Carton Boxmakers Shifting Strategies

External and internal pressures are forcing changes in manufacturing habits, product mix and technology utilization.

By David Luttenberger

Controlling production costs, increased M&A activity, and meeting changing end-user demands are but three of the many issues folding carton converters must address in the coming year in order to ensure a future for themselves, and to maintain a healthy industry as a whole. Overall, 1997 was an on-again, off-again year for carton makers who, fortunately, ended on an up note that they hope will carry loud and clear through '98.

With folding carton demand and production so closely tied to consumer spending, particularly on non-durable goods, with the ebb and flow of the national economy, so goes the folding carton industry. As of November, the volume of folding carton shipments was down 1.6 percent vs. 1996, at $4.67 billion vs. $4.74 billion. According to the a National Paperbox Assoc. (NPA) survey, industry backlogs, however, were up slightly, 2.37 weeks vs. 2.26 weeks a year ago, but still down from an industry average of between six and eight weeks two years ago.

Regionally, only the South was showing positive growth at about 2.8 percent. Even with December actual numbers not yet recorded, forecasts are for an over industry decline in shipments of about 2 percent. Currently, the value of production for the North American folding carton market is about $6.8 billion.

A study released by the Cleveland-based market research firm, the Freedonia Group, projects shipments among this segment to rise 4.7 percent annually through Y2K to $9.6 billion—a figure most industry experts believe is highly unrealistic given end-user consolidation activity and competition in the form of alternative packaging structures continuing to erode this segment's share of market.

Sentiment among respondents to a business climate survey of NPA member boxmakers was that about half felt that business in '98 will be on par with '97. More than one-third—38 percent—indicated they see improvement on the horizon.