Supplier Analysis | Rigid plastic sector looks up

How was trading in 2023 – did you hit forecasts? What is your company forecast for 2024?
Vincent Gass, Klöckner Pentaplast (KP): While challenging, 2023 was a good year for KP. We met our forecasts, growing volume and profitability, and we continued to generate strong traction in our core sectors with innovations, such as KP Elite and KP Infinity. We intend to build on this during 2024, increasing our global footprint and product portfolio.
Daniel Coates, LVF Packaging: Trading was good. We hit our forecast for the year and have a similar forecast in place for 2024.
Jonathan Powell, Spectra Packaging: We experienced a challenging market in 2023, with lower consumer confidence and reduced spending in conventional areas. A number of our customers experienced contractions within their businesses, however, we witnessed growth via alternative markets that aligned with some of our sustainable initiatives.
Jean-Marc Galvez, Berry: During 2023, our organisation took actions and demonstrated agility to offset challenging and volatile global market dynamics characterized by ongoing inflation, soft consumer demand and customer destocking. Our proven business model has generated eleven consecutive years of adjusted earnings per share growth and strong, consistent generation of free cash flow. We are optimistic about our future and expect a more normal operating environment in fiscal 2024. We believe that, both the easing of inflationary pressures on consumers and the increase of promotional activity by our customers will lead to demand improvement as the year progresses.
Richard Drayson, Aegg Packaging: Trading on plastic packaging was at a similar level to the previous year. This was in line with our company forecasts. Last year saw significant fluctuations in the costs of polymer, transport and energy costs. Glass sales were trading ahead year on year. This year volume on our plastic packaging is forecast to be slightly up on 2023 as we continue to develop our customer base and logistics service. The glass arm of our business continues to grow strongly.

Did you invest in capital expenditure, new staff, expansion last year? What are the investment plans for 2024?
Vincent Gass: We invest where the market is growing, including ambitious plans in North America where we are building a state-of-the-art plant, customised to US market needs. For 2024, we will also be investing in infrastructure to use more post-consumer recycled (PCR) material in our food packaging products, improving on our excellent 40% benchmark in 2023.
Daniel Coates: We invested heavily in 2023 – both in solar energy generation, which now produces most of the electricity we need to operate on a 24/5 basis, and in upgrading facilities for staff. We don’t have investment plans for the rest of 2024, but you can never say never.
Jonathan Powell: Spectra has invested year-on-year since we started in 2008, including recruitment across all facets of the business to capacity expansion, the latest technology and machinery and energy efficiency measures. Our robust investment program will continue into 2024 and beyond, albeit with a heightened focus on automation within our manufacturing processes.
Jean-Marc Galvez: We invest 4-5% of our revenue to support our customers’ growth, particularly where both our customers and investors will realise the return on the investment. In 2023, we started two new large green-fields – A 50,000 MT mechanical recycling plant at Leamington Spa, UK for FDA consumer packaging applications and a global healthcare facility at Sira, India to serve OTC and Inhalation global markets, both of which align with this investment strategy. In 2024, we will continue to invest in circular innovations, available now as stock solutions, such as beverage attached closures, reusable solutions or all plastic recyclable dispensing beauty products. We will also invest in tooling and recycling.
Richard Drayson: We launched our new in-house plastics packaging manufacturing division in Eye, Suffolk in 2023 to complement our Bulgarian operations and third-party manufacturing partnership in Ireland. This led to the recruitment of additional production staff and increase in our operating hours to accommodate the additional in-house capabilities. In addition, we invested in new lorries and electric forklift trucks, as part of our in-house logistics and warehousing service supporting both the plastic and glass divisions. We will continue to invest in all areas of the business to ensure we are supplying our customers with the packaging they need to show off their excellent products whilst keeping them safe for consumption. We continue to develop our hub infrastructure at Eye, Suffolk, which contains our administrative, manufacturing, warehousing and logistics facilities. Eye will benefit from a new warehouse management system and technical laboratory.

What are the main challenges that you are facing? Operational/energy costs? Materials costs and supply chains? Staffing?
Vincent Gass: Like many other packaging businesses around the globe, we face a combination of these challenges. Business costs across the board, including material and operational costs, are rising. It’s vital that as we look ahead to the industry’s future, we address this pressure, including boosting the availability and access of PCR, which is predominantly diverted to the bottle market.
Daniel Coates: Like just about every other manufacturer in the country right now, I’d say all of the above. The cost of living crisis has had a knock-on effect and created a manufacturing crisis, characterised by rising energy prices, wages and the myriad of other rapidly rising costs. I do have to say though, I couldn’t be more pleased with our staff during this difficult period – they’ve been fantastic.
Jonathan Powell: Rising costs continue to be a significant factor, and whilst we welcome the improvements in minimum wage rates, those increases present challenges of their own. Additionally, the continued domestic and international political instability continues to contribute to supply chain difficulties and energy prices, both of which exacerbate consumer confidence.
Jean-Marc Galvez: Ongoing inflation and soft consumer demand remain the main challenges we face. We continue to take actions to reduce our costs and to innovate to support our customers growth.
Richard Drayson: Due to an industry-wide shortage, obtaining food grade recycled PP to incorporate in our pots thereby making them Plastic Packaging Tax-exempt can be a challenge. However, we work with customers to provide alternative solutions, such as right-weighting or using rPET. We recruit when necessary and typically find excellent local people to fill any vacancies.

Describe sustainability demands you have to work towards – and also other demands such as pack formats and usability etc.
Vincent Gass: Although demand for PCR is rising, we’re seeing a more cost-sensitive market and lack of harmonisation in EU regulations, such as the PPWR, complicates efforts to meet local market needs efficiently. Despite challenges, we are providing scalable solutions tailored to each geography such as the UK’s XPS packaging ban, supporting customers’ sustainability goals while navigating regulatory variations.
Daniel Coates: As with all other thermoformers, we’re working in an environment where there’s a huge drive for recyclability and increased recycled content. As you’d expect, we’re thoroughly investigating other types of material and pack formats, but there does seem to be some discrepancy between what retailers want and what consumers are happy to pay for. For example, there are paper and card alternatives hitting the market, but these cost more to manufacture, which in turn leads to them costing more to buy. And due to the cost of living crisis, it does mean they aren’t taking off in quite the way you would’ve expected them to.
Jonathan Powell: Spectra has always championed sustainable packaging solutions because it is a core value to us. For example, our forward-thinking mandatory PCR initiatives pre-date the UK’s plastic packaging tax, and our work with our customers already exceeds those requirements. We’re proud of the fact that we go beyond what is required. This has been illustrated with the launch of our recycled standard PP closures at the beginning of the year, courtesy of a long-term Prevented Ocean Plastic commitment, which now sees recycled content included in all our products as standard.
Jean-Marc Galvez: To support our customers journey to achieving their sustainability goals and as part of our Berry Impact 2025 commitment, Berry Consumer Packaging International is committing to the following actions in 2024 to eliminate non-recyclable products from our portfolio: Remove black carbon based masterbatches from our packaging replacing with detectable, recyclable alternatives where required; Replace coloured PET bottles and jars with easier to recycle transparent or light-coloured bottles and jars; Replace metal handles with recyclable plastic handles on industrial pails. Our fully recyclable alternatives are available across our full product range. We trust these product upgrades towards circularity will continue to create sustainable value for our customers.
Richard Drayson: The Plastic Packaging Tax is a scheme aimed at reducing plastic waste. Therefore, there is a desire to incorporate a minimum of 30% rPP into our pots to make them PPT-exempt whilst at the same time safe weighting the pots to avoid use of excess plastic whilst still remaining fit for purpose.

What are you views on continued EPR reform delays? Do you feel the packaging industry is taking timely action to prepare for EPR changes/reporting?
Vincent Gass: While the extra year delays in EPR reform may be frustrating for many businesses, it presents an opportunity for greater clarity and focus. Ultimately, this delay could yield more informed and effective strategies for the packaging industry, and will underscore the industry’s innovative and creative spirit, driving towards sustainable solutions that benefit both businesses and the environment in the long term.
Daniel Coates: I don’t think any of us are surprised in the delays to the reforms; it’s a very complicated issue with many stakeholders. As with everything though, manufacturers need some clarity to help us to forward plan. The PPT is a great idea and I think it should go further to provide more impetus to the recycling of PET – particularly PET food trays which aren’t recycled anywhere near enough.
Jonathan Powell: We believe delays are hindering progress towards more sustainable and responsible packaging practices. Like many within the packaging industry, we recognise the importance of EPR changes in shifting towards a circular economy and reducing environmental impact.
Jean-Marc Galvez: The reform will create a strong incentive to increase recyclability. We are well positioned to offer recyclable packaging with our leading access to and investments in recycled and circular plastics. We are supportive of any regulation that is science based to support the net zero economy. The packaging industry will continue to be part of the solution and with our global scale and deep expertise in legislation and plastic manufacturing operations, we will strive to be prepared for the coming changes.
Richard Drayson: The delay offers the industry more time to prepare for the changes whilst working with local government and supply chains. This could potentially result in a smoother transition to the EPR model and help to mitigate any potential inflationary pressure. The downside is the period of uncertainty that is disruptive to long-term planning within the packaging industry.

As it becomes more apparent that there’s no ready-made (or nearly made) alternative to plastic, are attitudes towards it changing as the packaging material of choice?
Vincent Gass: We’re seeing an important shift in public attitude. Consumers are realising that plastic is not a simple issue. Cartonboard cannot solve all the challenges we’re facing, is often not suitable for a range of applications and often weaker in terms of product preservation and shelf life. Shoppers today are seeking convenience and simplicity of recycling which plastics offer.
Daniel Coates: I suppose that depends on whose attitudes you’re asking about. The retailers want the lowest prices possible while also wanting to show that they’re doing their bit to be ‘green’. But what’s deemed ‘green’ by consumers does seem to be based on those with the loudest voices and not the sturdiest of facts – all of which do still point towards plastic being the best available packaging solutions; at least when looked at alongside a responsible and joined up approach to recycling. There are instances where plastic can be replaced easily, most notably when it comes to single use plastics, and in these cases this does seem to have happened or is the process of happening. But other areas are proving far more challenging. As a manufacturer, we need to be across everything currently on the table, so that we can respond positively to wildly differing requests from different retail customers.
Jonathan Powell: We find this kind of narrative unhelpful because plastics are often the most appropriate material for packaging applications. We have always felt it is important to change society’s perception of the value of plastics. This shift will only be achieved through broader education, consumer behaviour, a change in the government response, and leadership from brands and manufacturers. This is something Spectra feels deeply passionate about. It’s why we launched our ‘Better Choices’ approach at the start of the year, which focuses on suitable material selection, making science-based choices and seeking proactive supplier partnerships. We believe these three pillars are fundamental to achieving responsible packaging outcomes.
Jean-Marc Galvez: Yes. Science, data, and analysis – such as Life Cycle Assessments associated with each of our customers’ packages and company-wise goals – is changing the perception and potential of the plastics substrate in a net-zero economy. We believe, and our publicly stated forecasted demand trends will reinforce, that plastics will continue to be a material of choice to advance a circular, net zero economy. Plastic packaging can have a lower overall environmental impact than other substrate alternatives such as paper, glass or metal.
Richard Drayson: Customers are rightly focussed on balancing sustainability with costs. As some plastic materials with recycled content are in short supply (rPP), we work with customers to create alternative solutions by rationalising the weight and product sizes which allows us to optimise the packaging. These include offering smaller pot sizes with less material used, or creating right weighted pots, reducing the weight and therefore both cost and tax liability of the packaging, without affecting the functionality of the pots.