“Rigid plastic consumer goods operations, for the most part, do not meet our criteria for financial performance and its profitability has been below Huhtamaki average,” said the company.
Hard plastic food packaging includes bottles, dairy, meat and deli containers, prepared food trays and a large group of containers mostly made for liquid foods.
A spokesperson for the packaging manufacturer told FoodProductionDaily.com that factors such as overcapacity in the sector as well as rising input costs were making its position in the rigid plastics segment almost untenable.
“We have good positions in smooth and rough moulded fibre products, release films, flexible packaging, foodservice paper cups and other products based on our paper forming technology,” added the company. “In these operations we have strong know how, technology platforms and business concepts that allow continued competitive advantage.”
The Finnish company has already ceased production of rigid plastic consumer goods packaging in Portadown in the UK with its site in Gosport, England, to follow suit at the end of this month. The firm previously cited a slow down in demand for consumer packaging and increases in manufacturing and energy costs as the reasons for the closures.
The Portadown site had been primarily involved in the manufacture of thermoformed polypropylene thin wall food containers used for products like coleslaw and desserts. However, its Gosport site will continue to produce packaging for the foodservice industry.
The company also announced earlier in the year that it will also close its rigid packaging site in Karlholmsbruk, Sweden by year-end 2008.
According to the packaging supplier, advisers have been brought in to assist in the review of its other rigid plastics operations and the outcome of this process will be communicated early next year.
Plastics analyst with Applied Market Information (AMI), Carole Kluth, told FoodProductionDaily.com that the Huhtamaki review is indicative of the pressures facing the European rigid plastics sector in general.
A report from AMI claims that rising costs and competitive pressures are driving restructuring and reorganisation throughout the European thermoplastic rigid film and sheet manufacturing sector.
She said that private equity groups are becoming increasingly involved in the sector, which is further driving restructuring to improve profitability.
The report examines Europe’s leading players in the rigid film sector. The 50 largest rigid film and sheet producers profiled were responsible for 2.6 million tonnes of polymer consumption in 2007, equivalent to 60 per cent of the total European market.
“Overcapacity in the marketplace is a factor in terms of competition, but the high prices for raw materials and fuel are really squeezing margins and food manufacturers are trying to resist any price increases by reducing the amount of packaging they use,” said Kluth.
“The UK market, in particular, is very competitive as the large supermarket chains wield a lot of power so consolidation is the essential for survival in that geography,” she added.
The choice of substrate solution also has an impact on a company’s outlook, with the more recoverable polymers proving significant, she argues.
“High costs could drive innovation in the sector with a future emphasis likely on more recyclable and sustainable thinner-walled and lighter weight film and sheets,” added Kluth.
Meanwhile, a report published in July by US-based BCC Research claims that a trend towards smaller, more portable beverage and prepared food containers will play a large part in the increased use of plastics in rigid food packaging in the US market.
The category is expected to expand by 4.7 per cent a year to £17.2bn in 2013, BCC said.
Researchers said that demographic changes such as greater numbers of single-person households and older consumers will support the demand for more convenient prepared foods and single-serving portions, sometimes in multi-packs.
This will increase material use, as smaller portions tend to use more packaging relative to their size, the report states.