Packaging M&A update: Q1 2018
Protective packaging is expected to overtake boxes as the largest product category within the industry; demand for corrugated packaging material is expected to increase, as well. Meanwhile, polystyrene (PS), polyvinyl chloride (PVC), and polyethylene (PE) prices continue to rise, while polypropylene (PP) saw a decline late in the quarter. This packaging mergers and acquisitions (M&A) update provides Deloitte Corporate Finance LLC insights and market data analysis that shed light on M&A trends in the packaging industry.
- E-commerce protective packaging1: The global retail e-commerce packaging market is projected to grow from $13.0 billion in 2017 to $21.4 billion by 2026. Protective packaging is expected to overtake boxes as the largest product category within the industry, growing at 6.3 percent annually through 2021. In terms of end markets, third-party fulfillment and logistics is the largest segment ($14.0 billion by 2026), while specialty retail is the fastest growing segment.
- Demand for containerboard2: Demand for corrugated packaging material is expected to increase by an average of more than four percent annually over the next five years, and will amount to almost 115.0 million tonnes of converted material (valued at $176.0 billion) by 2019. Almost 30 percent of this volume will be used in the packaging of processed foods, with fresh produce adding a further 10 percent to the total.
- Smart packaging3: Constant brand differentiation is becoming a necessity in the crowded marketplace facing brand owners. Converters are developing innovative printing methods such as QR codes, holographic images, Fresnel lenses and other 3D printing technologies. Further applications of smart packaging include the refining of offline coding equipment to improve the marking of products with sell-by dates and unique serialization codes designed for anti-counterfeiting.
- Continued growth for manufacturing and plastics4,5: Polypropylene (PP) prices declined by an average of six cents per pound in March. Prices had fallen by a similar amount in February after increasing by nine cents in January. Regional polystyrene (PS) prices moved up an average of four cents per pound for March after rising two cents in February. Regional suspension polyvinyl chloride (PVC) prices moved up an average of two cents per pound in March after moving up three cents in January. Polyethylene (PE) prices moved up four cents per pound in February, and film processors increased prices to cover the latest price movement. PE suppliers posted a three cent per pound increase in March.
This newsletter is a periodic compilation of certain capital markets information. Information contained in this newsletter should not be construed as a recommendation to sell or a recommendation to buy any security. Any reference to or omission of any reference to any company in this newsletter shall not be construed as a recommendation to sell, buy or take any other action with respect to any security of any such company. We are not soliciting any action with respect to any security or company based on this newsletter. This newsletter is published solely for the general information of clients and friends of Deloitte Corporate Finance LLC. It does not take into account the particular investment objectives, financial situation, or needs of individual recipients. Certain transactions, including those involving early stage companies, give rise to substantial risk and are not suitable for all investors. This newsletter is based on information that we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied upon as such. Prediction of future events is inherently subject to both known risks, uncertainties and other factors that may cause actual results to vary materially. We are under no obligation to update the information contained in this newsletter. We and our affiliates and related entities, partners, principals, directors, and employees, including persons involved in the preparation or issuance of this newsletter, may from time to time have “long” and “short” positions in, and buy or sell, the securities, or derivatives (including options) thereof, of companies mentioned herein. The companies mentioned in this newsletter may be: (i) investment banking clients of Deloitte Corporate Finance LLC; or (ii) clients of Deloitte Financial Advisory Services LLP and its related entities. The decision to include any company for mention or discussion in this newsletter is wholly unrelated to any audit or other services that Deloitte Corporate Finance LLC may provide or to any audit services or any services that any of its affiliates or related entities may provide to such company. No part of this newsletter may be copied or duplicated in any form by any means, or redistributed without the prior written consent of Deloitte Corporate Finance LLC.
1 N.A.“Retail E-Commerce Packaging Market: Global Industry Analysis (2012-2016) and Opportunity Assessment (2017-2026)”. https://www.prnewswire.com/news-releases/retail-e-commerce-packaging-market-global-industry-analysis-2012-2016-and-opportunity-assessment-2017-2026-300598812.html, accessed April 4, 2018.
2 Smithers Pira. “Paper-based Packaging Trens to 2019.” http://www.fordaq.com/newsletter/119939/Asia%20Pulp%20&%20Paper%20-%20Rapport%20Smithers%20Pira%20Paper-based%20Packaging%20Trends%20to%202019.pdf, accessed April 4, 2018.
3 Esposito, Frank. “PP resin prices take big drop in March as PS, PVC rise”. http://www.plasticsnews.com/article/20180329/NEWS/180329865/pp-resin-prices-take-big-drop-in-march-as-ps-pvc-rise, accessed April 4, 2018.
4 Sherman, Lilli. “Volume Resin Prices Mostly Up”. https://www.ptonline.com/articles/volume-resin-prices-mostly-up, accessed April 4, 2018.
5 Transcontinental Corporation. “Transcontinental Inc. announces transformational acquisition of Coveris Americas, becoming a North American leader in flexible packaging”. https://globenewswire.com/news-release/2018/04/02/1470476/0/en/Transcontinental-Inc-announces-transformational-acquisition-of-Coveris-Americas-becoming-a-North-American-leader-in-flexible-packaging.html, accessed April 4, 2018.