Flexible packaging appeals to FMCG sector

  GOVERNMENT initiatives to enhance the demand for processed foods and therefore, packaging, and an increasing expatriate population could mean that the emerging market for flexible packaging in the Gulf Cooperation Council market will do better than expected, says new analysis from Frost and Sullivan (chemicals.frost.com).
The report, "GCC Flexible Packaging Markets", finds that the need in GCC for best-in-class packaging solutions and replacement of rigid packaging with flexible packaging could see the market units steadily rise from 273.2 kilo tonnes (KT) in 2009 to 480.95 KT in 2016. In terms of revenues, this translates to $0.68 bn in 2009 and this to reach $1.20 bn in 2016 at a compound annual growth rate (CAGR) of 8.5%, it was estimated.
  "The food industry is growing at 18 to 20 per cent annually in KSA, and pre-packaged food constitutes 50% of the industry," the report noted. "There has been a shift in attitude amongst the local population, especially the urbanites, who are willing to spend on processed and packaged food."
Like most other regions, the GCC is rebounding from the economic downturn and segments such as retail and consumer goods are on the upswing, creating opportunities for the flexible packaging market.
Flexible packaging scores over rigid packaging on several fronts including long-shelf life, barrier properties and aroma retention capabilities, which are essential for packaging moisture-sensitive products. Flexible packaging also offers rigid packaging's benefits of stand-up pouches and re-closable packs, which provide merchandising and marketing advantages to fast moving consumer goods (FMCG) manufacturers.
"The traditional benefits of rigid packaging can be realised from flexible packaging with the added advantages of lower cost and greater flexibility," the report observed. "Consequently, plastics is estimated to account for 70% of the packaging across the GCC states, against the world figure of 50%."
Despite the potential for this dynamic market, it is held back by the lack of awareness about the flexible packaging solutions. There is also severe pricing pressure from film manufacturers, which is constantly eroding packaging manufacturers' margins. Therefore, small converters operating in the GCC have started procuring the raw materials from countries such as India and China, due to the ease of procurement and increased credit period. To stave off this challenge from foreign countries, local manufacturers should start providing converters with a credit period as opposed to the current zero credit period terms.
"To further distinguish themselves in this intensely competitive market, manufacturers have to demonstrate superior quality and back it up with enhanced customer relationship management," the report noted. "With rising commercial and consumer interest in this market through 2015, it is important to strategically position products to create brand loyalty and retain customers."