Packaging economics

The name of the game has become one of intense competition, of finding the growth niches within the overall packaging market to make sure that you grow faster than your opposition. The overall packaging market in developed countries may therefore seem to be rather mature and static but internally it certainly is very dynamic.

Each packaging material - paper, glass, metal and plastics - and each form of packaging within these segments continuously struggles for its share of this enormous market. But because the total is growing slowly, the industry has come to resemble a zero game where one material’s gain is another’s loss. This accelerating competition between the different materials has forced a greater emphasis on new technology, new packaging systems and new distribution systems, and these developments are increasingly occurring on a worldwide basis.

Two issues have become apparent when we refer to competitive packaging materials.

Firstly, materials must have certain characteristics to perform the functions which are required in their use as a packaging material. Some materials are better placed than others and there is normally a comparison of these properties to decide which will perform best under any given circumstances. No one material is perfect and in most cases there is a trade-off of properties to reach a final decision. It is interesting to note that most packaging materials can, through highly scientific means and advanced technological developments, overcome some of their inherent weaknesses to place them in a better competitive position, ie, their toughest opposition.

This invariably costs money, which leads to the second point, namely that of the economics of packaging material. Upgrading the product technologically may be a technically feasible proposition but the strong question remains: Is it commercially feasible? And in this respect the commercial realities of a product carry more weight than anything else. The crux of the matter is that customers will only convert to an alternative packaging medium if the conversion results in better bottom line performance.

This is a very stable industry, which has grown steadily over many years. It is far less prone to violent swings in the economic cycle, mainly because the major off-take is pitched at the non-durable segment of the market with a heavy emphasis on beverages - alcoholic and non-alcoholic as well as food.

Packaging in product distribution is a techno-economic function aimed at maximising sales, while minimising the total overall cost of distribution. It can be regarded as a benefit to be optimised rather than merely a cost to be minimised. Packaging must be considered in relation to four major factors in industry today: materials utilisation, machinery and line efficiency, movement in distribution and management of people.

Pierre Pienaar MSc, FAIP
National President
Australian Institute of Packaging (AIP)
info@aipack.com.au
www.aipack.com.au