Packaging Industry Update

Introduction

Harris Williams is pleased to present our packaging industry update for February 2020. This report provides commentary and analysis on current capital market trends and merger and acquisition dynamics within the global packaging industry. After a strong 2019, M&A activity within the packaging space is poised for continued growth in 2020, driven by a number of secular trends, including late-cycle investor rotation into more defensive industries, as well as record levels of available capital.

In this report, we highlight two specific areas of growth – gamification and flexible packaging:

  • Gamification of packaging will create more personalized experiences and interactions for consumers, allowing them to accumulate “badges,” similar to those on social media, while building brand loyalty and driving product engagement; and
  • North American flexible packaging market is predicted to achieve a compound annual growth rate of 3.8% over the next five years, driven in part by growing demand for lightweight packaging for food and pharmaceuticals.

We hope you find this edition helpful, and we encourage you to contact us directly if you would like to discuss our perspective on current industry trends, or our relevant industry experience.

Global Packaging by the Numbers – 20191,2

  • 181 announced packaging acquisitions
  • 4 transactions over $1 billion
  • 20% year-over-year increase in announced global M&A volume

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

Flexible Packaging: The Path Forward in 2020

Flexible Packaging  2/10/2020

"Pushback on use of plastics is a major challenge for flexible packaging. Going forward, suppliers look to find eco-friendly alternatives, while educating consumers on the many benefits of this growing packaging segment. Sustainability is once again a leading concern across the board. Companies are looking to find material recourses that will protect the environment and quell rising worries from the public."

Read the full article here.

A Holistic Approach to Sustainable Packaging

Packaging Europe  2/6/2020

"By using different material and packaging concepts, manufacturers can make an important contribution to meeting current market demands regarding sustainable packaging solutions. New packaging legislation has been in force in Germany since the start of 2019. Among other things, it lays down challenging quotas for the recycling of materials and the reusability of packs."

Read the full article here.

Glass House Effect

Packaging Today  1/28/2020

"There are many communication problems between what brands are doing sustainably and how that informs customers to make ethical environmental consumer decisions. FEVE, the European Container Glass Federation, is on a mission to help educate consumers and companies on the merits of glass as the best choice for sustainable, recyclable, and circular economy-oriented packaging material."

Read the full article here.

Packaging: Smart, Active and Intelligent

Packaging Today  1/22/2020

"Nowhere is smart packaging more relevant than in medical devices, where there is growing demand for functionality and an ability to meet human needs. Although such technology is in its relative infancy, it has huge potential for the industry. There are a number of different smart packaging technologies that have been developed, which can not only change supply-chain operations, but also change the ways that healthcare professionals and patients interact with medical devices."

Read the full article here.

Augmented Reality Wine Labels: A Flash in the Pan, or the New Standard?

Packaging Gateway  1/17/2020

Wine has long had an image problem, due to complex labels and packaging designs. Younger audiences have instead turned to craft beers and boutique spirits. In an attempt to reengae younger drinking-age consumers, several wine brands have turned to augmented reality (AR) packaging.

Read the full article here.

Recap of 2019 M&A Activity in the Packaging Industry1,2

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  • 2019 M&A activity in the packaging space remained robust
    – In 2019, 54 deals were announced in the North American packaging industry vs. 45 in 2018
    – Global deal volume grew 19.9% from 2018 to 2019
    – Four deals over $1 billion were announced or closed in 2019
  • Packaging industry M&A remains robust globally, with the majority of 2019 targets located in Western Europe (50%), North America (30%), and the Asia Pacific region (18%).

Packaging Gamification Drives Consumer Engagement3

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  • Gamification is the application of game-design elements and game principles in non-game contexts
  • The global gamification market was estimated to be $13 billion in 2019 and is expected to reach $31 billion by 2025, recording a CAGR of 18.9% over the period
  • In the realm of packaging, gamification provides educational experiences for children, playful and artistic designs that evoke the spirit of the product contained inside, and badge accumulation and awards similar to what’s seen in social media
  • As the trend of sharing unboxing experiences on social media continues, unique packaging experiences will draw consumers to prioritize unexpectedly moving and memorable experiences
  • This will drive the merging of traditional packaging materials with digital technologies in newly gamified ways

North American Flexible Packaging Market Grows4

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  • North America's flexible packaging market is predicted to achieve a compound annual growth rate of 3.8% over the next five years, to reach over $30 billion in 2023
  • Sales in the North American region accounted for almost 30% of total global sales
  • Increasing demand from food and pharmaceuticals is driving much of the growth in flexible packaging
  • Flexible packaging continues to be a hotbed for mergers and acquisitions, which is changing the structure of this still-fragmented market
  • Companies are repositioning their assets and rationalizing and restructuring their businesses, often involving the divestment of non-core activities and the addition of strategic bolt-on acquisitions

Public Comparables1

As of February 1, 2020 ($ 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. TechNavio

4. European Plastic Product Manufacturer

 

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