Demand for High-Barrier Film Packaging Surpassing Expectations; Snack Foods Top Market

The demand for high-performance barrier packaging films has surpassed all previous estimates, and the non-foil barrier flexible packaging market is now projected to grow at an average rate of 6% a year to $3.8 billion in 2003. Leading the way is the snack foods industry, which a new report says is the fastest growing market segment with the greatest demand for new barrier films.

Opportunities In High-Performance Barrier Packaging Films, 1998, published by management consulting firm Kline & Co. Inc. (Little Falls, NJ), cites technological and demographic changes, improved equipment and the emergence of new applications as leading factors that have pushed the demand for high-performance barrier packaging films beyond expectations. Consumer demand along with a robust U.S. economy have helped drive growth.

There are a number of reasons why the demand for new barrier films has been so strong in the snack foods industry, says Jay Dwivedi, senior consultant at Kline & Co. "Due to low unemployment and active lifestyles, consumers eat a majority of their meals on the run," says Dwivedi. "However, consumers are also demanding healthy, fresh and flavor-rich foods. Thus, food companies are increasingly seeking high-performance film constructions that will enable them to meet these expectations."

Other high-growth areas, says the study, include fresh meats, medical products, pharmaceuticals, pet foods and specialty chemicals. A breakdown of estimated market size in 2003 by end-use segments is shown below:

Identifying Strategies
Dwivedi notes that packagers are constantly seeking innovative packaging solutions on a cost-to-performance basis. Thus, the leading flexible packaging suppliers need to better understand the unmet needs of their customers. "The barrier film market is in such a state of turbulence that industry participants are struggling to clearly identify their strategic intent," says Dwivedi. "Along with know-how, companies should also make investments in technology, research, testing, cost benchmarking and state-of-the-art equipment to fully exploit the opportunity being presented."

Reducing the amount of material used and obtaining a desired set of film attributes for optimum barrier performance will drive the technological developments in the industry, but companies must be careful about their costs of manufacturing. "Companies that lack these resources or are not willing to make such strategic investments are not likely to survive in the long term as competitive pressures mount," Dwivedi adds.

The study also asserts that a high level of competitive activity in the U.S. market is expected as Japanese and European companies try to enter either on the basis of superior technology or lower price. In addition, the report identifies a clear potential for acquisition of under-performing companies as consolidation will continue to dominate the film industry for the next few years.

Complex Industry
The high-barrier film industry is very complex with numerous participants throughout the value-chain. Garrett Gee, business manager for plastics and packaging at Kline & Co., says that though film converters have traditionally been close to their customers, the quality of communication across the value-chain has been relatively poor. "This has had a detrimental impact on the growth of many industry participants," says Gee. "We expect plastic resins and other raw material suppliers to start considering the high-barrier film market as a separate entity. Film suppliers definitely need to understand consumer needs because they are driving the speed of innovation."

Opportunities In High-Performance Barrier Packaging Films, 1998 is intended to assist companies in assessing new and emerging opportunities in high-performance barrier film packaging. Says Dwivedi, "This study provides insights into the latest developments and how these can be exploited by industry participants to grow in the high-performance barrier packaging film market."

Kline & Co. is an international business consulting firm serving the packaging, chemicals and allied industries.

For information on how to subscribe to this multi-client study, contact Jay Dwivedi, Kline & Co. Inc., 150 Clove Road, P.O. Box 410, Little Falls, NJ 07424-0410, Tel: 973-435-3445, Fax: 973-435-6291.