In 2016, demand from this segment stood at over 23 million tonnes of material and held a value worldwide of $66 billion (US)/$86 billion (CAN) according to the new market study The Future of Sack and Kraft Paper to 2021. Its analysis charts how the market will expand to reach almost 28 million tonnes by 2021, valued at about $80 billion (US) at 2016 prices.
This expansion is taking part against a back drop of changes within the sack and kraft industry, placing a premium on technical innovation.
The most important influence on consumption of these materials remains in the hands of the end user. Shifts in buying patterns among consumers impact on all end-use applications and ultimately drive the demand for all packaging.
Consumption in traditional industrial applications is being eroded as sack formats are displaced by plastic and metal bulk and semi-bulk handling containers. This is being countered by increasing enthusiasm from consumer segments.
As sack and kraft paper packs find themselves increasingly moving from the warehouse onto supermarket shelves, there is a demand for grades that can carry the high quality graphics that allow them to compete with other packaging formats for the shoppers attention.
This is placing pressure on papermakers to develop innovative solutions to provide suitable and appropriate printing surfaces. A particular priority is to evolve solutions that can interface with digital – inkjet and toner – print technologies that enable short and customised editions of packaging creating value-adding opportunities for converters.
Another key development addressing this shift has been the introduction of ultrasonic sealing machinery. This technology can simultaneously offer a tighter closure and ejects loose material from the region of the valve seal, which enables faster and smoother filling processes that can translate into marked reductions in costs for converters.
One of the principal reasons sack and kraft papers are increasingly demanded in consumer applications is the enthusiasm of both brands and customers for sustainable, recyclable packaging solutions.
This impetus is also leading paper producers to bolster the environmental credentials of their sack and kraft grades. Adoption of sustainability practices has been fairly widespread throughout much of the industry and many suppliers now sport a plethora of environmental certifications – such as those approved by the Forest Stewardship Council (FSC).
As environmental pressures become ever greater, it is possible that kraft and sack paper manufacturers may start to develop entire product ranges marketed on a sustainability platform. In addition to sourcing from sustainably managed forests, some kraft paper producers have also made attempts to increase the amount of recycled material used in the manufacture of their products.
Across 2016-2021, sustainability certification is expected to become ever more widespread, with penetration of eco-labels increasing in parts of the world where their presence has been limited to date.
Pressure to reduce costs is fuelling ongoing innovation – such as the technological advances that enable much lighter weights of paper to achieve the same results. Grammages have declined significantly in the past 20 years, in some cases from 55gsm to as low as 20gsm. This shift to lighter weights increases the importance of sheet uniformity, bulk and thickness, absorbency, opacity, dimensional stability, surface finish, and printability; as well as reducing volume offtake for raw material suppliers.
This trend naturally cuts the weight of paper demanded, but demographic shifts in consumer markets is again helping to mitigate this. There is a wider trend in packaging towards smaller pack sizes as typical family units get smaller, so as to boost convenience and reduce food wastage for the end user. This is having a impact positive for the industry as one 500g pack consists of less material than two 250g packs, and there is a corresponding demand for more consumables, such as inks and adhesives that build the bag.
North America is the third largest regional market for sack and kraft paper packaging, with a 16% market share, after Western Europe (23%), and Asia (45%). Consuming 380,000 tonnes in 2015, Canada sits is the 14th largest national market, but has the second highest per capita consumption rate.
In North America, sugar and flour account for over a quarter of the demand for sack and kraft packaging papers, with the other major dry goods markets adding a further 20% of the total. Industrial applications represent just over 41% of total demand in 2015, though this will decline across the next five years for the reasons outlined above.
The sack and kraft packaging paper conversion industry remains highly fragmented, with the top ten converters globally accounting for just 10% of total market volume in 2015. The three biggest converters worldwide are Mondi, Segezha and Hood Packaging, which together made up less than 8% of the 2015 volume.
Consolidation among both raw material suppliers and converters is slowly changing the dynamics of the market. Mergers like that of MeadWestvaco and RockTenn to create WestRock in 2015, is encouraging other suppliers to consolidate further to redress the competitive balance.
Further consolidations at end-user level will also have an indirect impact on this market as newly formed user companies assert their increased buying power by switching packaging suppliers into one source, thus eroding the client base of the losing supplier.
The full impact of these market and technology drivers in different regions across the world is analysed and quantified in depth in Smithers Pira’s report The Future of Sack and Kraft Paper to 2021.
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