Editor’s Note: Well, it’s been both a busy and relaxing month (hence my lack of posts in the past 30 days). Now that the 2011 Quarter 3 issue of Converting Quarterly is in the mail (and online), and I’ve returned from an 11-day holiday in Hawaii, look for more frequent posts ahead.
The latest issue of The Converter from BMO Capital Markets analyzes the difference in geographic sales between each sector of the packaging industry for 28 companies in North America and 25 companies in Europe. Among some of the interesting stats:
2010 Sales Outside Home Region by Sector – Compared to Europe, North America has a higher percentage of packaging companies with a meaningful amount of sales outside their home regions. Similarly, when compared to paperboard, the flexibles sector has a higher percentage of companies with a significant amount of sales outside the home region.
- In North America, flexible-packaging converters have the most geographic diversity, with 40% of companies generating over half their sales from foreign regions.
- Paperboard companies have the lowest geographic diversity, both in North America and Europe. Approximately 44% and 75% of North American and European companies, respectively, have under 10% of sales outside their home regions.
- Flex-pack makers had the largest variance in geographic sales between North America and Europe, with 40% of N.A. companies generating in excess of half their sales outside the home region compared to zero European companies.
2007 vs. 2010 Sales Outside Home Region – The vast majority of packaging companies generate a majority of their sales in their home region. Over the last three years, both North American and European packaging companies have continued to primarily focus on the their local markets, and there has been only modest change in geographic-sales diversity.
Median Sales CAGR by Region – For both N.A. and Euro packaging companies, sales into the “Rest of World” region have been the biggest driver of growth over the last three years.
- The median three-year growth CAGR was 1.4% for the universe of North American packaging companies and 2.3% for the European universe studied.
- For North American companies, sales into the “Rest of World” region had the highest median growth CAGR, at 5.5%. Sales into North America generated a median CAGR of 1.2%.
- Median sales CAGR of North American packaging converters decreased on sales only into Europe—where it declined 2.4%.
- For European companies, sales increased into each geographic market. Euro sales into the “Rest of World” region had the highest median growth CAGR at 6.5%, followed by sales into North America, with a median CAGR of 0.7%, and sales into Europe, with a median CAGR of 0.5%.
My Thoughts: On one point, I suppose it’s not surprising that the makers of paperboard and flexibles should have more opps to sell outside their home regions. You can ship a lot more finished goods more economically than the makers of rigid containers, such as glass bottles or metal cans; and it’s a lot less expensive to start up a flex-pack plant overseas than a glass-making factory. On another point, the last three years (aka: most of The Great Recession) has certainly had the majority of manufacturers shifting their mindset closer to home than abroad. Hence, not so much global diversity since 2007. And on a final point, while N.A. and Europe were dealing with the aforementioned downturn, where are you going to sell more? The “Rest of World” region, where growth has in some cases been largely unaffected, i.e. South America, India, China, etc.