost of printing."
"Our goals are delivering innovative technology and service," said Mr. Shah. "That's how we've been growing."
Besides delivering technical service, customers want a product that meets their performance goals and provides a low cost of use.
"Printers are looking for a level of performance that meets their requirements at a price that provides the Lowest total cost of use," said Mr. Impastato. "We see more and more printers that now really understand the difference between cost per pound and cost of use. Cost of use is a little more difficult to measure, but today's printers understand that price, coverage and processing efficiencies all combine to provide a much more comprehensive look at true cost.
"Our goal is to build a relationship of trust and partnership with our customers," said Mr. Impastato. "This isn't possible in all cases, but we find if we can develop a partner relationship, we can integrate our operation with our customer. This provides the benefits of vertical integration to the printer without the capital investment to get into the ink business. Our intent is to work with our customers to continuously examine the operation looking for ways to help our customer reduce their overall cost and/or grow their business. We have numerous examples of projects where we have helped generate significant improvements in cost and capability. We understand that we can only be successful when our customers are successful."
It is essential to listen to customers to learn their needs in order to develop products that will help them succeed.
According to Mr. Cichon of INX International, customers are looking for products that perform and reduce applied cost, such as a single system that can replace multiple ink systems.
"We must be responsive to our customers and customer's customers. It is important to respond to key development directives coming from the package printer, but just as important, we must actively be working with the users of these packages assure that the strengths and limitations of the printed films are understood and leveraged to the ultimate advantages," he said.
In order to keep up with the changing needs of their customers, ink makers are placing great emphasis on developing innovative products in their R&D labs.
"Packaging is the most technically challenging part of the ink market," said Mr. Impastato. "The vast number of new materials and constructions keeps packaging ink suppliers busy. A capable and experienced R&D staff is a must in packaging. Due to the tight cost constraints on our customers, we find they often do not have the in-house expertise they had a few years ago. They depend on their suppliers to provide a high level of support in the development of new constructions and solutions to new problems."
"We use a technology pull approach," he continued. "First we determine the need by having a comprehensive dialog with our customers. Then we screen the projects for feasibility and impact. Once we have identified a project that is meaningful and valuable for our customer we assign the appropriate technical resources. The project is monitored on a regular basis to assure progress toward the customer-defined performance and cost criteria."
"Due to the constantly changing and ever increasing expectation of performance, printers want to see inks that have a wider performance window that will take into consideration all the variables printers have to deal with in their operations," said Mr. Cichon. Key areas of research, he said, focus on the ability to store, protect and allow for cooking food products, as well as smart packaging that identifies the authenticity of product to consumers protecting brand name products from counterfeit items.
"An effective R&D program starts with understanding the entire packaging life cycle, from cradle to grave," said Mr. Socha, "including substrates, raw materials for inks, press manufacturers, anilox, cylinders, plates, converters, end-users and finally the consumers. As ink manufacturers, we need to network with all stakeholders in order to anticipate trends in the market and be prepared to deliver the right product at the right time."
"It is the responsibility of research and development to stay ahead of customer demand and develop innovative, robust products capable of satisfying that demand," said Tony Renzi, director, packaging technology, Sun Chemical Ink. "R&D needs to be aware of the dynamic effects on supply, cost and quality in our worldwide raw material base so we will develop new ink and coating products that will meet our customers' price and performance standards. The technologies offered must work in tandem with the trends in packaging needs. Advances in packaging technology must be met with comparable ink and coating technology. New technologies which are evolving are hybrids of traditional chemistries. Traditional liquid ink technology is being combined with energy curable technology to develop products that can meet the escalating needs of today's packaging market."
"Packaging is extremely dynamic in comparison to other types of print markets," said Mr. Shah. "We must respond to these needs. Ink suppliers must have a strong R&D staff. Our customers demand that we must create technology to keep up with new packaging. Our R&D is coming out with technology for shrinkable applications, laminated stand-up pouch application and packaging for meat and cheese application (a lot of which are resealable)."
"The objective is to design the right products, on schedule, the first time," Mr. Renzi said. "This will ensure that the R&D function satisfies its primary responsibility to meet the future customer demands and stay ahead of the innovation curve."
The packaging ink market is always changing and evolving. There is constant pressure to come up with new and inventive packaging to catch the eye of consumers.
"The packaging market must continually reinvent itself," Mr. Mullen explained. "It is the new packaging look, the new functionality and the new technology that sells products in the retail market."
"Sun Chemical played a key role in the development of UV and electron beam inks, which are making gains in the packaging arena," said Mike McGovern, director, sales and marketing, energy curable inks and coatings, Sun Chemical Ink. "Recently Sun Chemical announced WetFlex EC a new wet-trapping ink for use on central impression flexo presses. Due to its obvious advantages, we anticipate press manufacturers will incorporate its use into future press designs."
Printers are looking for quality inks that will meet the special need of their particular job and keep up with the innovations.
"Packaging is changing constantly, and is getting more and more sophisticated," said Mr. Shah. "Customers are looking to see if we are prepared for these changes. They are looking for a product to fit their ever changing needs. For example, bottle labeling is getting popular with shrinkable sleeves than paper label. So the demand for ink formulation is changing very rapidly in that market. As long as we keep up we will stay ahead. The packaging printers don't want to keep on changing ink suppliers every time they have a new demand."
The result of so much emphasis being placed on R&D is, of course, more innovative technologies and products being rolled out of the labs.
"We are constantly improving laminated inks," said Mr. Shah. "That is our most demanding market -- high end products. We started formulating energy curable products like UV/EB."
"We have developed many new technologies internally that measure cohesive strength, flow properties and residual material. We also identify the impact of residual materials on the products during application," said Mr. Cichon.
As the technology grows, packaging inks will become increasingly sophisticated and versatile.
"We see more versatility and strength to packages," said Mr. Cichon. "Versatility may include smart packaging that not only protects authenticity but enables supply chain management as well. Most innovation will continue to seek cost reduction with quality improvements. New concepts may include single point packaging and possibly hermitically sealed boxes."
"Packaging inks will become more and more sophisticated in the future," said Mr. Impastato. "Printers require inks that are not only press friendly, but must also provide higher and higher end-use performance properties, on a wide variety of substrates. In addition, I would expect to see more functionality built into ink in the future."
Complying with environmental regulations continues to be an important issue. As such, "greener" technologies such as water and UV/EB sill continue to gain in popularity.
"I believe the future of packaging ink industry will place more emphasis on environmental compliance," said Mr. Socha. "Water-based and energy-curable inks and coatings will continue to make advances in capabilities, and will slowly gain acceptance as a viable alternative to solvent-based technology."
"Package design is becoming more functional in nature than in the past," Mr. Renzi said. "More than ever, that package needs to create functional value as well as maintaining the basic utilitarian value. For example, packaging systems now in use include storage containers that utilize zip lock technology. Others are cooking containers that utilize structures offering boil-in pouch technology. Still others are used as drink containers for the juice pouch market."
"Each of these functional applications puts demand on the inks to perform under new and demanding conditions," he continued. "Inks are no longer used solely to communicate art and design. As the demand for higher performance packaging evolves, so does the demand for high performance inks. As long as there are new packaging innovations, there will be a demand for innovative packaging inks."
Packaging inks have a bright future ahead. "Even with the recent downturn in the economy, the packaging market has not declined as bad as other markets worldwide," said Mr. Shah. "Innovative packages will be on the rise which in turn will demand strong R&D and will present challenges to the ink chemist to remain excited."
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|Date:||Oct 1, 2002|
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