Packaging Machinery Purchasers Confirm Companies’ Predictions

ARLINGTON, Va.—Consumer and industrial goods companies have adjusted their predictions for 2008 packaging machinery spending only slightly, according to PMMI’s Spring Update to the Purchasing Plans Study.

Interviews and surveys for use in the update were conducted in April and May 2008, and initial research took place in December 2007 and January 2008. More than half of the respondents said they would stay on track with their packaging machinery purchase plans for 2008. The remainder were split evenly between increasing budgets and scaling back.

As in the initial study, Foods (+1 percent to +3 percent) and Personal Care Products (0 percent to +2 percent) expect to see growth over 2007. The remaining six categories anticipate moderate declines: Beverages (0 percent to -2 percent); Pharmaceuticals and Medical Products (-1 percent to +1 percent); Chemicals (-1 percent to +1 percent); Consumer, Commercial, and Industrial Durables/Hard Goods (-1 percent to +1 percent); Paper Products, Textiles, and Other Non-Durables (-2 percent to -4 percent); Converters, Printers, All Other (-3 percent to -5 percent).

“The packaging machinery market’s performance seems to be in line with today’s broader economic picture and the slowness all industries are facing right now,” said Charles D. Yuska, president and CEO, PMMI.

Looking at the overall packaging picture, PMMI’s updated research predicts an increase of 0.4 percent over 2007 in packaging machinery spending vs. a 0.6 percent prediction in the initial survey, bringing the year’s anticipated spending to $6.292 billion, just slightly less than the $6.304 billion predicted earlier in the year.

This report marks the first time PMMI has issued an update to the Purchasing Plans Study, and asked respondents to re-examine their earlier responses in light of the rapid economic changes taking place so far this year.

Forecasts and associated findings in both editions of the report were based on telephone interviews and online surveys conducted in December 2007 and January 2008 (initial report), and in April 2008 (update). The 511 decision makers represented, collectively, 1,564 U.S. plants and 9,000 packaging lines.

Cuts and Boosts Balance Out
More than half of the companies surveyed (55.6 percent) said they would not change their purchasing plans for the year. Of the remainder, 22.5 percent say they revised their budgets higher; 21.9 percent have cut back. Mid-sized companies (six to 25 packaging lines) had the highest rate of budget increases (25 percent), and larger firms (more than 25 lines) had the highest rate of budget cuts (29 percent).

Interestingly, the magnitude of the changes—i.e., the percent change in dollars from the original projection—is roughly equal between the groups. Effectively, increases and decreases cancel each other out.

“Packagers are bringing in new machinery for two leading reasons: to accommodate new products and to increase capacity for existing products,” said Yuska, noting a variety of reasons packaging machinery buyers are maintaining or increasing their 2008 budgets:

• Upgrades to increase speed, productivity and/or efficiency
• Reduce maintenance needs and increase uptime
• Increase output
• Accommodate new product lines
• Higher-than-expected demand for products
• Heavy emphasis on product safety, security, tracking and labeling.

On the other side of the spectrum, weaker-than-expected demand and economic uncertainty have led to project cutbacks, delays and cancellations. Increasing costs for raw materials and energy spurred budget cuts for 15.9 percent of the companies adjusting their plans downward. For 10.4 percent of the packagers increasing their budgets, however, those same increased costs—which bump up the price of the machinery—are the reason.

Sustaining Sustainability
It’s clear from PMMI’s Purchasing Plans Study that sustainability is playing a specific role in many firms’ decision to order packaging machinery this year (48.3 percent of the sample), most frequently to improve efficiency and address issues such as energy use and greenhouse gas emissions (30.5 percent), as well as general production costs and material waste.

About a quarter of the respondents (24.2 percent) said “sustainability” is a factor because of customer demands and requirements. But that’s just the beginning, Yuska said.

“The most influential customers look at all facets of packaging sustainability when making buying decisions, so sustainability-related decisions in packaging are at least indirectly influenced by major customers,” he noted.

Sustainability-related issues that affect packaging machinery purchase decisions include: accommodating new packaging styles and sizes (19 percent); accommodating new packaging materials (16.8 percent); reducing the amount of packaging materials used (11.6 percent); to increase product shelf-life and quality (6.3 percent) and to meet management expectations (2.1 percent).

“North America is the largest packaging machinery market in the world, and with trends in marketing and sustainability, we’re confident it will remain significant,” Yuska said.

He added, “PMMI’s industry research shows that packaging machinery customers are looking for solutions to challenges, such as accommodating new products and increasing efficiency. Our members are working with their customers to find solutions, and because PMMI now includes the entire packaging supply chain, they’re in a better position to achieve that goal.”