Slow Economy Takes Toll on Packaging Machinery

ARLINGTON, Va.—Consumer and industrial goods companies have only slightly adjusted their predictions for 2008 packaging machinery spending, according to the spring update of the Purchasing Plans study conducted by the Packaging Machinery Manufacturers Institute (PMMI).

Initial research was conducted in December 2007 and January 2008, while interviews and surveys were completed in April and May 2008. This is the first time PMMI has issued an update to its Purchasing Plans study. PMMI asked respondents to reexamine their earlier responses in light of the declining economy. The 511 respondents represented 1,564 U.S. plants and 9,000 packaging lines.

More than half of the respondents said they would stay on track with their packaging machinery purchase plans for this year, while the rest were split evenly between increasing budgets and scaling back.

In terms of industry verticals, only two categories—foods (+1% to +3%) and personal care products (0% to +2%)—expect growth over 2007. The remaining six categories—beverages (0% to -2%); pharmaceuticals and medical products (-1% to +1%); chemicals (-1% to +1%); consumer, commercial and industrial durables/hard goods (-1% to +1%); paper products, textiles and other non-durables (-2% to -4%); converters, printers, all others (-3% to -5%)—anticipate moderate declines.

“The packaging machinery market’s performance seems to be in line with today’s broader economic picture and the slowness all industries are facing right now,” says Charles D. Yuska, president and CEO of PMMI.

Overall, PMMI’s updated research predicts an increase of 0.4% over 2007 in packaging machinery spending instead of the 0.6% prediction in the initial survey. That brings the year’s anticipated spending to $6.292 billion, just slightly less than the $6.304 billion predicted earlier in the year.
More than half of the companies surveyed (55.6%) said they would not change their purchasing plans for the year. Of the remainder, 22.5% said they revised their budgets higher, while 21.9% have cut back. Mid-sized companies (six to 25 packaging lines) had the highest rate of budget increases (25%), and larger firms (more than 25 lines) had the highest rate of budget cuts (29%).

“Packagers are bringing in new machinery for two leading reasons: to accommodate new products and to increase capacity for existing products,” says Yuska, noting the following other reasons packaging machinery buyers are maintaining or increasing their 2008 budgets:

• Upgrades to increase speed, productivity and/or efficiency;
• Reduce maintenance needs and increase uptime;
• Increase output;
• Accommodate new product lines;
• Higher-than-expected demand for products;
• Heavy emphasis on product safety, security, tracking and labeling.

However, weaker-than-expected demand and economic uncertainty have led to project cutbacks, delays and cancellations, according to the PMMI report. Increasing costs for raw materials and energy spurred budget cuts for 15.9% of the companies adjusting their plans downward. For 10.4% of the packagers, however, those increased costs, which bump up the price of the machinery, are the reason they are increasing their budgets.

PMMI’s Purchasing Plans study also reports that sustainability is playing a role in the decision to order packaging machinery for 48.3% of firms. Most companies (30.5%) are purchasing equipment to improve efficiency and address energy use and greenhouse gas emissions as well as general production costs and material waste. About a quarter of the respondents (24.2%) said “sustainability” is a factor because of customer demands.

“The most influential customers look at all facets of packaging sustainability when making buying decisions, so sustainability-related decisions in packaging are at least indirectly influenced by major customers,” says Yuska.

Sustainability-related issues that affect packaging machinery purchase decisions include:

• accommodating new packaging styles and sizes (19%);
• accommodating new packaging materials (16.8%);
• reducing the amount of packaging materials used (11.6%);
• increasing product shelf life and quality (6.3%);
• meeting management expectations (2.1%).

For a copy of the spring 2008 Packaging Machinery Plans update, visit www.PMMI.org. The study is free for PMMI members.

Hide comments

Comments

  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.
Publish