coke can, Packaging trends, Packaging M&A Update: Q4 2016

Analysis

Packaging M&A update: Q3 2017

Packaging manufacturers, dealing with an increase in polyethylene prices due to the effects of major hurricanes, are seeing high demand for PET films and retail ready packaging. This 'Packaging M&A update: Q3 2017' provides Deloitte Corporate Finance LLC insights and market data analysis that shed light on M&A trends in the packaging industry.

Packaging trends

  • PE buying activity1: Private equity capital has become an important consolidator and financier to rigid packaging firms, such as injection molding, thermoforming, and blow molding. The current M&A atmosphere is largely being driven by middle-market deals and is attracting interest from those traditionally outside the sector. Many investors see plastic packaging as a steady business with attractive returns. The caps and closures market, for example, is expected to grow by 5.6 percent a year through 2019.
  • Resin supply challenges2: Polyethylene (PE) prices in the North America have moved up an average of 4 cents/lb. The PE pricing situation has been complicated by a series of increases released for different dates by different suppliers. Most PE suppliers had a Sept. 1 enforcement date for the 4 cents, while several others had Sept. 15 and a few opted for Oct. 1. PE buyers who didn't see the 4-cent increase in September likely would see it by Oct. 15. These price increases are due to the effects of major Hurricanes Harvey and Irma.
  • Retail-ready packaging3: The global retail ready packaging market will likely grow at a 4.3 percent compound annual growth rate (CAGR) during the period between 2017 and 2025 to attain a value of US $84.46 billion by 2025 from US $60.52 billion in 2017. This is because many large retailers have realized the importance of shelf-ready packaging that can be placed right on to the shelf without the need for unpacking or repacking. Effective product packaging is responsible for valuable business with benefits such as better on-shelf availability through reduced waste and better stock replacement, which is likely to drive the retail-ready packaging market through 2025.
  • PET films to lead plastic packaging segment4: Demand for polyethylene terephthalate (PET) film in the packaging market is forecast to expand 2.4 percent annually to 322 million pounds in 2021, outpacing demand for any of the major packaging film resins. Growth will be driven by rising barrier requirements, particularly in food packaging. According to The Freedonia Group, PET’s moderate barrier properties can better address these requirements than other commodity resins at a comparable cost, said the report. Demand for PET film in food packaging is expected to grow 2.5 percent per year to 219 million pounds in 2021.

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References

1 “Caps, Packaging Very Attractive to Investors”. Plastics News. September 27, 2017.

2 “Resin Supply Challenges Send Prices Up for PE, PP and PS”. Plastics News. September 28, 2017.

3 “Retail Ready Packaging Market: Players Focus on Bettering Product Portfolio to Bolster Positions ”. Transparency Market Research. October 3, 2017.

4 “PET Film Demand Set to Outpace Other Packaging Films Through 2021”. Plastics Today. August 10, 2017.

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