Packaging Industry Update

Introduction

Harris Williams & Co. is pleased to present our packaging industry update for May 2018.  This report provides commentary and analysis on current capital market trends and merger and acquisition dynamics within the global packaging industry. In general, the packaging industry continues to benefit from a number of strong secular trends, including globalization, demographic shifts, and an increased focus on sustainability, among others.  In this report we highlight the impact of two headwinds specifically:

  • The impact of millennials on the packaging industry – this demographic group, more than 85% of which consider packaging to be an important part of the product and brand experience, includes 79 million individuals and accounts for $200+ billion of combined buying power.
  • The dramatic growth in e-commerce as a global sales channel – the dollar value of e-commerce sales is expected to nearly double between 2017 and 2021, driving significant change in the packaging industry over this period.

Given these factors, as well as the continued availability of debt and equity capital, deal activity in the packaging industry has remained at elevated levels throughout the first five months of 2018. 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.

2018 By The Numbers 1

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Our Practice

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

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Strong Momentum Across the Packaging Industry

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What We're Reading

Action Packed Entertainment

Packaging News (May 9, 2018)

"If video killed the radio star back in the 1980s, some might have predicted that the internet would kill multimedia packaging in this decade, although that would be a far less catchy song. However, with increasingly impressive technology, packaging has more than just survived in this field."

Read the full article here.

Plastic-Like Polymer Could Be Recycled “Infinitely”

Packaging Gateway (April 26, 2018)

"Colorado State University chemists have discovered a polymer that has many of the same characteristics as plastic but can be converted back into its original small-molecule state for complete chemical recyclability. According to the Department of Chemistry research team, the polymer is comparable to plastic in weight, heat resistance, strength and durability. However, unlike typical petroleum-based plastics, the new polymer could be recycled repeatedly, creating a plethora of opportunities for improved sustainability within the packaging industry."

Read the full article here.

Robotic Automation, Jobs, And Retraining

Packaging World (April 20, 2018)

"Increased automation has changed the manufacturing industry in the U.S. Manufacturers are rapidly introducing robotics to the assembly line. The ARC Advisory Group notes that despite the current rush toward robotic automation in the packaging industry, the space still is nowhere near saturated with automation and robotics."

Read the full article here.

New Packaging Study Reveals Complexities Of Sustainability

Packaging World  (April 19, 2018)

"Results of a new survey show a positive business sentiment towards sustainability. However, despite the enthusiasm, many respondents lacked the tools and resources to achieve sustainability goals or measure progress. Survey findings concluded that 55% of respondents fail to formally measure sustainability and environmental impacts."

Read the full article here.

Labels And Packaging In A Digital World

Labels & Labeling (April 9, 2018)

"For years, brands have recognized the importance that labels and packaging can play in purchase decisions at the store shelf. Eight seconds is all it takes for a shopper to decide which product they will take home with them. You have eight seconds to make an impact with your labels and packaging, so you better make it count."

Read the full article here.

Key Themes

M&A Activity In The Packaging Industry1

  • M&A activity in the packaging space remains elevated.
    • On an LTM basis as of May 2018, $31.2 billion of deal value has been announced globally vs. $24.3 billion for the prior year LTM period.
  • Packaging industry M&A remains robust globally, with the majority of LTM May 2018 targets located in Western Europe (36%), North America (35%), and the Asia Pacific region (18%).
  • Eight deals over $1 billion have been announced or closed in the last twelve months.

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The Impact Of Millennials On The Packaging Industry2

  • As of 2015, individuals aged 20 to 38 are categorized as millennials, a group that includes more than 79 million individuals and $200 billion in buying power.
  • Millennials are a consumer group with characteristics different from previous generations: they shop online, are connected to social media, make value-driven purchase decisions, and most notably for the packaging industry, consider packaging an integral part of the shopping experience.
  • 85% of millennials consider packaging to be a part of the product and brand experience; As such, millennials are quickly becoming the key target group for retailers and brand owners to win in order to ensure future sales growth and profitability, resulting in an anticipated shift away from traditional packaging to those alternatives that more directly embody millennial values, such as convenience and sustainability.

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Dramatic Growth In E-Commerce As A Global Sales Channel3

  • E-commerce currently accounts for an estimated $2.3 trillion, or ~10.5%, of the ~$22 trillion global retail market; this dollar value is expected to nearly double by 2021, with more people gaining access to the internet, driving significant change within the packaging industry during this period.
  • The emergence of e-commerce has created a number of new considerations for the packaging industry as a whole; several key considerations include:
    • Brands and CPG manufacturers are having to reassess how they package products for the online shopper and to adapt to new generations of tech-savvy consumers; and
    • E-commerce shipping cases must be strong enough to withstand a substantially more complex, and less automated, supply chain than for traditional retail.

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Public Comparables1 

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Public Markets Overview1

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Select M&A Activity1,4 

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1. Factset

2. Stora Enso

3. Smithers Pira

4. Mergermarket