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WTT: The Folding Carton Sector, excerpts from 2012 PRIMIR Research

For the first few weeks of we featured articles focused on the corrugated packaging sector. For the next few weeks we will be focusing on the folding carton sector and will post interviews with Ben Markens of the Paperboard Packaging Council and Jay Willie of the Independent Carton Group.

To help us introduce the various packaging sectors to the growing WhatTheyThink Labels & Packaging readership we asked PRIMIR if we could pull excerpts from their 2012 study that Karstedt Partners was commissioned to write titled Packaging: Evaluation of Vertical Markets & Key Applications. This study was unique to many industry studies in that it looked at the force being placed on Brand Owners, the originator of packaging orders. Taking this focus a step further the study looked in-depth at the major vertical markets of food, beverage, household, personal care and healthcare to see what will be driving packaging demand in these verticals and thus driving the supply chain. Following are some of what we brought to PRIMIR members surrounding the folding carton sector. The full table of contents for the report can be downloaded here.

The growth in the folding carton sector is projected to mirror that of consumer products growing at a rate that matches GDP.

Insights From Converter Interviews

The research team conducted over 180 interviews with constituents all through the packaging supply chain. Following are some excerpts from those interviews with folding carton converters.

The folding carton converters indicated that they are considering moving between flexo and offset printing processes over the next five years. Discussions indicated even movement in-and-out of each process. Both sides of these movements claim high investments and prepress costs are detrimental for flexo adoption and the lower overall operating and finishing costs of flexo over offset on the opposite side.

Carton manufacturers say they need to more effectively manage production orders that are shrinking in size and increasing in frequency. They are actively seeking solutions that allow them to produce more orders while maintaining overall production volumes. This is not simply obtained by purchasing presses that have quick changeovers. This plan moves a bottleneck from one process step to another. Carton converters are searching for solutions that truly transform their operations for the better.

In discussions with a carton manufacturer who recently installed a highly automated large format sheet fed press, he states that one of the major challenges he faces is feeding the press jobs and clearing the table after it. By this he means that prepress has to have fresh printing plates ready throughout the production day, and pallets of board have to be continually loaded into the feeder to assure the press does not have to wait for raw materials. As soon as the press needs to wait for input materials, efficiency and profitability are erased. On the output end, he notes, the bottleneck soon shifts to the die cutting process, which is tuned for fewer changeovers and more volume.

Another area of wasted time and resources is the practice of maintaining inventories of finished goods for customers. In speaking with converters of all types over the years, this practice is seen as a ‘necessary evil’ that customers need and converters provide. Most say it has gotten a lot better, but it still is a major drain on profits for both the converter and ultimately the customer as well. JIT was offering relief to this practice but in reality it has marginal success. Converters still manage inventories for customers opting for ‘just-in time’ deliveries rather than ‘just-in time’ manufacturing.

For most carton manufacturers, quality is a given, there is no discussion about cutting quality to gain productivity or flexibility. The quality standpoint is one of the reasons they tend to stick with technologies they know as reliable. As mentioned earlier, there are mixed messages regarding carton press preferences shifting from offset-to-flexo to take advantage of inline processing available in narrow and mid-web flexo presses for cartons. Converters familiar with flexo printing have a first-hand understanding of the quality of high definition flexo and what is required to produce flexo quality printing. Converters that have little or no first-hand experience with flexo, believe that the cost and learning curves are too steep to make a viable transition. Suppliers interested in bringing flexo presses to the carton segment have to overcome significant inertia, which includes solid ROI data to substantiate the advantages of such systems.

Interest in digital printing is high, but participation is limited… This is not to say that carton manufacturers are not interested in digital printing, on the contrary, interest in new press offerings at drupa 2012 was high among carton converters. This segment eagerly awaits a solution that offers an alternative to running orders on equipment that is not equipped to manage them consistently and effectively.

However, digital solutions bring on a similar series of process issues, most notably what happens after printing, when coating, die cutting and folding and gluing is needed. The issue of die cutting is addressed by digital die cutting that uses lasers and special creasing methodologies. This was shown at drupa 2012 as well as other new technologies that show promise in helping to alleviate these production bottlenecks.

The interviewed carton converters believe that their customers are more ‘value-oriented’ than ‘volume-oriented,’ by a 2 to 1 margin. Sixty percent say their customers would pay a premium for products or services that address unmet needs. This corresponds to the brand owners’ response. Specifically, folding carton packaging provides the most value to their brands. Overall, 72% of brand owners say they will pay more for products or services that satisfy their unmet needs.

As part of the study Karstedt Partners interviewed 122 Brand Owners in multiple vertical sectors as well as 60 converters and industry leaders to compile comprehensive trending information that will be affecting buying decisions for the next few years. For more on the study and to become a member of PRIMIR visit them at http://www.primir.org.

 This article was originally published on WhatTheyThink.com
http://whattheythink.com/articles/62829-folding-carton-sector-excerpts-2012-primir-research/
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Digital Solutions for Packaging at drupa 2012: Part IV A deeper look at Unmet Needs in Package Printing

This post builds on Part Three of the series and continues to expand on our new report, 2012 drupa Packaging Review – Folding Carton Report where we explore what vendors showed at drupa 2012 it is important to understand what challenges their customers are facing. Karstedt Partners in collaboration with Mike Ferrari of Ferrari Innovative Solutions has developed a series of graphic depictions to help illustrate the dynamics affecting the packaging supply chain. The first diagram shows the revised view of the packaging lifecycle for a typical product. To review, segments “A” and “B” align with special requirements, for either new product launches or promotional activity. Segments “C”, “D” and “E” focus on the management of active products. The supply chain focus is on segment “D”, the mainline or long run requirements, as this is desired business in a capital-intensive business such as packaging.

The Packaging Lifecycle – Revised View

Source: Karstedt Partners, LLC

This next graphic shows how the demand stream coming from the tails of the lifecycle diagram, quadrants A, B, C and E are driving 70% of orders but only 30% of volume and how that has shifted and is causing major problems in meeting the needs/

Impact of SKU Proliferation on Converters – The New Operational Reality

Source: Karstedt Partners

In the following illustration the yellow box represents the increased inefficiencies created through additional low volume production demands. In a capital-intensive business, profitability risk is far greater in the new model due to the extended time getting to volume runs, and the resulting overall lower capacity due to more production set-ups and greater inefficiencies.

Change in Demand Brings Inefficacies

Source: Karstedt Partners

The reality of the situation is when productivity enhancements are considered over a typical production period the overall impact on most converters is a net decline in capacity, as productivity enhancements have contributed to greater thru-put. Additional SKU proliferation, increasing demand from an improved economy, and limited options for additional productivity improvements from existing equipment and processes is straining operational capability.

The reduction in overall thru-put is also having a negative impact on profitability. This “perfect storm” is forcing converters to re-think their operational model. Converters commonly use the term “flexibility” to define what they are seeking. The perfect solution is a press that combines high productivity, print quality, converting and finishing options, media flexibility, at the lowest cost. Absent the “total solution”, converters are seeking to create a broader operational platform to manage variations in daily production demand. For years, converters have upgraded production presses, and have moved non-conforming production demand to older presses to improve productivity. Product requirements, along with changes in press technology, are creating problems around the traditional practice of being able to move demand from one press to another. Converters recognize that specific solutions are now required to manage specific requirements for print as well as converting. The needs of the customer, as well as the needs of the business, now require multiple options for printing and converting.

 


Series Overview: True to its history of introducing new technology to the printing world, drupa 2012 offered plenty of new things. In addition it showcased a great deal of packaging specific offerings in printing and finishing technologies. If drupa 2008 was “The Inkjet drupa” this time around it was surely “The; ‘we think we have a digital solution for packaging’ drupa”. Karstedt Partners spent 10-man days on the floor meeting with equipment suppliers, users, journalists and pundits evaluating what was being offered by vendors, and what was being asked for by users. This 4 part series of posts offers an overview of what we learned from these meetings and can share with those interested in our opinions and observations. The full 61-page report is available by clicking here.

 

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Digital Solutions for Packaging at drupa 2012: Part III Unmet needs in Package Printing

As we continue to explore what vendors showed at drupa 2012 for our Digital Printing for Packaging, it is important to understand what challenges their customers are facing. Karstedt Partners in collaboration with Mike Ferrari of Ferrari Innovative Solutions has developed a series of graphic depictions to help illustrate the dynamics affecting the packaging supply chain. The first diagram shows the historical lifecycle for a typical product. Segments “A” and “B” align with special requirements, for either new product launches or promotional activity. Segments “C”, “D” and “E” focus on the management of active products. The supply chain focus is on segment “D”, the mainline or long run requirements, as this is desired business in a capital-intensive business such as packaging.

The Packaging Lifecycle – Historical View

Source: Karstedt Partners, LLC

Packaging Converters receive orders from Brand Owners and translate the demand stream into production orders. The next figure shows converter production requirements.

Packaging Converter Production Requirements – the Old Operational Model

Source: Karstedt Partners, LLC

Consumer behavior related to how we shop, where we shop, and what we shop for has changed over the past ten years. Likewise, the retailer and brand owner response has changed dramatically to enhance consumer engagement. The result has been rapid product proliferation. Twenty years ago, in most major product classifications, four to five major brand producers served 80% of that specific market demand. Put another way, four products served 80% of the market. Today, four to five major brand producers continue to serve most major product classifications, but instead of producing a single product, they now produce 250-300 variations of the same product. The product inside is the same, only the packaging has changed. The next figure shows how this dynamic is impacting the product lifecycle.

The Packaging Lifecycle – Revised View

Source: Karstedt Partners

The total volume produced has not changed; the total number of orders, as well as the distribution of those orders has changed dramatically. The number and frequency of mainline orders has decreased dramatically, while the number and frequency of orders for innovation, event marketing, low-volume SKUs and end-of-life requirements has increased dramatically. The challenge for the packaging supply chain traditionally has been to manage scale; the new challenge is to continue to manage scale while also managing scope. Industries with an infrastructure tailored to volume typically have a difficult time adding capabilities for speed, flexibility and convenience. This creates opportunities for new entrants such as contract manufactures and contract packagers.

The fourth post in this series: A Deeper Look at the Unmet Needs in Packaging,  will further discuss what challenges face packaging converters that digital and analog systems suppliers are trying to address.

 


Series Overview: True to its history of introducing new technology to the printing world, drupa 2012 offered plenty of new things. In addition it showcased a great deal of packaging specific offerings in printing and finishing technologies. If drupa 2008 was “The Inkjet drupa” this time around it was surely “The; ‘we think we have a digital solution for packaging’ drupa”. Karstedt Partners spent 10-man days on the floor meeting with equipment suppliers, users, journalists and pundits evaluating what was being offered by vendors, and what was being asked for by users. This 4 part series of posts offers an overview of what we learned from these meetings and can share with those interested in our opinions and observations. The full 61-page report is available by clicking here.

 

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Digital Solutions for Packaging at drupa 2012: Part II – Press Manufacturers Changing Messages

Relative to digital printing for packaging, drupa 2008 was a time for investigation and generalized discussion regarding product concepts and market requirements. Drupa 2012 delivered a variety of solution targeting a broad range of packaging markets that attracted the attention of converters present at the show. The focus on packaging was not limited exclusively to developers of digital presses. Also well represented were pre-press and converting solutions to support digital presses in a packaging environment. The magnitude of the investment made at all levels of the supply chain over the past four years validates the packaging market as a catalyst for future growth in digital printing. This bodes well for the packaging industry.

Analog Printing for Packaging

Several items stand out from the interviews:

  • Traditional press manufacturers are focusing on driving down waste and reducing make-ready time. Press demonstrations were showing four-color press changeovers occurring in less than 15 minutes. Omet has redesigned their process for registering print, reducing scrap from typical 200-300 sheet quantities to 2.5 meters.
  • Traditional press suppliers are no longer ignoring the impact of digital printing. KBA, Heidelberg, ManRoland, Komori, Mitsubishi, Bobst and Omet were all discussing plans and options for digital printing.
  • Packaging is a growth opportunity for most traditional analog suppliers. Demand for packaging historically tracks to GDP, and unlike the Commercial Print Market, demand for printed packaging will benefit from digital media, rather than be harmed by it.
  • Several traditional press manufacturers stated a nuisance order for Folding Carton is any order less than 5,000 impressions, 20,000 impressions are considered a standard run. One supplier estimated 65% of production jobs are less than 20,000 impressions. Whatever the actual numbers may be, the point is, regardless of how the jobs are run, individually on a narrow width press, or ganged on a wide press, changes in the order flow are creating headaches for the printer.

Different marketing messages yield different results

There is a stark contrast in the marketing messages delivered between traditional and analog press suppliers. Analog suppliers speak about productivity and flexibility. Digital suppliers speak about one-to-one marketing, personalization, and customization. In terms of productivity, analog suppliers speak in terms of sheets produced per hour, using the sheet size as a reference point. Digital suppliers also speak in terms of sheets per hour, but use terminology such as B1 or B2 size configurations that are foreign to most North American Converters. The prospect for both suppliers is typically a converter, so why is there a difference in the message conveyed, and what is the impact on the converter? We spoke with several converters that attended drupa to gain their thoughts; following are a few comments on the topic.

  • “With economic uncertainty continuing, our business focus is on doing more with less. That means how we continue to grow the volume and produce it for less. Fewer people, less expense, and less material are a way of life in our business. Digital technologies can certainly play a critical role in fulfilling that need, but digital suppliers must learn how to connect their technology to my immediate need. One to one marketing is nice, but the supply chain from the Brand Owner to the Converter cannot manage one-to-one marketing campaigns today”.
  • “What constitutes a low volume run? Digital printing is not about managing to a theoretical run volume, it is about increasing the utilization of high volume assets.”

Drupa attendees seeking packaging solutions now have multiple options to consider. How will the respective technologies be positioned in the market? What is the marketing message and how do converters perceive it?

Impressions post drupa

  • Traditional analog suppliers are in a tough position. The supply base will undoubtedly experience additional contraction and consolidation. A digital solution will not solve the problems faced by analog suppliers, but it may be critical to have a solution in place to preserve a relationship with key customers.
  • Digital suppliers need to articulate the digital value proposition. The need for variable data in Commercial Printing is a critical requirement. At least initially, variable data for most packaging applications is not a critical need.
  • In speaking with several converters post drupa, we asked if digital printing is now the lowest cost investment option for incremental capacity. They believe it is, but need more information related to how much capacity it will deliver and what the impact is on current operations. The answer for which technology to pursue, traditional wide width presses versus narrow width sheet-fed digital presses, will take some time to sort out. In an uncertain economy, converters like the security of limited investment.

Winners and Losers

While all participants were claiming drupa was a tremendous success, with the exception of Landa, we saw nothing on the print side of technology that was a game changer.

On the traditional analog side, most companies in the sheetfed offset have made solid improvements in productivity, sustainability and scrap reductions. The absence of a clear winner in terms of technology typically pushes the purchasing decisions to ancillary services such as parts and service. Pre-press integration will now begin to become a larger part of the decision making process. Heidelberg and KBA will retain a dominant market position due to their strength with large companies purchasing multiple presses. Companies such as these find it convenient to have commonality in equipment throughout their facilities. Smaller participants such as Goss, Ryobi, Mitsubishi and Komori will survive as long as their customer base survives. Heidelberg and KBA continue to grow share in Asia, a historical strong hold for Komori and Ryobi. It is too early to predict the future of ManRoland. Do new customers need them as a potential supplier? Will existing customers abandon them on new press purchases, seeking greater security in other suppliers?

The introduction of combo presses and the expansion of DI technology into packaging will be intriguing to watch. Combo presses may find a niche in high value packaging applications such as beverage, cosmetics, and premium brands. The challenge these companies face is finding printers with enough volume in the target applications to justify the investment. DI technology is also interesting. It has been around for some time, and the traditional issues (no variable data capability and imaging errors in the plates) creating doubt around the investment have been addressed. The price point for this technology is below many comparable pure digital systems, with higher thru-put and a potentially lower cost of print.

On the digital side, it was interesting how toner technology stole the show. HP, Landa and Xeikon all positioned themselves as the clear market leaders. Maintaining that leadership will require delivery of successful solutions on the promises made. Surprising is the lack of any real attention to Kodak, Xerox, Konica Minolta, Epson, FujiFilm. Oce and Screen. These companies have all enjoyed success in other digital arenas, but they have thus far failed to captivate a new audience with solutions suitable to garner attention. Kodak may be a wild card with either their stream or prosper technology, but for now, only two companies, Bobst and Sun Automation have acknowledged being development partners, and both are struggling.

The third post in this series: Addressing the Unmet Needs in Packaging, will discuss what challenges face packaging converters that digital and analog systems suppliers are trying to address.

 


Series Overview: True to its history of introducing new technology to the printing world, drupa 2012 offered plenty of new things. In addition it showcased a great deal of packaging specific offerings in printing and finishing technologies. If drupa 2008 was “The Inkjet drupa” this time around it was surely “The; ‘we think we have a digital solution for packaging’ drupa”. Karstedt Partners spent 10-man days on the floor meeting with equipment suppliers, users, journalists and pundits evaluating what was being offered by vendors, and what was being asked for by users. This 4 part series of posts offers an overview of what we learned from these meetings and can share with those interested in our opinions and observations. The full 61-page report is available by clicking here.

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Digital Solutions for Packaging at drupa 2012: Part I – Folding Carton Market Trends

Overview: True to its history of introducing new technology to the printing world, drupa 2012 offered plenty of new things. In addition it showcased a great deal of packaging specific offerings in printing and finishing technologies. If drupa 2008 was “The Inkjet drupa” this time around it was surely “The; ‘we think we have a digital solution for packaging’ drupa”. Karstedt Partners spent 10-man days on the floor meeting with equipment suppliers, users, journalists and pundits evaluating what was being offered by vendors, and what was being asked for by users. This 4 part series of posts offers an overview of what we learned from these meetings and can share with those interested in our opinions and observations. The full 61-page report is available by clicking here.

The objective for this analysis is to assess the potential opportunities, threats, and implications for the packaging supply chain posed by new products and initiatives introduced at drupa 2012. Following are a few general comments and impressions regarding the show. In preparing for the show we scoured the web sites and presentations of the major players attempting to gain a feel for the state of the market from their perspective. The following slide from KBA caught our attention, and raised a big question; How is the industry going to respond to a 49% decline in revenue?

Source: 87th Koenig & Bauer AG Annual General Meeting, June 14, 2012

At 73% share, sheetfed offset dominates the new equipment market. Market segmentation of sheetfed offset typically groups press sizes into the following configurations: less than 24 inches, 24-36 inches, 37 to 42 inches and 43 inches and above.

As we prepared for our drupa interviews, we desired to understand where companies participated and what their outlook was for their particular segment of the market. Following are some observations:

  • Press options for the under 36-inch segment are numerous with no shortage of participants. Heidelberg is the dominant player in this segment, with a 35% share in the 50 x 70 cm format size and a 48% share in the 70 x 100 cm format size. The bulk of Komori, Ryobi, Mitsubishi, Gallus, Presstek, and Omet sales also come from this classification.
  • Press options in the VLF (very large format) size, or above 40 inches reduce dramatically. KBA is the market leader, followed by Heidelberg, ManRoland and Goss.
  • Packaging applications are beginning to become the driver for sales in the VLF format. A sales manager from a large press supplier estimated 65% of VLF presses sold are being purchased for packaging applications.
  • Digital printing is having the greatest impact in the 50 x 70 cm format size. Hot button issues are the requirements for flexibility, derived through flexibility in format size, quick set-ups and changeovers, and solid integration of pre-press to press.
  • Digital capabilities in the 70 x 100 cm format size are now being introduced. FujiFilm, Screen, HP, MGI and Landa all displayed technologies targeting this format size. Having missed the boat on the 50 x 70 cm format size, traditional analog suppliers are quickly announcing strategic partnerships with digital developers.
  • Entry into the 70 x 100 cm format size has also opened the door into potential expansion into Folding Carton. While Commercial Printing applications remain the primary target, Folding Carton is viewed as a potential opportunity through Commercial Printers as well as Folding Carton Converters.
  • The introduction of off-line converting equipment specifically designed for packaging applications makes an off-line digital printing solution much more attractive.

The next post in this series will look how digital and analog systems as well as their promotions to the packaging market have progressed since drupa 2008. For the full review click here.

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