Ask any two economists when the recession will start in the US, and you'll likely get three opinions. That same lack of consensus shows up in our Website Poll. Some respondents say we're already in a recession; others feel that there won't even be a true recession this year, just a general slowdown.

When it comes to the state of the flexible packaging industry, however, there does appear to be a clear consensus. Despite how the overall economy is bound to impact the production and sale of all types of converted products, flexible packaging has never been more popular with end-user customers and consumers. And while issues and challenges remain, opportunities for new markets and new products abound.

In his 2008 State of the Industry presentation during the Flexible Packaging Association (FPA) annual meeting last month in Orlando, FL, George Thibeault, FPA chairman and president of Constantia Hueck Foils LLC, detailed just these positive aspects for flex-pack converters. Broadly, the total US packaging industry accounted for $133 billion in annual sales in 2006—up 4-5 percent, and flexible packaging made up a healthy 18 percent of the market.

But it's the “value-added” sub-segment of flexible packaging—worth $19.8 billion in sales last year—that stands out among the other parts of the field (see chart at right), the FPA reports. Unlike retail poly bags, and trash and storage bags and wraps, the “value-added” (make that more highly converted) materials brightly shine with their colorful graphics, reclosable zippers, standup-pouch configurations and even built-in handles.

Among various flex-pack structures, basic rollstock is still king with 87 percent of FPA members manufacturing this material type, which also accounts for 61 percent of the market's dollar value. But again, the more “value-added” products such as layflat, standup and retort pouches, and shrink sleeves and wraps are making names for themselves. These structures represented 11 percent of market value last year or nearly $3 billion, FPA says.

When it comes to the different resins and films that flex-pack converters are using, there seems to be a movement away from polyethylene (PE) and polypropylene's (PP) dominant role in the past. Six percent fewer manufacturers report using both PE and PP film last year. Instead, the share of other materials (polystyrene, polyester and nylon) is growing. This ties in well with the rise of more complicated structures (high-barrier lidding and retort pouches) requiring these films.

In a printing comparison, there's no doubt that flexography tops all methods for flexible packaging. Although the numbers vary slightly from year to year, flexo leads with 61 percent of the market value of shipments last year. Gravure comes in second with 11 percent and offset/other with barely a percent; more than a quarter of all flex-pack materials were sold unprinted.

Moving on from the structure to the material to the printing, the end-use sales markets for finished packaging remained mostly the same in 2007, the FPA reports. Retail food continues to dominate with nearly half of all sales ($12.1 billion) followed by retail non-food and industrial applications at 9 percent each ($2.3 billion).

The FPA's 2008 State of the Industry Report also draws a picture of the flip side—the major issues of concern among converters. In descending order, members listed (1) raw-material costs and availability. This was the top concern for more than eight out of 10 converters; (2) labor—getting and retaining skilled and talented people; (3) the very competitive environment; (4) imports—the trade deficit for flex packs is continuing to increase; (5) energy prices, particularly those impacting freight cost: and (6) the US economy and interest rates.

It's that last one that lead many FPA members to forecast a slowdown for the industry this year (see table). Based on the trade group's estimates, sales will climb only 2.1 percent or $600 million in 2008—down from 5.1 percent growth in 2006. Both profits and volume are expected to be lower as well.

Anyone in business can see why the fourth-most prominent issue—imports—ranks highly with these converters. From a flex-pack trade deficit of about $600 million in 2000, the gap has widened to an astonishing $1.9 billion in 2006, based on US Census Bureau and FPA data (see chart). Chinese imports outstrip those of the No. 2 importer Canada by more than 30 percent, and these two countries alone make up almost two-thirds of all flex-pack imports into the US.

On the opposite side, exports to Canada and Mexico totaled about $975 million in 2006 or nearly 70 percent of all US flex-pack exports. The dollar volume of exports to all countries has risen about 40 percent since 2000—a healthy annual growth rate of 6.6 percent.

Looking ahead, Michael Richmond, principal with Packaging & Technology Integrated Solutions LLC, provided some critical insights into flexible packaging's future during the FPA annual meeting. “Retail will continue to be a key driver for packaging, collaboration among suppliers, converters and customers is important to future growth, and the issue of sustainability is real and not going away,” he says.

On the international scene, Richmond emphasized how packaging is gaining importance for all types of products in developing economies. “Both the Western World and BRIC [Brazil, Russia, India, China] countries offer growth but in different ways,” he explains, but because the true value of packaging is hard to measure, converters need to communicate all its beneficial aspects to the customers involved.

“Packaging is making more of a difference than ever before and is the new product enabler,” Richmond says. For example, how else could a product such as “WetBone Water To Go!” for dogs be successful without packaging it in a lightweight, flexible pouch with a dispensing valve.

These kinds of innovations were exemplified by the 99 entries in the 2008 FPA Achievement Awards competition. Besides improved graphics, many entries focused on material advances in barrier, peelability, chemical-resistance, micro-perforation and insulating properties. About 15 percent of the entries made the environment and sustainability their hallmark, and a further handful showed off new microwavable-pouch technology.

A last look at where flex packs are going includes popular end-use markets. Fresh produce and pharmaceuticals were leaders a few years back, but FPA members indicate that the newest growth opportunities are for prepared dinners and mixes (think retortable sauce pouches), medical devices, refrigerated meats (imagine resealable trays of cold cuts), and health & beauty aids (not just sample sachets).

By overcoming some serious but likely short-term negatives, the solid flexible-packaging industry has no where to go but up.