Packaging Industry Update

Introduction

Harris Williams is pleased to present our packaging Industry Update for November 2018.  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 significantly above prior year periods, underpinned by continued strong secular trends globally.  In this report we detail two of these trends: smart packaging, an emerging, sub-sector of the packaging industry that is forecast to grow to $7+ billion over the next five years, and sustainable packaging, which is expected to impact consumers across all geographies and 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.

November 2018 by the Numbers1,2

  • 70+ YTD packaging acquisitions
  • 3 LTM transactions over $1 billion
  • 25% LTM year-over-year increase in announced global packaging M&A value

Deal Spotlight: MIKART

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Harris Williams exclusively advised Mikart, a leading contract manufacturer and packager of solid dose and non-sterile liquid pharmaceuticals. The Company provides comprehensive, end-to-end commercialization services to an array of longstanding customers, emphasizing a quality-first approach and best-in-class manufacturing, packaging and regulatory capabilities. Mikart’s broad range of capabilities includes packaging, formulation development, clinical trial supplies, regulatory filing support, analytical services, and clinical and commercial manufacturing. Mikart has deep technical expertise across a range of packaging forms, including:  bottle filling which includes solid dose and nonsterile liquids, packaging tablets, hard-gel, and soft-gels in blister packs, and unit dose offered in sachets and cups. In addition, the Company offers full 2023-compliant Drug Supply Chain Security Act (“DSCSA”) serialization.

Get our full perspective on medical plastics and packaging

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

      CPGs Tell All: Adapting to Industry Trends with OEM Partners

      Packaging World  11/14/2018

      As end users face a shift in their core consumer base from Baby Boomers to Millennials, CPGs are having to answer to ever-changing demands forcing them to be agile, nimble, and ready to compete faster than ever before. CPGs  have to adapt quickly, and are relying on their OEM partners to assist them in creating more flexible equipment that can accommodate multiple products, grappling with e-commerce challenges, and ultimately, speeding the time to market.

      Read the full article here.

      How to Prepare Food & Beverage Packaging for E-Grocery

      Packaging Strategies  11/8/2018

      Do you know how to prepare your packaging for the grocery side of e-commerce? This Q&A, with Alexandre de Souza Carvalho, director of marketing services at Tetra Pak will answer this question and more for food and beverage manufacturers, producers and retailers.

      Read the full article here.

      3 “Smart Packaging” Predictions for 2019

      Packaging Digest  11/06/2018

      Smart packaging is one area that’s sure to continue to amaze us in the new year as consumers rely on their smartphones to stay connected to friends, family and favorite brands. Cameron Worth, founder of SharpEnd—a London-based branding agency that specializes in using the Internet of Things (IoT) to connect with consumers—talks about three new areas of smart packaging and how packaging departments might benefit moving forward.

      Read the full article here.

      Hot Packaging Markets: Understanding Growth Opportunities

      Package Printing  10/15/2018

      "Packaging is in high demand and growth projections are favorable for each segment of the industry. Despite the differences in flexible and rigid packaging, varying consumer behaviors and brand demands have led to significant opportunities in each format. But understanding the market segments where each type of packaging shines is imperative to making the most out of these opportunities."

      Read the full article here.

      Amazon Incentivizes Brands to Create Frustration-Free Packaging

      Packaging Digest  9/18/2018

      To help reduce packaging waste and improve efficiency of ecommerce shipping for its vendors, Amazon will require that select products being sold and fulfilled by Amazon arrive in its fulfillment centers in certified packaging under its Frustration-Free Packaging (FFP) program. The new program offers vendors many opportunities to develop unique packaging solutions for the growing e-commerce channel, while reducing packaging waste by optimizing the amount of packaging used by vendor products.

      Read the full article here.

      Key Themes

      M&A Activity In The Packaging Industry1,2

      • M&A activity in the packaging space remains elevated.screen_shot_2018-12-11_at_4.12.02_pm.png
        • On an LTM basis as of November 2018, $32.6 billion of deal value has been announced globally vs. $26.1 billion for the prior year.
        • YTD announced deal value as of November 2018 is also elevated over the same period the prior year ($28.5 billion in 2018 vs. $22.5 billion in 2017).
      • Packaging industry M&A remains robust globally, with the majority of LTM November 2018 targets located in Western Europe (35%), North America (32%), and the Asia Pacific region (23%).
      • Three deals over $1 billion have been announced or closed in the last twelve months.

      Consumer Engagement Trend Drives Innovation in Smart Packaging3

      • Smart packaging is commonly defined as an addition of the screen_shot_2018-12-11_at_4.13.57_pm.pngcommunication function to traditional packaging, and communicates information to the consumer based on its ability to sense, detect, or record external or internal changes in the product's environment.
      • Brand owners are increasingly demanding functional packaging, as opposed to just a technology or component, that adds real value to their brand, rather than short-term marketing gimmicks.
      • Other technological developments in printed electronics, Cloud computing and the Internet of Things are also driving the increased adoption of smart packaging technologies.
      • As a result, the global smart packaging market is expected to experience strong growth in the years ahead, and is forecast to grow from $5.3 billion in 2016 to nearly $7.6 billion by 2021—an annual CAGR of 7.5%.

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

      • Due to increasing global enviroscreen_shot_2018-12-11_at_4.15.44_pm.pngnmental 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 November 23, 2018 ($ in millions, except per share amounts)

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      Notes: LTM as of most recent reporting; free cash flow conversion defined as EBITDA less capital expenditures divided by EBITDA.

      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

       

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