Russian flexible packaging market: 2—3% still makes gain

The trends of the previous years continued during the season of 2016 in the Russian market. Market participants estimate a rise in consumption of flexible packaging at 8%. The participants of the international conference Russian flexible packaging market: trends, forecasts, prices are largely unanimous that the season of 2016 was successful yet difficult. Even though sales dropped in many industries, many flexible packaging producers ramped up the output.

FLEXIBLE PACKAGING FASTEST-GROWING SEGMENT

The packaging industry keeps burgeoning worldwide. "The packaging for foods, consumer industrial goods, beverages or pharmaceuticals is increasing in importance across the globe”, Thomas Schneider, the World Packaging Organisation president, said. The participants of the international conference Russian flexible packaging market: trends, forecasts, prices think that the Russian market is not exclusion in these terms. More and more manufacturers of consumer goods pay attention to the packaging and its quality primarily. According to the national packaging confederation, flexible packaging accounted for 20% of the packaging market in 2016, and this segment is growing at the fastest pace. Only the cardboard and paper segment has a larger share now.

Consumption of polymer packaging outstripped that of cardboard and paper items

The new research of PIRA Company suggests that the packaging market will expand by 4% annually through 2018 when packaging sales will approach $1 trillion. Observers of the Russian packaging market believe that the Russian market will grow at a different rate than the global one. The 8% market development in 2016 may slow down in 2017—2018. Consumption will stabilise because the 2015-2016 rise was mostly due to a ban on foods imports from Europe to Russia. In future, the embargo factor will not be that significant and, accordingly, the foodstuff packaging segment will see no upturn.

Many market participants think that slower rise in packaging demand, reduced lending and high interest rates, increased costs through the use of import raw materials and equipment as well as growing packaging value are currently putting the brakes on the flexible packaging consumption growth. This will decelerate the flexible packaging market development to 2—3% per year.

THERE IS REASON FOR OPTIMISM

Anyway, 2—3% still makes gain. Market participants are sure that if the economy recovers further and the flexible packaging import substitution programme is still run, Russian producers stand a chance of raising the output. Despite the difficulties of 2016, the fact that market participants continue to invest in production gives the grounds for optimism as well because this means they are confident about the payback.

Now, flexible packaging manufacturers give priority to the penetration into new markets and the product range expansion rather than the optimisation. With no price cutting efforts made, this indicates the great development potential.

Participants of the Russian flexible packaging market understand that they should work at better functionality and fulfilment of consumer expectations to ensure sustainable growth. On the other hand, they are aware that it is impossible to retain the output without reducing costs and searching for economic feedstock and auxiliary materials.

The conference attendees believe that formula pricing of primary materials may become one of the instruments of cost reduction. Prices for all polymers will be volatile in the near term. This a serious challenge facing the downstream industries. An increase in sales under long-term contracts will also contribute to stable performance of both suppliers and consumers even during the high-season and the force majeure events at facilities. Effective formula pricing will enable flexible packaging producers to invest in capacity expansion, thereby developing the Russian polymer market.

Reference

The first International conference Russian flexible packaging market: trends, forecasts, prices took place in AZIMUT Moscow Olympic Hotel on 23 January 2017. The major discussion topics were enhancement of the packaging business performance, establishment of ties between raw material and packaging producers, the outlook for the Russian flexible packaging market, and the packaging recycling issues. Conflex SPB, Biaxplen, Isratek S, Uniflex, Ormos-Polimer, HP Indigo and many other companies participated in the conference.