Packaging Industry Update

Introduction

Harris Williams is pleased to present our packaging industry update for August 2019.  This report provides commentary and analysis on current capital market trends and merger and acquisition dynamics within the global packaging industry. Overall, M&A activity in the packaging industry remains elevated in 2019, driven by strong secular trends globally. In this report we highlight two of these trends: The rise of the packaging automation and robotics market, which is expected to grow at 13% annually between 2015 and 2025, and the dramatic growth in the online grocery market, which is expected to grow 10x between 2016 and 2025.  We hope you find this edition helpful and encourage you to contact us directly if you would like to discuss our perspective on current industry trends or our relevant industry experience.

2019 by the Numbers1,2

  • 90+ YTD packaging acquisitions
  • 5 LTM transactions over $1 billion
  • 11% 2019 YTD year-over-year increase in announced global packaging M&A volume

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HW Deal Spotlight: Cold Chain Technologies

Harris Williams exclusively advised Cold Chain Technologies (“CCT”), a leading global provider of single-use and reusable passive thermal packaging solutions that ensure reliable shipment of temperature-sensitive materials, principally serving the life sciences supply chain. CCT’s products are used in many segments of the life sciences industry, including commercial manufacturing, pharmaceutical distribution, clinical trials, specialty pharmacy deliveries, and direct-to-patient shipments. Headquartered in Franklin, Massachusetts, Cold Chain Technologies has been a leader in temperature-sensitive packaging solutions since its founding in 1967.  Over the last 21 years, CCT has developed the industry’s broadest portfolio of high-performing proprietary products, including a variety of modular single-use and reusable parcel and pallet shippers, thermal pallet covers, and phase change materials. The buyer was Aurora Capital Partners.

 

Upcoming Industry Events

picture1_10.pngHarris Williams will be attending the 2019 PACK EXPO conference on September 23-25th at the Las Vegas Convention Center in Las Vegas, NV.

 

 

picture1_11.pngPlease join us for cocktails on September 24th from 4:30-7:30pm in the Lakeside Vista Room at the Wynn Hotel.

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Strong Momentum Across the Packaging Industry

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What We’re Reading

5 Trends Disrupting the Packaging Sector

Packaging Strategies  8/21/2019

As packaging becomes entrenched in the every day lives of businesses and consumers alike, McKinsey & Co. suggests five disruptive trends that will emerge and create new opportunities for companies to improve competitive positioning and drive operational efficiency.

Read the full article here.

With Light or Biodegradable Packaging, Cosmetics Lines Move to Eco-Friendliness

Wall Street Journal  8/16/2019

As young consumers increasingly demand sustainability efforts from their favorite brands, some cosmetics brands are switching to refillable, compostable, and biodegradable materials. The global cosmetics industry produces over 120 billion units of packaging annually, a large chunk of which ends up in landfills.

Read the full article here.

Is Web-to-Pack the Next Big Thing?

Packaging World  7/26/2019

"What’s claimed to be the world’s first web-to-pack platform for folding cartons made an auspicious debut April 9 to 13 at an open house held in Shenzhen, China. The platform connects packaging designers, print buyers, and producers with unparalleled efficiencies. One big benefit of this platform that converters of packaging materials will greatly appreciate is that it lets them fulfill prepress work online based on standards."

Read the full article here.

Drink Makers Seek More Recycled Plastic

Wall Street Journal  6/30/2019

"Beverage companies with ambitious goals to use more recycled plastic in their packaging are facing a shortage of discarded containers from recycling programs. Less than a third of the six billion pounds of plastic most commonly used for drink bottles and food containers is recovered by U.S. recycling programs. Most of what is recovered becomes polyester fiber for rugs and clothing or plastic sheeting. Just a fifth, some 330 million pounds, ends up in new bottles and food containers."

Read the full article here.

Loop Reusable Packaging Shopping Platform Launches in U.S.

Packaging Digest  6/6/2019

"As the Loop circular-economy ecommerce shopping platform launches in New York—and debuts online in the U.S. through retailers Walgreens and Kroger—its architect will be stepping on stage at the upcoming EastPack event to convince you of the value and timeliness of durable, reusable packaging."

Read the full article here.

M&A Activity in the Packaging Industry1, 2

  • screen_shot_2019-09-03_at_11.20.59_am.pngM&A activity in the packaging space remains robust
    • On an LTM basis as of August 2019, $18.9 billion of deal value has been announced in the global packaging industry vs. $15.3 billion for the prior year
    • YTD announced deal volume as of August 2019 has grown 11.2% over the same period the prior year (99 deals in 2019 vs. 89 deals in 2018)
    • Five deals over $1 billion have been announced or closed in the last twelve months
  • Packaging industry M&A remains robust globally, with the majority of LTM August 2019 targets located in Western Europe (42%), North America (33%), and the Asia Pacific region (17%)

Global CPG Packaging Customers Embrace Robotics3,4

  • screen_shot_2019-09-03_at_11.23.30_am.pngThe automation and robotics market continues to grow, creating significant demand for packaging automation equipment and packaging designed to withstand automated handling
  • Processing operations and secondary packaging have seen the greatest growth in robotics over the past five years
  • CPG packaging customers are increasingly making investments in robotics to maintain competitive positioning, increase production capacity, reduce labor shortages, and expand margins
  • As volume and productivity standards increase, CPG packaging customers are using robotic capabilities for repetitive, non-ergonomic tasks, allowing human workers to handle activities of higher value add
  • With advances in automation, CPGs can create a wider range of products, packaged in containers of any size, without sacrificing overall efficiency and design

Booming Growth in Online Grocery Sales: What Does This Mean for Packaging?5,6

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  • Increased adoption of smart devices and improved interfaces for websites and mobile apps has led to a tremendous growth environment for the online grocery marketBy 2025, online grocery sales are expected to account for 20% of total grocery sales, up from approximately 2% in 2016
  • New business partnerships have emerged to meet changing consumer habits and support continued investment and opportunity
    • Amazon / Whole Foods, Walmart / Jet.com, Albertson’s / Plated, Target / Shipt, and Aldi / Instacart
  • Food and beverage companies that strategically adapt their packaging to focus on online promotions and home deliveries are best positioned to take advantage of the lucrative market opportunity

Public Comparables1

As of August 22, 2019 ($ in millions, except per share amounts)

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Public Markets Overview1

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Select M&A Activity1, 2

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1. Capital IQ

2. MergerMarket

3. PMMI Business Intelligence

4. Packaging World

5. L.E.K. Consulting

6. Packaged Facts

 

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