Your Business Outlook - May 2006

Mastiogale’s most recent polyethylene film market study forecasts modest growth for the retail packaging market. Retail PE packaging consists of consumer trash bags; merchandise bags; household bags and wrap; laundry, dry cleaning, and garment bags; t-shirt bags; pouches; and paper and personal-care overwrap. Collectively, these markets used just over 4.6 billion lb of PE resin in 2005 and represented about 27% of all PE film made in North America. Retail packaging is expected to pass 5.1 billion lb by 2008 with an average annual growth rate (AAGR) of 3.4%.

 

Fighting off imports

Resin pricing and currency issues have negatively affected retail packaging markets, where U.S. bag producers face stiff competition from Asian and Middle Eastern producers that benefit from less costly labor and raw materials. To compete, North American producers have had to accept lower profits and/or give customers fewer bags per container. Some major domestic manufacturers have even outsourced some of their film extrusion and/or bag making to foreign suppliers to supplement their own capacity.

Processors and converters interviewed for this study say mergers among PE resin suppliers have had a negative impact as well. Fewer resin suppliers diminishes competition and makes it more difficult to negotiate lower prices. Processors also say there are fewer PE grades available and shortages of certain resin types and grades, compounding the plight of North American manufacturers.

T-shirt bags continue to be the largest sector of retail PE packaging at 1.6 billion lb in 2005. With a modest AAGR of 4.1%, it is expected to reach 1.85 billion lb by 2008.

The second-largest retail packaging market is consumer trash bags at approximately 1.5 billion lb. With an AAGR of 3%, it is predicted to reach 1.6 billion lb in 2008. Product design trends reflect consumers’ greater willingness to pay extra for added strength and puncture resistance rather than for features such as colors, scents, or deodorizers. (Although not part of consumer packaging, industrial trash bags consume 1.36 billion lb and are growing at 2.6%/yr.)

Household (sandwich, storage, freezer, and snack) bags and wraps are expected to have an AAGR of only 2.4% and add 40 million lb to the current volume of 529 million lb.

Merchandise bags reached 435 million lb in 2005 and are predicted to grow 2.5%/yr, pushing consumption to 469 million lb in 2008. Department, discount, fast-food carryout, and specialty stores are the users of merchandise bags.

Although one of the smaller retail PE packaging sectors, pouches are the fastest growing (6.2% AAGR). Pouches consumed 259 million lb in 2005 and are expected to hit 311 million lb by 2008. Innovations in this product area include Glopak’s milk pouch, which contains a floating straw, and pouches with zipper-type resealable closures.

Paper and personal-care overwrap is a small market of only 189 million lb; 3.1% annual growth will take it to 207 million lb in the next two years. Applications include low-growth items like diapers, paper towels, and feminine hygiene products. Higher growth areas are paper plates, napkins, cups, and cotton balls.

Laundry, dry-cleaning, and garment bags make up the smallest retail PE packaging market, which is expecting zero growth and will remain at 153 million lb through 2008. Usage declined in recent years due to the proliferation of machine-washable fabrics and the trend to casual dress.

 

Mastiogale, with offices in Houston and St. Joseph, Mo., is a consulting firm specializing in industrial-consumer opinion research and market trends in the plastics industry. For more information, call (816) 364-6200 or visit www.mastiogale.com/pt/outlook.