The Niche Payoff
It's tough to get a good feel for how any industry is doing right now as the economy recovers from the worst recession in ages. Recent housing reports indicate that recovery is still sluggish. However, products must be packaged and while not recession-proof, each segment of the packaging market has come through some very difficult times. The folding carton segment, an area taking constant punches from film manufacturers, continues to rebound from, as Ben Markens, president of the Paperboard Packaging Council (PPC) puts it, falling off a cliff in 2009. "The economists say we are going to have decent growth, but it will take a while to make up for the big losses everybody took in 2008-2009," he says.
Right on the money
According to Markens, there are pockets of PPC members doing very well, and other members still struggling through these uncertain economic times. Taking that as a microcosm of the overall folding carton market, it's understandable that growth has been slow and is expected to continue that way.
A Freedonia Group study titled "Corrugated & Paperboard Boxes to 2014" reports that demand for corrugated and paperboard boxes is projected to increase 2.4 percent annually through 2014 to $36.4 billion. According to the study, "An acceleration of shipments of nondurable goods such as food and beverages will support demand for related boxes. Additionally, box demand will benefit from the increasing importance of higher-value boxes that can support improved printing and graphics as producers continue to look for ways to heighten the visual appeal of boxes in order to offset competition from alternative packaging formats."
Second quarter reports from some of the leading paperboard packaging manufacturers substantiate Freedonia's data. For example, second quarter earnings for International Paper were $93 million, compared with a net loss of $162 million in the first quarter of 2010. Industrial packaging operating profits for the company increased to $193 million, compared with $46 million in the first quarter of 2010. Its consumer packaging had an operating profit of $49 million compared with $31 million in the first quarter.