Consolidation of the flexible packaging market
Consolidation in the global flexible packaging industry has been ongoing for many years, particularly in North America and Europe. In the recent years, this trend has been extended to Asia, Latin America, and Africa. Major players like Amcor and Sealed Air try to access or strengthen their position in both mature and emerging markets. The example of Sun Capital shows that the interest of private equity in the flexible packaging industry is growing rapidly.
Consolidation, in business, describes the acquisition and merger of smaller companies into the larger ones. Consolidation allow companies access to new clients, new technologies, new geographies, cheaper financing, and also superior bargain power. So far, the flexible packaging market is still more or less fragmented, with only few true global players. Having said that, currently the top 20 of global flexible packging converters account for atleast half of the market, and these companies further strive to increase their market share. With few exceptions, most of these companies operate at regional or national level. There are evidences that the leading players are now following the large brand owners and pursue a strategy of global acquisitions. Due to its global growth, the flexible packaging market has become highly attractive to private equity. Already a large number of the top converters are owned by private equity firms. On the other hand, there are number of medium sized groups which have often resulted from smaller acquisitions. These groupings have been able to achieve profitable positions at regional or national level. Through flexibility, they provide competition for the few large groups.
In the recent years, the pace of consolidation in the flexible packaging industry has accelerated, mainly due to the increasing involvement by private equity firms.
Probably, the most prominent example of involvement of private equity is the ‘Sun Capital‘ who merged some long-established converters like Britton, Exopack, Kobusch, Paccor, and paragon under the umbrella of Coveris. Another example is ‘One Equity‘ who invested in Globalpack, as well as in Spear and Parikh for their portfolio company Constantia Flexibles. This was the starting signal for a couple of investments for Constantia Flexibles. While these two are US based private equity companies, there are also European players in the market such as capiton who backs Schur Flexibles in the acquisition of companies like AlfaBetaRoto. A bit overlooked from the Western markets are the activities from Japanese converters such as Dai Nippon, Toppan Printing, and Rengo who mostly acquires companies in the domestic market. Most recently Rengo has been very active in South East Asia.
Following gives an overview on recent activities in the market, although it is not intended to be chronological or exhaustive.
In 2009 Amcor made a big leap forward by acquiring Alcan Packaging. This brought them approx USD 4 billion in sales, more than 10,000 employees and numerous plants worldwide.
With the acquisition of blown film extruder and flexo printer Polythene Industries Amcor has now ten flexible packaging plants in China. Prior to that, they acquired the flexible packaging operations of Juangsu Shenda, as well as Zhongshan Tian Cai Packaging.
Another acquisition in Asia was Bella Prima Packaging from Indonesia, and of Packaging India Private Limited from Essel Propack in India. Before this they have acquired Uniglobe and a plant from Tuflex, both are in India.
In North America, Amcor purchased California based Deluxe Packages.
In order to increase their footstep in the growing African market, they took over Nampak Flexibles, who has been the market leader in Southern Africa. According to the company reports, above move made Amcor Flexibles the leading player in the African market. Amcor employs almost 29,000 people worldwide and has operations across over 43 countries. The company has approxmately 10% of the global market share.
Most recently they have invested in South Americas largest flexible packaging converting group called Alusa. This group has sites in Argentina, Chile, Colombia and Peru.
The Australian giants acquires not only on a global scale, but also in a local market. This shows the purchase of Australia based Detmold Flexibles, and of Aperio.
It is safe to say that there is barely a market and region untapped by the worlds largest packaging producer.
Being No. 1 player in US market since long time, the company has now followed a strategy to increase its footstep on the European and Asian continent in order to compete with giants like Amcor and Sealed Air. Bemis acquired the Food America‘s operation of Alcan Packaging, which brought them 23 facilities in the USA, Canada, Mexico, Brazil, Argentina and New Zealand. They have also acquired Mayor packaging Enterprises, based in Hong Kong.
Bemis employs 17,500 staff in 60 facilities spread across 11 countries. The company reports net sales of USD 4.1 billion.
Europe's second largest flexible packaging group has acquired the leading Mexican converter Globalpack, a company with annual sales of USD 180 million and approximately 1500 employees. Further they purchased India based Parikh Packaging. The Austria based company problably is next to Amcor, whose biggest focus is on growing through acquisitions. In 2013 Constantia Flexibles alone acquired companies with sales of EUR 350 million and who has 2600 employees. Constantia acqiured majority shares in Asas, Turkey's third largest flexible packaging supplier.
Constantia Flexibles has more than 10,000 employees in over 50 group companies in 20 countries. It serves over 3000 customers worldwide.
In 2014, One Equity Partners sold their stakes of Constantia Flexibles to Wendel Group. Last year South African based flexible packaging producer Afripack has been acquired. The manufacturer also has plants in Kenya and Mauritius. African continent is presently one of the fastest growing markets for flexible packaging, thus it has become an important target for packaging groups with a global presence.
Coveris has acquired Elldex Packaging Solutions, a New zealand based flexible packaging company. This move allowed them to expand globally especially in Australia. They also acquired Learoyd packaging from the UK.
Coveris revenue is approx USD 2.8 billion and has 64 plants across North America, Europe, the Middle East and China.
This group has acquired Pure-Stat Technologies, an American laminate manufacturer. They have expanded in the growing Central and East European market by taking over Czech Republic based company called Fiomo. Most notably they acquired Positive Packaging which has nine production plants in India, Africa and UAE.
Huhtamaki has a network of 69 manufacturing plants in 34 countries, and employs around 16,700 staff and reports net sales of EUR 2.2 billion.
The paper and board producer entered into the flexible plastic packaging market with the acquisition of Nordenia in 2012. Two extrusion coating plants were added after purchasing them from Walki. The company acquired Ascania, a nonwoven manufacturer from Germany. This year Mondi increased its presence in Asian market by acquiring the Korean company KSP, which also has plans to build a plant in Thailand. Mondi stated that their plan is to build on consumer packaging as one of the leading solution provider in core applications of personal care, food, pet food, and industrial needs.
Mondi employs more than 25,000 people across more than 30 countries. Mondi reports revenues of EUR 6.8 billion.
At the end of last year, New York based private equity company Wellspring Capital Management announced that its portfolio company ProAmpac has completed the acquisition of Coating Excellence International. Previously ProAmpac had been formed by Wellspring through merger of Prolamina Corporation and Ampac Packaging. In 2011 Ampac added Elag Verpackungen to Floeter Flexible Packaging Group who they acquired years before.
ProAmpac has over 2000 employees and 16 manufacturing centres in North America, Europe and Asia.
Except for some press releases about acquisitions of equipment suppliers, there is not much information about acquisitions by Sealed Air.
Sealed Air has approximately 25,000 employees and generates a revenue of USD 7.7 billion.
A Canadian company has entered into the flexible packaging market by purchasing Capri Packaging, based in Missour. Company has also acquired Ultra Flex Packaging who employs almost 300 people.
Transcontinental has over 9000 employees in Canada and United States, and generated revenue of CAD 2.1 billion.
The Indian packaging giant has had an eye on flexible packaging converters in North America and Europe for a while. Currently they spend a significant amount in opening new plants all over the world, also there are reports about planned acquisitions in the near future. Uflex seems to be under pressure at their home market since India had become a very intersting markt for foreign investment (i.e. Amcor, Huhtamaki, and Constantia). According to many experts, the food packaging revolution in India is only beginnging, and will outgrow China very soon.
Sonoco has acquired two-thirds of Graffo Paranaense de Embalagens, a Brazilian company.
A Spanish packaging group called Emsur bought New York based Ultrapak. German producer Südpack took over the Polish company Bahpol. Schur Flexibles bought Flexofol, Vacufol, and KHW Plast.
Consolidation of the once highly fragmented flexible packaging market has always been ecouraged by the global fast moving consumer goods brands who have an understandable interest to reduce the number of their suppliers. Private equity is also into this because of its own interests in the industry which is prospering at a faster pace. When looking at the bigger picture, consolidation brings many advantages to the market such as more investments in technology as well as research & development which at the end of the day may benefit the whole industry. At times where some banks shy away from some investments, the increasing interest of the private equity becomes very handy.
What is your opinion? Is private equity investment a dance with the devil or the only way to go for the flexible packaging industry? Contact me at firstname.lastname@example.org and feel free to share your thoughts & experiences.