Packaging Industry Update

Introduction

Harris Williams is pleased to present our packaging industry update for May 2019.  This report provides commentary and analysis on capital market trends and merger and acquisition dynamics within the global packaging industry.  Following an exceptional 2018, the packaging industry has continued to outperform the broader market during the first half of 2019 in terms of both industry growth and deal activity, driven largely by rising levels of consumer spending and e-commerce sales.  In this update we profile two impactful themes within these broader industry drivers:

  • The impact of the consumer experience in the packaging dispenser market – demanding consumer factors such as functionality, ease of use, consistency, and control in packaging dispensers are driving innovation and differentiation among packaging brands.
  • The dramatic growth in online grocery sales – the share of e-commerce orders in the food & beverage market is expected to grow nearly 10x between 2016 and 2025, 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 2019. 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

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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
  • Paperboard
  • Plastics
  • Specialty Paper

Applications

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

Strong Momentum Across the Packaging Industry

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What We’re Reading

Introduction to the Circular Economy

Inside Packaging  5/1/2019

"The push to increase society’s sustainability is steadily moving beyond individual product changes and approaching acceptance of the fact that, in order to make real impact, it is vital that systemic changes are made at all levels. The idea of a circular economy is that, rather than the current approach of take-make-dispose, the system would instead look to minimize waste and maximize the use of resources. In basic principle, such a system already exists in the form of established recycling schemes, but a true circular economy would see far more wide-reaching, systemic approaches to decreasing waste."

Read the full article here.

Grocery Stores Are Packed with Plastics. Some Are Changing

National Geographic  4/22/2019

"Food packaging makes up a huge proportion of plastic waste in the U.S. Some stores are beginning to wean themselves off it... In the last few years, more and more plastic-free food stores have opened their doors, springing up from Hong Kong to Germany to Ecuador. These stores are testing the models that grocers have long relied on, searching for ways to de-plasticize both the food supply chain and their customers’ carts."

Read the full article here.

Understanding the Impact of Automation

Package Printing  4/9/2019

"Throughout the package printing and converting process, automation can mean a number of things. Beyond the actual production of a job, tasks such as cost estimation, prepress file verification, assigning a job to the proper press and preparing a job for shipment, can make for a cumbersome path to turn a packaging concept into the final output. While package printers are constantly seeking out ways they can boost their efficiency, implementing automation elements can be daunting. The best place to start is by taking stock of systems already in place."

Read the full article here.

Meet Gen Z on Their Turf

Packaging World  4/7/2019

"After years of everything millennial taking center stage, the focus is shifting to a new generation: Gen Z. Made up of those born between 1996 and 2010, this generation will comprise 33% of the world’s population by 2020. While much has been said about the millennial spirit, “millennialism” isn’t just about millennials. It is a mindset that drives the expectations of Baby Boomers, Gen X, and millennials alike and even stretches to Gen Z. The question is, what sets Gen Z apart?"

Read the full article here.

5 Packaging Trends Emerging in 2019

Packaging Digest  3/18/2018

"In the ever-changing packaging industry, new styles come and go; consumers’ needs and desires shift and evolve; and brands are always on the lookout for a way to get ahead in their respective markets. This will prove no less true in 2019, as evidenced by the various trends on the horizon for the packaging industry. Take a look at five predictable packaging movements and their drivers."

Read the full article here.

Key Themes

M&A Activity in the Packaging Industry1,2

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  • M&A activity in the packaging space remains robust.
    • On an LTM basis as of May 2019, $9.0 billion of deal value has been announced in the North American packaging industry vs. $8.2 billion for the prior year
    • YTD announced deal volume as of May 2019 is slightly down over the same period the prior year (43 deals in 2019 vs. 54 deals in 2018)
    • Four 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 May 2019 targets located in Western Europe (42%), North America (33%), and the Asia Pacific region (17%).

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

Booming Growth in Online Grocery Sales: What Does This Mean for Packaging?4,5

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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 market.
    • By 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 May 21, 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. L.E.K. Consulting
5. Packaged Facts

 

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