News Release

US and Canada continue to see positive growth in flexible packaging but uncertainty slows Mexican market

PCI Wood Mackenzie's latest review of the North American marketplace, 'Flexible Packaging North America Supply Demand Report', reveals North America’s $24 billion flexible packaging industry remains the largest regional market in the world, accounting for around 28% of global flexible packaging demand in 2017.

According to the report, the US continues to dominate the region with domestic demand expected to continue to grow by over 4% per annum over the next five years. Growth in the Canadian flexible packaging market is forecast to slow slightly to 3.5% per annum and political and economic uncertainty in Mexico has seen growth drop to under 4% in 2017.

Over the next five years PCI Wood Mackenzie forecasts that North American flexible packaging demand will continue to show good growth at just above 4% per annum to reach $30 billion in 2022.

PCI Wood Mackenzie research analyst, Rob Gilfillan, said: “The US is the world's richest, most advanced global economy and as such has the largest flexible packaging market together with the highest consumption of flexible packaging per capita.

"It’s interesting to note that the US has historically been relatively conservative in its use of flexible packaging, when compared to Europe and Japan, as consumers previously placed more confidence in rigid packaging formats and major brand owners had little incentive to invest in new pack formats."

Mr Gilfillan added: "However, we are starting to see a change in the situation as the benefits of flexible packaging to packers and consumers are more widely appreciated.”

In terms of volume, demand in the region grew by around 3.5% to 75 billion-m2 due to a combination of follow-through on input costs, the growing use of higher-value materials, such as; stand-up pouches, multi-layer barrier films, vacuum skin and modified atmosphere packaging, and the continuing transition to flexible packaging from the more traditional rigid formats, such as; glass, metal and board.

The North American market has seen significant M&A activity in 2017, among both the leading and smaller players, with interest from private equity firms behind nearly all deals, especially in the US. However, even with all this M&A activity it is debatable whether or not the industry is concentrating, with the leading 26 converters still only accounting for less than half of the region’s value-added flexible packaging market, compared to 70% in Europe.

Despite the good market growth, profits have not improved at converters and the North America industry has suffered from years of under-investment and is now weighed down with old and inefficient machinery. The recent flurry of M&A activity has started to address the situation but many in the industry are concerned the lack of investment is still not at sufficient levels to meet future growth.

Most North American based converters continue to focus their efforts primarily within the region and given the global nature of brands today we wonder how this might impact their supply position in the longer term as many international brand owners look to rationalise their supply base and opt for producers with a more global footprint.