gE Blog Series: International Packaging Part 4 - Packaging Industry Outlook
Back in 1965, Fred Smith wrote a paper for his Yale undergraduate economics class that proposed an overnight package delivery service in which one carrier would be responsible for a piece of cargo from pick-up to delivery. This idea was unorthodox in the delivery of packaged materials at the time, as cargo shipment in the supply chain was handled by a multitude of companies. Smith received a grade of “C” on the assignment, because the professor told him that the idea was “not feasible”. Fast forward nearly 50 years, and Fred Smith is the founder/CEO of FedEx, a $28 billion company that transformed the way packages are delivered. His idea would revolutionize the package transportation industry, but this was not an overnight success story; at one point the company was kept alive by Smith turning the company’s last $5,000 into $27,000 with a gambling trip to Las Vegas. The packaging industry as a whole has changed a lot in the past few decades, thanks in part to massive innovation brought on by people like Fred Smith.
The global packaging industry is often overlooked for the crucial role that it plays in the global economy. Nearly every product that is sold worldwide has some sort of packaging, but the industry is about much more than just protecting a package before it is sold. Packaging is also used as a massive marketing tool, a well-designed package can sell a product as much, if not more so, than the actual quality of the product itself. Packaging has the power to build brands in a way that nothing else can and it has the ability to turn brands into cultural icons (think about how recognizable a Coke bottle or Pringles tube are).
The global packaging market is projected to grow strongly over the next decade, increasing in size from $670 billion in 2010 to $820 billion in 2016. However, most experts believe that there will continue to be a large discrepancy between growth in emerging markets as compared to growth in more mature markets such as North America and Europe. In 2011, retail packaging grew at a rate greater than 5% in Asia and the Middle East; in contrast, the North American market had an annual growth rate of only 0.3%.
Increased levels of consolidation can also be expected in the sector, as competition heats up and large companies acquire smaller, specialized companies to increase their product mix, reduce costs, and infiltrate markets that they do not have a presence in. In a recent survey, 56% of industry executives rated raw material prices as the most important business concern in 2012. The sector is very reliant on the cost of creating packages, so any fluctuation in global raw material prices will have a heightened impact on the industry.
The global packaging industry has grown enormously in the past 20 years, from new product design to increased emerging market presence to technological innovations. There is no doubt that this industry will continue to grow and have a significant impact on the global economy in the near future.