Package deal
The growing demand for consumer products and ther replacement of traditional packaging products with polymer packaging is driving the growth of the flexible packaging industry in the Middle East. Market research and consulting firm frost and sullivan analyses the trends and major challenges in the market. According to them, the way the industry addresses these issue will be critical for the growth of the market. We bring you excerpts from a study conducted in late 2007.
The Middle East market for flexible packaging film has shown good growth during 2006, with some market segments showing fairly dynamic progress. The total regional market contributes approximately 3 to 3.5 percent of the total global flexible packaging market, with an estimated growth of 6 percent.
This study analyses the Mid East market by five main product types. These are: Polyester (PET) film Polyamide (nylon) film Polyethylene film Polypropylene film Others
The regional market is highly fragmented, with different types of companies operating in the market: Some end-user companies in the region operate their own in-house packaging facilities. Typically these were borne out of necessity, in order to secure a steady supply of suitable packaging material. There are many specialised packaging companies that cater to a variety of end-user industries from food to FMCG products. These companies are film fabricators, and buy resins and manufacture the film. There are some integrated manufacturers in the market that not only produce the resin, but also manufacture film.
Flexible packaging producers can generally be classified into two segments, namely basic material (polymer) makers and converters.
Basic material manufacturers make films PET (polyethylene terephthalate), BOPP (biaxially oriented polypropylene), and polyethylene or other polymer based films.
Converters make the end-product such as flex-packs. Depending on user requirements, converters process various raw materials such as films, inks and metal sheets into flex-packs such as laminates, labels, cartons, wrappers, and tubes.
Few vertically integrated participants also form a part of the flexible packaging industry. Flex-packs, due to their ease of handling and disposal, lower raw material cost, and barrier against moisture and gases, find application in the packaging of toothpastes, soaps, shampoos, detergents, processed foods, beverages, and so on. Some of the industrial applications for these products are automobile industry and healthcare products. The flex-pack industry is dependent on the FMCG industry for its growth.
Market opportunities and forecasts
The world flexible packaging market consumed approximately 13.5 thousand tonnes of various plastic films, papers and metal foils in 2006 for consumer packaging. The global market is estimated to grow at approximately 4.5 percent over the next few years, totalling to approximately 17 thousand tonnes by 2010.
North America and Europe are the biggest markets, making up approximately 55 percent of the total market. Asia Pacific consumes approximately one-fifth of the total global demand. It continued to be the fastest growing end-user market, at an estimated growth rate of 7 to 8 percent, with China and India being the fastest growing markets along with the Southeast Asian economies.
The Middle East is currently one of the smallest end-user markets, and that presents a great growth potential for flexible packaging products in the market. Moreover, the increased manufacturing activity in the region and the export of products to neighbouring markets such as Europe will further drive the demand for flexible packaging.
Market drivers and restraints
Overall, the Middle East flexible packaging market growth will be driven by the following factors: Rapid economic growth in many Middle East countries, especially GCC and Egypt Growth in the end-user industry, such as the food processing and dairy industry in the region Shift from rigid to flexible packaging in a bid to reduce packaging costs Growth in the petrochemical segment in the country will boost the replacement of rigid packaging Environmental concerns to reduce packaging products and promote products that can be recycled Changing consumer patterns Technological upgradation and improved performance properties of the packaging products Some of the major market restraints are: Increasing competition from neighbouring Asian economies such as India and China Newer and improved processing methods have reduced the gauge (thickness) of the packaging material and properties, which means that although the market will grow in terms of revenue, the proportionate growth in the volume will be minimal Low-cost manufacture of finished products in countries such as India, China and others will impact the demand for packaging products for the domestic manufacturer, and the processing industries from Europe are shifting their base to these countries.
Market segment analysis
In 2006, polyethylene film represented the largest segment, constituting approximately 60 percent of the total flexible films packaging market in the Middle East. The market is estimated to grow at approximately 5 percent over the forecast period. However, polypropylene films are likely to replace polyethylene films in some of the applications. Better performance, technical properties and the versatility of polypropylene will increase the product’s market share, from approximately 29 percent to approximately 34 percent by the end of the forecast period.
The other fastest growing segment is PET film, which is estimated to grow by 6.9 percent during the forecast period. Specialty films such as polyamide, polyvinylidiene chloride, and others will continue to grow at the same level during the same period.
Trends and innovations
Some of the major developments that have taken place in the market are due to the introduction of newer products and concepts such as:
Stand-up pouches – The term standup refers to a pouch that supports itself in an upright position when it is filled. Pouches are increasingly replacing more rigid structures such as cans and bottles, for both dry products and liquids. Design innovation in closures and dispenser systems has improved the convenience and performance of pouches. They are currently available with snap caps, threaded closures, nozzles and zippers for reseal ability. These design innovations are permitting pouches to invade markets that are customarily held by rigid containers. Better display graphics and material reduction are also key drivers of the rapid growth in their use.
Retort pouches – These are designed to be filled, usually with a food product, and then heat sterilised in a procedure analogous to scanning, to produce a shelf stable product. Their flexibility, smaller volume, and much lighter weight are their significant advantages. The basic design for retort pouches is a multilayer lamination containing an outer layer of polyester, a layer of aluminium foil, and an inside layer of polypropylene that provides the sealant and product contact layer.
Shrink wrap – Shrink wrap or shrink film are polymeric films that shrink tightly over the substrate (or whatever they cover) when the film is heated or the temperature is increased during packaging. Shrink wrap is used as an over-wrap on many types of packaging: CDs, DVDs, cartons, books, beverage cans, large appliances, pallet loads, and so on. These types of packaging products have been used in the market for many years, however, newer polymers such as polystyrene and others are increasingly preferred over polyvinyl chloride due to environmental concerns.
Some of the other product innovations are:
Re-sealable pouches: These can be closed again after being opened. To achieve this, they may have zipper attachment.
Dispensing pouches: These are with closures such as screw caps. Some of the changes that are likely to happen during the forecast period are: Local manufacturers are still catering to the low-cost competitive market, while most of the specialty market (for example, pharmaceuticals or healthcare packaging) is dominated by global players. However, the increasing price of these advanced materials may force the end users to look for local products. This may, in turn, create opportunity locally. A comparatively low production cost due to the cheaper raw material cost is an advantage for the manufacturers/ converters in the region. Consolidation in the industry is likely to happen over the next few years. Companies such as Ti Films (which has three manufacturing units in UAE, Egypt, and Oman) are considering acquisition and JVs for larger market access and resource optimisation.
Trends in the end user segment
The food and FMCG industries are the major end users of flexible packaging products globally. Food products will continue to dominate the application segment for flexible packaging products. However, industrial applications are also growing in the region. Increased manufacturing activities are likely to see a demand for flexible packaging products. This, though, will be very small in comparison to the demand from the food and FMCG segments.
The packaged food products segment will see changes in the flexible packaging product used. Food product manufacturers are likely to demand aesthetically better products and improved price-performance products from packaging suppliers.
Strategic conclusions
The growing importance of flexible packaging has emerged from the need to improve the end product performance, shelf life, reduce costs, and have better aesthetics. The emerging applications require products to possess unique functionality and properties under extreme conditions, such as heat resistance or specific gas barrier properties. The development of better products and the improved cost performance of the product continue to be the key commercial success factors.
The industry continues to use traditional and dated flexible packaging products and awareness about specialty films remains relatively low. The Middle East flexible packaging market is projected to experience fairly good growth during the forecast period, despite various challenges faced by the market as well as the competitive environment.
