The Folding Carton Market

While it is easy to look at the modern print landscape and worry about various technologies edging out the printed piece for a wide range of applications, there is one area that continues to be strong and growing—folding cartons. Packaging is one of those applications that simply can’t be replaced by another medium, making it an area every print service provider (PSP) should be thinking about adding to the lineup, if they don’t already have this kind of work.

“This market is attractive to other PSPs as printing companies are looking for new products to sell,” noted John Lencioni, sales manager for Esko. “There is increasing competition from traditional commercial printers who are converting to folding carton packaging. While many existing folding carton printers focus on flexo, there are many who can certainly be successful with offset presses. Commercial printers, with their offset presses, have focused on customer service and excellent pre-press/printing capabilities necessary to compete in commercial print. A specialty printer with die cutting capabilities is a design department and finishing department away from competing in folding cartons.”

So how big is this market? While folding cartons took a hit several years ago when the economy took a downward slide, it is now rebounding at a healthy pace. Sriram Mohan, lead analyst at Technavio, noted that the market is estimated to have been around $80 billion in 2014, with countries like China, India and Japan leading the market with 40 percent of that total.

Adam Page, business manager, Reports and Consultancy, Smithers, agreed, noting, “It should be emphasized though that the market is still in a recovery phase, and consumption is still down on 2010 levels in a number of countries in Western Europe and the Americas, elsewhere, there is significant growth occurring in the Asian folding carton market and, more specifically, China. Last year, Chinese volumes amounted to 12.6 million tonnes, and by 2020 are set to reach 18.1 million tonnes—a five million tonne increase over six years, versus overall growth of around three million tonnes elsewhere around the world, of which almost one million tonnes will be in India.”

There are a few major trends that are driving the steady growth of folding cartons worldwide. Consolidation and automation are the biggest trends that Doug Herr, director of sales, Folding Carton for Bobst North America Inc. is watching. “There will continue to be consolidation, and we will continue to move toward improving efficiencies, whether through higher run speeds or quicker change-over times. The issue now seems to be more moving toward automation of quality control. The days of people inspecting products after they’ve been produced, to sort which are the ones that can’t be shipped versus which can be—those days are quickly moving behind us.”

Population growth coupled with changing consumer demands is the trend that Ken Brown, HP Indigo category manager for Packaging, Americas, is watching the closest. “There are natural increases due to population growth and additional growth due to smaller packages, along with demands for greater varieties. Product life cycle reductions, frequency of change required for relevancy, more promotion content and regionalization are also driving factors for growth. This growth also creates new challenges for converters being able to react quickly and effectively, either enabling or compounding supply chain for those brands.”

Mohan agreed with that set of trends as the driving force of the market right now. “One of the major drivers in the global folding carton market is the increasing demand for packaged food and beverages globally,” he noted. “With the increase in consumer income in countries such as China, India, and Brazil, the demand for good-quality packaged food is also increasing. Moreover, the increase in the population in many countries has led to increased consumption of food and beverages, which is also leading to an increase in demand. Moreover, this high demand for food and beverages has led to an increase in the demand for packaging solutions and products, which include folding cartons. According to the analysis, the Food and Beverage end-user segment accounted for almost 40 percent of the global folding carton market in 2014, which signifies the impact it can have on the demand. Packaged food and beverage companies are demanding an increased variety of folding cartons with unique designs that meet the increased production requirements and help create product differentiation. Thus, the increase in the demand for packaged food products and beverages is driving the sales of the folding cartons used in packaging food and beverages.”

Taking Advantage of the Trends

Just knowing folding cartons are a huge market with a lot of potential for worldwide growth isn’t enough, however. PSPs need to position themselves and their capabilities the right way to ensure they bring home their share of that large and growing pie.

“The PSPs should focus on customization of services, which is the key,” stressed Mohan. “The traditional ways would focus on economies of scale, however for PSPs the volume would be comparatively lesser, and revenues per unit would be higher.”

Brown noted that digital technologies, in particular, are going to be the driving force of this kind of customization. “Digital print has changed commercial printing, photo, now book publishing and labels with a lasting positive impact. Packaging has started seeing a similar transition including flexible, shrink, corrugated and folding cartons.” He went on to point out that like with the other segments, digital technologies will allow PSPs to not only produce items faster and more efficiently, but it will also allow them to address the growing need for brands to have more personalized packaging. “…the end consumer is more and more demanding for products to have some type of relevancy or personal connection to them through personalized or mass customization packaging campaigns, versus the norm or static brand packaging,” he noted. “This in turn creates massive issues for converters, in terms of traditional print methods, supply chain, co-packers, distribution methods and cost. The net effect is printed packaging is being requested to: Print what you want, print when you want it, print how you want it—without limitations.”

“It is important for printers or smaller converter/printers to focus on more niche, higher quality printing and finishing techniques (more colors, hot-foiling, embossing, spot varnishing, etc.) as they will find it hard to compete with major players on high volume jobs,” said Page. “Brands will further prioritize differentiation from the competition on supermarket shelves when it comes to packaging, so developing a capability for delivering innovative designs will become more important.”

One important thing to note, however, is that like with any other market segment, PSPs should take the time to do their homework first. “I would say by far the most important aspect [of entering the market] is understand the folding carton industry, the processes, jargon, lingo, etc., and really understanding what the customers are looking for,” said Herr. “The other thing is that no one should try to be everything to every customer. They need to find a niche they are most capable of fulfilling—smaller items size-wise, or large items? Short run vs long-run? Are they best at going after highest quality products, or are they better off going after medium folding cartons, consumer products with general quality and length of runs? Or should they go after very simple work to get started? Before they enter the packaging industry, they need to be very specific as to what their goals are.”

Herr went on to suggest that a better way for a PSP to get into the folding carton space would be to partner with someone already in the industry. He noted that finding a partner in another geographic location to expand both the print capabilities and customer base of both parties is one option. Or finding a local converter and combining resources to serve your specific market better. He noted that either it’s an equity agreement, a full on merger between the two or just a solid partnership, this approach will benefit everyone.

At the end of the day, the folding carton market is one that will continue to see growth in the coming years. It is a market that, traditionally, PSPs haven’t been focused on, but the potential for new revenue streams and partnerships is an opportunity that cannot be overlooked.