Folding Cartons: A Look Beneath the Numbers
It may be growing at a rate that one research organization deems “sluggish,” but the package printing industry’s folding carton segment is a lot livelier than the general trend line indicates.
Consumer packaged goods (CPG) marketers are insisting on, and getting, more innovation and short-run variety from printers and converters of folding cartons, like the four companies profiled here. As carton production declines in some categories, output in others (including emerging ones) waxes strong.
Even rising paperboard prices and competition from non-specialist producers can’t dampen the optimism of carton companies that have gauged shifts in demand correctly and equipped themselves to take advantage of the opportunities they offer.
All growth is good, and a modest increase still raises most boats as long as it continues steadily.
This is what the Paperboard Packing Council (PPC) projected in Trends: 2017 Industry Outlook and Market Data Report, which forecasted that a 0.4% annual growth rate would raise the total value of U.S. carton shipments from $8.6 billion in 2016 to just over $9.6 billion in 2021. A strong consumer economy and an anticipated break in the rise of board prices would provide the upward momentum, according to PPC.
The Smithers Pira research group sets the total value of the U.S. folding carton market considerably higher ($14.62 billion in 2022) than does PPC, but its assessment of the market’s “sluggish” prospects for growth is similar. According to a Smithers Pira report, The Future of Folding Cartons to 2022, growth will be most rapid in dairy goods, pet food, and tobacco. Confectionery and chilled foods are expected to be the slowest growing segments for folding cartons, while frozen foods will see a marginal decline.
Look, then, for growth in uneven patterns, with strong shipments in high-end categories such as luxury products, cosmetics and spirits and weaker ones in commodity segments like food and carbonated beverages. Folding cartons are also losing share in some applications to flexible packaging, a format that CPG marketers are finding increasingly attractive.
Despite a period of slow-paced growth, some folding carton producers have found themselves maintaining a frantic pace as they try to stay ahead of changes in market demand.
For example, Ed Zumbiel, president of Zumbiel Digital (Hebron, Ky.), calls pressure for faster turnarounds one of the market’s most salient characteristics. Driving much of it is SKU proliferation: adding stockkeeping units and packages for those SKUs to accommodate new portion sizes, product varieties and other kinds of brand extensions.
“When the economy is on fire, the SKUs tend to rise,” Zumbiel says. “And right now, they’re going absolutely crazy.”
“Quicker turns are really big,” states Corey Gustafson, president of JohnsByrne Inc. (Niles, Ill.). He says that as customers realize they need smaller inventories, more versions, and shorter distribution cycles in order to deal with the “fluid marketplaces” in which they’re now operating, they’ll expect their packagers to give them that kind of help.
The folding carton market’s other main keynote is its hunger for differentiation.
According to Joey Schmissrauter III, president of TPC Printing & Packaging (Chattanooga, Tenn.), differentiation happens when a package “stimulates spontaneous purchases at retail” with a hit of foil, a specialty coating or some other embellishment that draws shoppers to the product. TPC’s knack for adding high-value visual appeal to cartons for cosmetics and spirits is a large part of the reason why “our growth has been pretty spectacular” in recent years, Schmissrauter says.
Growth in the folding carton industry always stems from astutely sizing up consumer market trends and moving quickly to capitalize on them. Just ask Stacy Warneke, president and CEO of Warneke Paper Box (Denver, Colo.), who does business in one of the first two states to legalize the recreational use and sale of marijuana (the other was Washington).
That market has soared, and Warneke, viewing it as her company’s top growth opportunity, says that one use of a groundbreaking digital inkjet press she’s in the process of installing will be to produce some of the specialized packaging that cannabis products require (see adjacent sidebar). She also is zeroing in on packaging for natural foods, another growing market segment in Colorado.
Performing credibly in markets like these has many requirements, but none is more essential than competitive capital investment. As Gustafson points out, a folding carton producer nowadays has to be equipped to offer its customers “a variety of solutions at different price points” that add value while satisfying expectations in cost and turnaround.
“Capital investment is a big part of what we do,” Gustafson observes. “Nothing in our facility is old.” He says this explains why at JohnsByrne, “our manufacturing is almost a laboratory” for the kinds of diversified packaging applications that customers expect.
Many of them come from “Press 384,” a 15-unit Heidelberg Speedmaster XL 106 offset press hard at work there since 2015. With its three coating units, eight print units and four dryers, the custom-built “concept press” can carry out intricate coat-print-dry combinations at speeds up to 18,000 sheets per hour.
Determined to have “anything you can imagine under one roof” in terms of capability, Schmissrauter has installed an eight-color KBA Rapida 106 press, a Bobst 106 LER diecutter, a pair of folder gluers and a laminator at TPC within the past three years.
Just added is a Scodix Ultra2 Pro digital enhancement press for packaging, and coming in November is a Scodix UltraPro E106. It will be the first such packaging enhancement system in North America, according to Schmissrauter, who looks forward to creating “an abundance of short-run foil” and other special effects with his Scodix platforms.
Zumbiel Digital scored a first on the world stage last year as the vanguard adopter of the Kodak PROSPER 6000S simplex color inkjet press for packaging: a hybrid platform that combines Kodak inkjet technology with seven in-line flexo towers and an in-line diecutting unit. Zumbiel calls it a “high-throughput, low cost digital machine” that “screams” through versioned carton runs at 600 feet per minute. He has also invested in faster diecutting for his conventional presses and camera inspection systems for his folder-gluers.
With a plant full of Heidelberg offset equipment, Warneke Paper Box was more than ready to welcome the Heidelberg Primefire 106 inkjet press now being installed there in its North American debut. Stacy Warneke says that when she saw the seven-color, 40˝ device at drupa 2016, she realized that “from the first sheet out, this is what we were waiting for” in a press for individualized, short-run digital printing.
Intended uses include track/trace coding for pharmaceutical packaging and anti-counterfeiting imprints for product integrity, both of which, says Warneke, the Primefire 106 is well suited to handling through its ability to hold text as small as 1 pt. Versioned packaging for cosmetics and other retail items will also be part of its workload, which Warneke thinks could eventually represent up to 30% of the plant’s total volume.
For folding carton producers, capital investment along these lines isn’t just for adding capacity: it’s also a defense mechanism. The phenomenon of convergence is driving printers in various segments of the industry to look for opportunities in segments that are new to them — including packaging, which some commercial printers are making limited but noticeable inroads into.
Gustafson notes that he takes every potential competitive threat seriously. Success in value-added packaging, he observes, is an open-ended process of meeting the demands of continuous improvement, capital investment, and employee training. “You need to be invested specifically to the market you’re serving,” he says, and not just as far as equipment is concerned: talent and skill sets are just as crucial to possess.
A commercial printing business with its eye on packaging is “10 years away from being where we are” in terms of capability, says Schmissrauter, adding that the single biggest cause of failure for newcomers is their “inability to fully grasp the cash requirements” attached to entry. Zumbiel concedes that while a commercial shop with a digital press might be able to “nibble around the edge of the market,” its struggles with downstream tasks like diecutting and gluing probably would keep it out of the mainstream.
A more immediate issue for folding carton producers is what’s been happening to the prices of the stocks they print and convert. They continue to “rise, rise and rise,” says Warneke, although she adds that her suppliers are reliable and that she hasn’t been obliged to spot-buy.
Schmissrauter says that as the largest user of Invercote paperboard in the U.S., TPC has been feeling price pressure in those papers and across the entire range of substrates the company uses. He’s also wary of what he calls an “invasion” by European paper producers into the market for high-end SBS (solid bleached sulfate) paperboard, which he says the U.S. paper industry hasn’t added new capacity to produce in 30 years.
Apart from substrate prices, the concerns these producers express have more to do with seizing opportunities than with warding off threats.
Zumbiel says that digital adopters like himself are “like a bunch of missionaries out there” as they try to educate customers about what the process can do for their packaging. There’s an “undercurrent” of resistance to digital printing coming from some quarters of the industry, according to Zumbiel. But he notes that once customers perceive the time-to-market advantages that digital production can give them, objections and hesitations vanish very quickly.
Schmissrauter says he’s seeing the “beginning of a trend” whereby consumer goods manufacturing is returning from overseas sources to the U.S. — and the production of packaging along with it. The general economic picture, Gustafson says, is “ripe with opportunity” for packagers who are good at aligning themselves with their markets and “riding the right horse” when the right horse comes along.
Warneke believes in taking digital printing beyond short runs and versioning to “a new frontier of packaging” where the personalized messaging on the carton is something “other than just the obvious”: different, and more compelling, than what appears there currently. It’s a quest she’s looking forward to with enthusiasm. “What a fun industry to be in,” she says, “and what a great time to be in it.”