Printing Quality - Ace in the Hole

"THE BOX INDUSTRY'S emphasis on visual appearance, spurred by printing and graphic design enhancements, will increase and continue to be a driver of growth." So says a study released earlier this year by The Freedonia Group titled, Corrugated & Paperboard Boxes to 2005.

Folding carton converters' businesses will benefit the most from the improved printing capabilities, with the study indicating the largest growth in this segment—albeit, a modest 2.5 percent. The growth will come from increased use in the durable-goods markets, along with a general emphasis on innovative packaging designs and visually appealing graphics content. Consumer goods manufacturers are drawing up battle lines along the point-of-sale trenches and package graphics are viewed as a major weapon in the arsenal.

Slow start out of the box

The 2.5 percent average growth over the 2005 time period will have some catching up to do from a sluggish start out of the box. Calender year 2001 was not a good year, and by all accounts, the struggle is continuing well into 2002.

Folding carton manufacturers are working hard to manage inventories and profit margins as evidenced by some of the curtailment activities at some of the major players in the market. International Paper/Shorewood took market-driven curtailments in 2001 amounting to about 100,000 tons of bleached board, while consolidating the operations of two Shorewood plants. IP was not alone, as both MeadWestvaco and Smurfit-Stone curtailed operations last year and reported the likelihood of reductions continuing in 2002. These moves were in response to a business environment characterized by weak demand, pricing pressures, and higher energy costs.

Carton converters' view

If the 2.5 percent growth holds for the folding carton market, respondents to packagePRINTING's Folding Carton Converters Survey are looking to increase their share of the pie. Those reporting annual growth expectations came in at an average of 8.3 percent, with a high of 40 percent and a low of minus 10 percent. The wide variation in growth expectations is not entirely surprising considering the size range of the companies in the listing.

Carton converters appear to be managing their businesses with a careful eye on the bottom line. Coming off a difficult 2001, almost half of the respondents reported expectations for profit margins to increase in 2002, with less than eight percent expecting decreased profit margins. A sign of the times of the difficult moves being made by these companies is indicated by the decreased number of employees in carton operations. More than 75 percent of the respondents from last year's listing reported fewer people in carton production.

Capacity utilization is also at low levels as 50 percent of those responding indicate operating at capacity levels of less than 80 percent. Almost half of the converters will be looking to use this excess capacity by expanding into new business areas. The two areas most frequently mentioned for expansion were the addition of new printing processes and new end-use markets.

For new printing processes, it is no surprise that UV flexo showed up several times as a new printing process added to converters' mix of operations. This technology expands the capabilities of flexo printing. As for end-use markets, one business area MeadWestvaco mentions as a growing segment is consumer media products, such as DVDs and computer games.

To download the packagePRINTING's Folding Carton Converters Profiles, click here. Please note: If you experience problems downloading this file, you should try clicking your right mouse button (PC users) as selecting "Save Target As".