Freedonia study: Developing countries to drive growth in packaging machinery

Global packaging machinery demand is projected to advance 6.5% per annum through 2019 to almost $52.5 billion.

A recent study by Freedonia Group suggests product sales will be driven by market growth in China and other industrializing nations, where demand for processed food and beverage products and other manufactured goods is expected to post the strongest increases as personal incomes and consumer spending rise.

In a recent interview, Freedonia analyst Gleb Mytko said that in the last decade a number of industrializing nations have adopted regulations that target packaging machinery and materials, including China and India.

“As the regulatory framework in developing parts of the world develops, it will have a significant effect on packaging equipment use,” said Mytko, who added that in most instances the standards that have been adopted focus on maintaining product quality and preventing contamination during the packaging process. “Compliance is fairly universal. Additionally, some manufacturers in industrializing countries are also adhering to technical regulations from developed markets—dealing with everything from operator safety to energy efficiency—in order to be able to sell their packaging machinery abroad.”

This will result in additional investment in new manufacturing capacity and related packaging machinery in the Asia/Pacific region, the Africa/Mideast region, Eastern Europe, and Central and South America. China alone is expected to account for one-fourth of all new product demand gains through 2019. Smaller firms in developing countries are expected to transition from manual packaging processes to mechanized packaging between 2014 and 2019 in order to expand output and increase efficiency, further boosting packaging machinery demand.

In general, Mytko said, regulations require manufacturers to replace outdated equipment and to purchase models that comply with the new standards. While regulations have a significant impact on packaging equipment industries of industrializing countries, he suggests growing consumer demand for a wide range of packaged goods is a much more important driver of new machinery sales. “Manufacturers of packaging equipment always focus on what their customers need. Many multinational producers are expanding their operations in industrializing countries in order to be closer to customers. These trends have been occurring for more than a decade now.”

The large, mature North American and West European packaging machinery markets are forecast to expand at a subpar annual rate during the 2014-2019 period. Product sales in the US and Germany, the two largest markets in these regions, are expected to moderate after advancing roughly 9% per annum between 2009 and 2014. In Japan, the world’s third largest national market behind China and the US, demand for packaging equipment will rebound through 2019 after declining during the previous five-year period, largely due to a 2014 drop in product sales from post-recession market peaks hit in 2012 and 2013.

The food and beverage markets are forecast to account for 55% of all new product demand generated between 2014 and 2019. As discretionary incomes in developing regions rise, households will increase spending on a wide range of processed food and beverage products. Recently, health foods have become much more popular in North America and Europe, while sales of foods and beverages that can be consumed on-the-go have grown in developing nations because of urbanization.

Demand for labeling and coding machines, and filling and form/fill/seal equipment is forecast to grow more than 7% per annum during the 2014-2019 period. Because competition in most industries is intense, suppliers of manufactured goods will continue to invest heavily in labeling and coding machinery and transition towards the use of more expensive models, which can enhance the appeal of their products and comply with stricter product tracking requirements.

The world’s six largest packaging machinery firms—Krones (Germany), Bosch (Germany), Tetra Laval (Switzerland), Coecia (Italy), IMA (Italy), and Salzgitter (Germany)—accounted for 23% of 2014 global sales.