Packaging Industry Update

Introduction

Harris Williams is pleased to present our packaging industry update for February 2019.  This report provides commentary and analysis on current capital market trends and merger and acquisition dynamics within the global packaging industry. Despite periods of market volatility in late 2018, M&A activity within the packaging sector remains robust, with the LTM value of announced deals through February 2019 nearly 10% above the prior-year period, underpinned by continued strong secular trends in the space. In this report we detail two of these trends: dispensing solutions, a sub-sector of the packaging industry that is forecast to grow to $9+ billion over the next five years, and sustainable packaging, which will impact consumers across all packaging segments in a number of different ways globally. 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.

February 2019 by the Numbers1,2

20+ YTD packaging acquisitions

LTM transactions over $1 billion

9% LTM year-over-year increase in announced global packaging M&A value

screen_shot_2019-02-25_at_2.54.26_pm.pngHW Deal Spotlight: Wulftec

Harris Williams exclusively advised Wulftec, a leading manufacturer of end-of-line packaging solutions including semi- and fully-automatic stretch wrapping and strapping equipment. The Company designs, engineers, and manufactures highly-customized end-of-line packaging machinery for customers in the distribution & logistics, food & beverage, construction materials, and consumer products industries. Operating out of a state-of-the-art manufacturing facility in Ayer’s Cliff, Quebec, Wulftec works with customers to design packaging machinery solutions that fit seamlessly at the end of their existing systems. Utilizing a high-touch and expedited marketing process, Harris Williams engaged a select group of buyers active in the packaging automation space. The ultimate buyer was Duravant, a portfolio company of Warburg Pincus.

Our Practice

Harris Williams is a leading advisor to the packaging industry. Our significant experience covers a broad range of end markets, industries, and business models.

Packaging Types

  • Bags
  • Bottles & Cans
  • Caps & Closures
  • Flexible
  • Labels
  • Pouches
  • Rigid

Materials

  • Films
  • Foil
  • Glass
  • Laminations
  • Metal
  • Paper
  • Plastics

Applications

  • Cosmetics
  • E-Commerce
  • Food & Beverage
  • Healthcare
  • Industrial
  • Other

Strong Momentum Across the Packaging Industry

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What We’re Reading

Executive Forecast: The State of Flexible Packaging in 2019

Flexible Packaging   2/4/2019

Digital printing. The continuation of rigid-to-flexible. Recyclability. The ongoing importance of product differentiation. Combating the negative stereotypes of plastic. These trends — and a whole lot more — are covered in Flexible Packaging’s annual executive forecast.

The periodical caught up with representatives from Nordmeccanica, TC Transcontinental, MACtac and Bumble Bee Seafoods to provide a well-rounded, comprehensive view on the flexible packaging industry from the respective perspectives of an equipment manufacturer, converter, supplier and CPG. See what each of them had to say from their position in the industry for the annual flexible packaging forecast:

Read the full article here.

Packaging the Brand for High-Stakes Competition

Forbes   1/23/2019

Nothing underscores the intensity of the marketer’s competitive landscape like the shelves in a supermarket. On the brick and mortar battleground, the high stakes role of packaging continues to grow. The demands placed on packaging to differentiate the product, communicate benefits, justify pricing, and move the product off the shelf are increasingly complex and critical.

Read the full article here.

Compostables, Meant to Cut Plastic Waste, Are Stumbling

Wall Street Journal   1/22/2019

Compostable bags, cups and cutlery are becoming more popular amid the mounting backlash against plastic waste, but many aren’t making it to the compost heap. Companies like PepsiCo Inc., Nestlé SA and Unilever PLC are increasingly rolling out compostable packaging and products intended to break down after use. They say these items are more eco-friendly because they’re made from renewable materials like cornstarch rather than from petroleum, and also reduce waste. The problem is most compostable products don’t break down on their own.

Read the full article here.

Why Sustainable Packaging is Good for Profits as Well as the Planet

World Economic Forum   1/15/2019

Although sustainability is increasingly a priority for consumers when making purchasing decisions, many businesses are yet to sufficiently prioritize sustainability and circularity when considering design, use and disposal of packaging, with the majority of packaging still single-use and non-recyclable. Fortunately, there are a number of pioneering organizations attempting to improve this bleak trajectory by investing time and resources in the development of more circular packaging solutions.

Read the full article here.

Packaging Trends that Dominated 2018

Package Digest   12/19/2018

Sustainability, ecommerce, customer experience, cannabis, and snacking stand out, along with other trends, that represent significant influences on packaging design, development, and production this year. Packaging Digest’s end-of-year analysis revealed these 11 most-popular packaging-trends-related articles, based on page views from its global audience.

Read the full article here.

M&A Activity in the Packaging Industry1, 2

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  • M&A activity in the packaging space remains elevated.
    • On an LTM basis as of February 2019, $26.8 billion of deal value has been announced globally vs. $24.7 billion for the prior year
    • YTD announced deal volume as of February 2019 is also elevated over the same period the prior year (21 deals in 2019 vs. 16 deals in 2018)
  • Packaging industry M&A remains robust globally, with the majority of LTM February 2019 targets located in Western Europe (36%), North America (31%), and the Asia Pacific region (23%).
  • Five deals over $1 billion have been announced or closed in the last twelve months.

Customer Convenience Underpins Strong Growth in the Packaging Dispenser Market3

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  • The race to improve the consumer product experience has been one of the most prominent trends in the packaging industry over the last decade.
  • In the highly saturated consumer goods markets, brands see opportunities to capture value by utilizing innovative dispensing solutions with improved convenience.
    • Consumers value functionality, ease of use, consistency, and control in their packaging dispensers, and brands will be able to differentiate their products by meeting these consumer needs.
  • Such innovation is expected to help grow the global packaging dispenser market from $7.6 billion in 2017 to $9.3 billion in 2023, a 3.5% increase per annum
    • Developing Asian markets with a growing consumer population and middle class will be responsible for the majority of the growth in packaging dispensing fixtures moving forward.

Sustainability Continues to be a Major Focus in the Global Packaging Market4

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  • Due to increasing global environmental concerns and newly implemented regulations by government agencies, the sustainable packaging market is expected to experience significant growth and surpass $200 billion by 2021.
  • Innovative solutions and technological advancements used to produce sustainable packaging materials will be a major driver in the market.
  • Within the sustainable packaging market, the food and beverage sector is expected to outperform other sectors due to high demand for biodegradable packaging options especially for organic food and premium products with specific requirements.
  • The Asia Pacific region is expected to experience the most growth in sustainable packaging, underpinned by the anticipated introduction of new regulation.

Public Comparables1

As of February 18, 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. FactSet

2. MergerMarket

3. Smithers Pira

4. Transparency Market Research

 

 

The information and views contained in this report were prepared by Harris Williams LLC (“Harris Williams”). It is not a research report, as such term is defined by applicable law and regulations, and is provided for informational purposes only. It is not to be construed as an offer to buy or sell or a solicitation of an offer to buy or sell any securities or financial instruments or to participate in any particular trading strategy. The information contained herein is believed by Harris Williams to be reliable but Harris Williams makes no representation as to the accuracy or completeness of such information. Harris Williams and/or its affiliates may be market makers or specialists in, act as advisers or lenders to, have positions in and effect transactions in securities of companies mentioned herein and also may provide, may have provided, or may seek to provide investment banking services for those companies. In addition, Harris Williams and/or its affiliates or their respective officers, directors and employees may hold long or short positions in the securities, options thereon or other related financial products of companies discussed herein. Opinions, estimates and projections in this report constitute Harris Williams’ judgment and are subject to change without notice. The securities and financial instruments discussed in this report may not be suitable for all investors and investors must make their own investment decisions using their own independent advisors as they believe necessary and based upon their specific financial situations and investment objectives. Also, past performance is not necessarily indicative of future results. No part of this material may be copied or duplicated in any form or by any means, or redistributed, without Harris Williams’ prior written consent.

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