Eastern Europe, Turkey: Hot Spots For Flex Packs

Want in on where the real growth in European flexible-packaging converting will be? To paraphrase Horace Greeley, "Go East, young man, and grow up with Russia, Ukraine and Turkey."

Europe is, of course, a powerhouse of the global flex-pack market, accounting for about 27 percent of the world's $40 billion in sales. That compares to North America's 36 percent share and roughly equals the 26 percent share of the Asia-Pacific region. But a closer look reveals that Europe's flex-pack market overall through 2009 is growing at only 1.7 percent a year (see chart).

The real growth hotbeds for the industry are in the newest entrants to the European Union, says John Durston, vice chairman of Flexible Packaging Europe. Durston spoke as part of the Flexible Packaging Association's annual meeting in Naples, FL, this spring.

"While Western European demand is mature at around 1 percent annual growth, new EU entrants in Central and Eastern Europe have 5 percent growth, Turkey is growing at 8 percent, and Russia and Ukraine are growing at more than 10 percent," Durston says.

The drivers for change in these areas are many, but a combination of internal and externals forces are at work. Growing national economies, rising consumer affluence and changing lifestyles mean more Hungarians, Poles and Czechs want, and can afford, products packaged to the highest standards of quality, graphics and convenience. At the same time, major Western European food/non-food manufacturers and their flex-pack converter suppliers—as well as retail chains—are investing in new plants and store locations in Russia, Poland and other Central European nations.

"A more integrated European flexible-packaging industry is coming," says Durston, "as material specifications are being made on a global basis versus by country. There will be continued overcapacity, especially in Western Europe, despite plant consolidations. Competition will intensify, with local supplies of flexible packaging being made in some central and eastern markets."

The days of cheap oil are gone, Durston emphasized, with raw material costs likely to continue rising—up 50 percent in some cases—along with a reduction in the supply base. Western European imports of biaxially oriented polypropylene and biaxially oriented polyester films from Turkey and Russia will grow for the next 5–10 years, he says, due mainly to a lack of significant European investment since 2003 and massive capacity increases in the Far East and India.