“Fragmented” rigid plastics market set for steady growth despite industry challenges, says Frost & Sullivan

09 Jan 2019 --- The rigid plastic packaging market will reach US$166.63 billion by 2022, growing at a CAGR of 5.2 percent between 2017 and 2022, according to new Frost & Sullivan forecasts. The main obstacles to further growth, as identified by the market researcher, include the option of flexible packaging alternatives, particularly stand-up pouches, increasingly challenging environmental regulations and the “fragmented” nature of the market.

The rigid plastics packaging market has witnessed steady growth in recent years due to rapid urbanization, rising plastic production, technology developments driving smart rigid packaging, and increased application in end-use industries such as food & beverage and pharmaceuticals.

“There are factors that have significantly boosted the demand of rigid plastics like increased shelf-life, breakage avoidance and lightweight properties,” Prateeksha Kaul, Research Analyst, Visionary Science at Frost & Sullivan, tells PackagingInsights.

She explains that, in order to tackle the issue of food safety, food & beverage manufacturers are developing efficient smart packaging systems that will ensure safe food supply and long-term storage, thereby extending a product’s shelf-life.

“They are also developing game-changing technologies such as inert barriers, which eliminate numerous manufacturing processes, equating to reduced cost and waste, and making the manufacturing process more eco-friendly,” she says.

To gain a competitive advantage in a fragmented market, Kaul recommends players emulate market leaders such as Amcor and Berry Global by establishing an effective and innovative rigid plastic packaging product portfolio. They can also partner with or acquire other companies to expand their customer base and strengthen their market position. These strategies will drive new growth opportunities and attract customers that are focused on higher durability and environmental sustainability, according to Kaul. In his view, further imperatives for success and growth include:

• Customizing rigid plastic packaging to end-user specifications such as prolonged shelf-life and easy-opening.
• Expanding operations to the Asia-Pacific region, which has high-growth prospects for pharmaceuticals due to increasing healthcare expenditure.
• Focusing on high-growth sectors such as food & beverage by providing efficient products as there is extensive food loss during transportation.
• Offering better rigid plastic products at lower costs in developing, economically weaker countries to boost revenue growth.

Frost & Sullivan forecasts growth of 5.2 percent between 2017 and 2022 (CAGR) in the rigid plastics packaging market.Growing pains
Kaul believes that the rigid plastics packaging market is fragmented as the market consists of a lot of national as well as regional market participants, as opposed to the dominance by multinationals seen in other parts of the packaging sector. “The technology and requirements for the production of rigid plastics such as bottles, caps, and tubs are not complex hence various players operate in the market,” she tells PackagingInsights.

“Although plastics have delivered many benefits, the environmental impacts associated with their production and disposal have raised serious concerns,” Kaul adds. “The market is also affected by the presence of competitive packaging options, such as flexible plastic packaging.”

The introduction of flexible stand-up pouches in the food and beverage industry is a particularly competitive challenge to continued growth in the rigid plastic packaging market, according to Kaul.

“Lightweight packaging and reduced carbon footprint are key reasons for the preference of flexible packaging over rigid by brand owners. To mitigate these risks, players will need to develop innovative packaging that conforms to current recycling and re-usability regulations, but also to increasingly stringent future environmental regulations,” she adds.

Kaul believes that since the market is fragmented, there is no particular player that holds a dominant share. “This means that market players resort to various developmental strategies such as geographical expansion, product launches and collaborations to expand their presence,” she says.

Within the fragmented rigid plastics market, Kaul strongly recommends players to consider mergers and acquisitions. This will help companies gain an extra share in the market by expanding either their customer base and/or product portfolio, or by allowing them to gain market entry.

“For instance, in 2016 Amcor acquired Sonoco which helped the former expand its production capacity. In 2018, Alpla Holding GmbH acquired Greek packaging supplier Argo SA to bolster its pharmaceutical business,” she says.

“The rigid plastics packaging market is expected to maintain its steady growth. However, I anticipate that companies will constantly focus on products and technology innovations to sustain the strong market competition and retain their market position,” concludes Kaul.

By Joshua Poole