Flexible packaging suppliers under threat - claim

By Jane Byrne

- Last updated on GMT

Related tags: Flexible packaging

The flexible packaging sector is under threat from spiralling polymer price hikes with supply chain optimisation required to lessen the impact of future increases, claims Flexible Packaging Europe (FPE).

Flexible packaging and multilayer film have many applications for food producers particularly for frozen, dry and fresh foods, as well as liquids.

In recent years, the sector has been working to offset growing raw material, energy, transport and labour costs through innovation like down gauging and consumer convenient packaging options, claims the FPE.

However, an FPE spokesperson told FoodProductionDaily.com that the squeeze in margins can no longer be balanced by productivity efficiency within the sector and prices now have to be passed down to food processors, if the flexible packaging industry is to continue.

Untenable position

The FPE, whose membership represents sales revenue of €7bn, said that food manufacturers will have to work with the sector to "create solutions to what is becoming an untenable position."

Raw material prices represent 60 per cent of the total cost of flexible packaging, according to the FPE.

Delivery times to food manufacturers also might not be met due to a slow down in supply at several polymer producers' facilities, claims the FPE.

Alcan price increase

Last week, Alcan Packaging Food Europe, a leading supplier of flexible packaging for the food and beverage market, announced an average five per cent price increase on all its products and up to 15 per cent price increase on resin-based packaging products in Europe, effective on all deliveries from 1 August, 2008.

"These increases are due to unprecedented energy cost levels and high inflation rates on all input costs. As we have done in the past, we will be working with our customers to minimise the impact of these significant increases," ​said Thibault Laumonier, sales and marketing vice president of Alcan Packaging Food Europe.

Challenging times

Indeed, a report published in March warned of a challenging future for European packaging firms with rising input and transportation costs predicted to continue to weigh down the industry.

Credit agency Fitch Ratings, which compiled the report, said that many packaging firms were suffering financially due to not passing their costs on to customers.

"Failure to pass through raw material and transportation cost inflation, together with an inability to generate sufficient mitigating cost efficiencies are the hallmarks of weaker credit quality for highly leveraged packaging producers," ​said analyst Michelle de Angelis at the time.

De Angelis told FoodProductionDaily.com that although the nine companies reviewed for the study cannot be revealed, more than half provide packaging for the food and beverage industry.

The report clams that the successful packaging companies will be those that can contain costs by passing them to customers, combined with rationalisation - organising the business to improve efficiency.

Related topics: Processing & Packaging

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