Plastic’s pain brings happier days for cartons

By Jo Francis, Monday 22 January 2018

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Sir David Attenborough could just turn out to be the biggest influencer yet when it comes to the future for carton printing.

cartons

The veteran broadcaster’s Blue Planet series, with its distressing scenes of turtles and albatrosses tangled in humankind’s carelessly discarded plastic detritus, has resulted in mass outrage about the use of plastics and society’s throwaway culture.

This public backlash, combined with the ban on the importation of plastic waste by the Chinese government as of this month, is leading to a fresh awareness and an understandable rethink from major brands and retailers on their use of plastics. 

To cap it all, Prime Minister Theresa May has now outlined long-term government plans to eradicate all unnecessary plastic waste by 2042.

Jon Clark, general manager at BPIF Cartons, views all of this as a major fillip for the sector. “If there’s one thing that’s helping the folding carton industry right now it’s the anti-plastic wave, which is more like a tsunami at the moment.

“Cartonboard is one of the most environmentally friendly materials, and we are trying to convince specifiers to use cartonboard instead of other materials.”

A number of retailers and brands have now pledged to reduce their use of plastics, including a pledge from Iceland to eliminate or drastically reduce plastic packaging on own-label products by the end of 2023. 

“This is such an exciting time for the carton industry,” enthuses one senior carton industry manager. “There is such a backlash against plastics. It’s a really interesting time for cartons because it’s the only material that’s truly sustainable.”

Market research expert Neil Osment, director at research and consulting firm NOA-Prism, says that prior to recent events the carton category had actually been in the doldrums, with brands replacing cartons with flexible plastics and plastic trays.

“This could be the saving grace of an industry that was taking a nosedive,” he states. “Carton volumes had flatlined, there was no growth, against a background of corrugated that is growing at 5%.” 

The welcome wave of fresh interest, then, is also likely to result in further innovations, to make sure cartons tick even more boxes for purchasers and concerned consumers alike. 

Paul Hartwig, production director at pharma and food packaging specialist Firstan, says the firm is already receiving new enquiries as a result of the plastics crisis. “We’re being asked where we can help with the issue of plastics, and we’re producing more folding carton trays,” he says. “We are also looking at cartons that have barriers, for example a PE layer, and working with coating manufacturers on water-based food grade coatings.”

Coming together

While this momentous shift towards more sustainable and recyclable packaging options is likely to be the next big thing for the sector, the current big thing is, well, all about size. Specifically, the enormous amount of M&A activity that has taken place in recent years, which has completely changed the shape of the industry. 

The expansion of multinational giants such as Graphic Packaging International and Multi Packaging Solutions – itself acquired by the even bigger Westrock last year – has resulted in a sort of polarisation of folding carton converters. 

Clark says the UK carton sector represents a circa £1.2bn business overall, with a market split of roughly 70% food packaging, and 30% pharmaceuticals and beauty. 

“Cartons has seen a huge amount of consolidation over recent years, and we now have companies like Graphic Packaging International that is totally dominant in food packaging and Multi Packaging Solutions which is probably dominant in healthcare,” he says. 

Viewers of television programmes such as the BBC’s Inside the Factory will be familiar with the vast scale of manufacturing and the huge volumes of packaging required for FMCG products, be that tea bags, biscuits or pasta. Just imagine, for example, how many packets of generic painkillers are sold every day.

For some of the very large producers there’s no doubt that the number of finished sheets on the floor is an overriding driver, and the volumes involved are huge – even if the margins are not. 

Alexir Packaging chairman Robert Davison, who is also chairman of the BPIF Cartons special interest group, says the average return on sales across the sector is 2%-2.5%, “which is pretty small for the sort of investment that is required in this environment.”

There are headwinds for the folding carton sector that have a lot of commonality with the printing industry in general: the negative impact of uncertainty caused by Brexit, and rising input costs due to unfavourable exchange rates, although anecdotally it seems that such increases are easier to pass on than in commercial print. 

Training of the next generation is also an issue, but here the sector has some good news to report. 

“People are not being educated at school about manufacturing or packaging, so BPIF Cartons has created a training scheme that is aimed at apprentices or trainees at converters,” explains Davison. 

“The first trials took place before Christmas, and a full programme is being organised for 2018. We are looking at gaining accreditation so that Apprenticeship Levy funds can be used for it. We are trying to enhance training across the sector.”

The next generation of folding carton professionals will find themselves in a sector that certainly presents some interesting opportunities, whether their ambitions are local or global. 

Market dynamics

It’s a highly competitive market involving large amounts of commodity production, combined with rigorous delivery demands and service level agreements from customers. By contrast, some parts of the sector (of which more later) are both high-value and high-margin, involving multiple printing and finishing techniques.

Consolidation has not been limited to the carton converters, it’s a constant theme elsewhere in the supply chain as well, with one carton veteran describing the situation as “like being in a sandwich”. 

“Our suppliers have consolidated so there’s only a few of them now, our customers are also huge, and we’re sandwiched in the middle,” he laments.

An example is Kraft’s takeover of Cadbury’s. Two substantial customers in their own right became one even more enormous customer, with Kraft subsequently leveraging its buying power accordingly and drastically reducing its number of suppliers. 

“When you look at big sourcing, it’s on a pan-European or international scale,” notes the carton printer. 

The impact of so much M&A activity is that what was the middle ground “has simply fallen away”, leaving a handful of very large players at the top of our table, and then a pretty substantial gap between those companies – all part of, or owned by, large multinational groups – and the independents, with The Wilkins Group emerging as the largest of those. 

However, the independents aren’t being squeezed out because of all this M&A activity, rather the opposite in fact. 

“It’s actually been good for the rest of the marketplace,” says Clark. “A lot of customers don’t want to be a little fish in a very big pond.”

“Big retailers don’t actually like the fact that some of the packaging groups are now as big, or bigger, than they are,” observes James Williams, managing director at PrintWeek’s FMCG Packaging Printer of the Year, Curtis Print & Packaging.

Alexir’s Davison also confirms that his company has found new opportunities opening up as a result. “Certainly some doors have opened that a few years ago would have been closed to us. Larger companies that wouldn’t have entertained SMEs are more willing to talk to us now,” he says. 

A further knock-on benefit for the indies has come about thanks to the fact that M&A deals don’t always go according to plan, as the unfortunate example of Essentra shows. The PLC acquired Clondalkin’s Specialist Packaging division in a $455m deal in 2014. As part of the consolidation that followed it decided to relocate the former Clondalkin Great Harwood and Northampton operations to a new plant at its Newport centre of excellence. 

Much disruption and loss of business ensued, with the astonishing outcome being that Essentra then decided to shut down the Newport cartons facility altogether just a year after it had opened, taking a £35m hit in the process. 

“All of that turnover that used to be at Great Harwood, Northampton and Newport was sloshing around the market and has done wonders for the smaller players,” says Clark. 

Indeed, a common theme among the independent players is that they are able to play to their strengths, by offering the sort of flexible service that might not necessarily be on offer from a larger group. 

One carton printer describes a typical scenario, thus: a customer has a contract with a large carton converter for deliveries to be made once a week, but then needs something additional in a hurry, for example for a promotion. Their ad hoc request would ‘crash the plan’ because it is outside the terms of the contract, potentially resulting in a large additional fee. 

By comparison, smaller suppliers by their nature are likely to be nimbler, and be in a position to pull out all the stops to help. 

“We’re printing something this afternoon for immediate delivery,” confirms Firstan’s Hartwig. “Every two-to-three weeks we’ll have an urgent order where a customer is short on something. They rely on people like us to help.”

Glossop Cartons sales director Jacky Sidebottom agrees. “A lot of people are unhappy dealing with massive multinationals, as they don’t get the TLC they get from companies such as mine,” she says. 

“There’s a lot of goodwill and loyalty involved in our business. You feel for your customer and want to make it happen for them. There are lots of benefits to dealing with an SME. You’re dealing with the decision maker, and people care.”

In the case of high-value items such as beauty products or perfume, the packaging is an intrinsic part of the customer buying experience and plays a vital role in the perception of the product.

And while there is understandably much focus on the exterior of cartons to deliver that all-important shelf appeal, Celloglas recently carried out a micro-experiment with the Retail Institute, looking specifically at the effect of different interior pack finishes: shiny gold, matt black and plain. 

The perceived value of both the gold and matt black pack was considerably higher. 

A Smithers Pira report on luxury packaging, published last year, pointed to continuing growth in that part of the market, with much attention on ‘premiumisation’ – the development of packs that promise a luxurious experience within. 

Williams at Curtis Print & Packaging says that his firm has developed a niche market that is all about applying his team’s considerable know-how to bring to life customer aspirations for their brands.

“Our beauty industry clients appreciate the value that packaging can bring to a product, whereas if it’s a fish fingers packet that’s not necessarily the case,” he says. 

And this crucial perception of brand value has only become even more important in the internet and social media age. 

“Packaging sets the tone; it’s the first interaction the customer has with the product. If you search for unboxing videos on YouTube, there are millions of them. And if you look at the beauty bloggers and vloggers, the first thing they talk about is the packaging. If it’s not right it sets a negative tone,” says Williams. 

For many customers, the quest for stand-out via new or different pack treatments is unrelenting, according to Glossop’s Sidebottom. “Everyone is chasing the new, the different the eye-catching. That’s the big driver, everyone wants to look different or have a unique pack on the shelf.”

She also reports that turnaround times are increasingly being squeezed, with the pressure on to convert jobs quicker and quicker. 

Digital direction

In common with the rest of the printing industry, digital production technologies are playing a part in cartons, albeit relatively small at present. Glossop was the first user of Highcon’s Euclid and then Beam digital cutting and creasing devices. While Qualvis Packaging and Alexir have both opted for digital printing setup combining technology from Xerox, Kama and Tresu. Kalas Packaging installed the UK’s first HP Indigo 30000 press for folding cartons at the end of 2016. 

Elsewhere, the first beta sites for the much-talked-about B1 inkjet presses from Heidelberg and Landa Digital Printing are at carton printers, and although these presses are yet to arrive in the UK carton printers here are studying the likely economics of such production techniques with interest. 

Just as in other parts of the packaging market, such as labels, the craft production trend involving small manufacturers and makers is generating the sort of new business that is ideal for digital production. 

“The digital market is interesting, there are lots of people talking about it but not that many people doing it,” says Alexir’s Davison. “It’s an area of major interest to us. We are dealing with start-up businesses who have requirements for small quantities, or for a sample batch of cartons to present to a retailer.”

The complexities of carton shapes, sizes and printing requirements mean these products don’t necessarily lend themselves to the web-to-print market as readily as more standardised products such as leaflets and business cards. However, Alexir has put considerable investment into developing a web-to-carton workflow that is now being deployed by partner Macfarlane Packaging for its ‘Brand it’ custom carton range through Macfarlane Online, and it will be fascinating to see how these emerging on-demand carton solutions develop.

Overall, it seems there is plenty for folding carton converters to be positive about, not least because a folding carton cannot be supplanted by digital media. Clark describes his members as “pretty upbeat”, and says he fully expects to see more people moving towards cartons. Thanks to David Attenborough, cartons might just be on the cusp of gaining some fresh appreciation. 

cartons-table

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