Raw packaging materials continue price rise

by Pan Demetrakakes
Executive Editor

As the prices of petroleum and other raw materials used in packaging continue to rise, suppliers to packaging converters are beginning to pass along price hikes—a move that could lead to high prices down the line.

Recent major supplier material hikes include:

• Dow Chemical raised polyethylene (PE) prices 5 cents a pound in June and scheduled another 7-cent hike for July.

• Flint Group North America announced surcharges of 6 cents per pound to water-based inks and coatings, and 10 cents for solvent, energy curable and paste products. It also is instituting price increases ranging from 4% to 7% for all its inks and coatings.

• Sun Chemical is putting a 10-cent-per-pound surcharge on all solvent-based packaging inks, and 6 cents for water-based inks.

• Sonoco Products Co. will add a $40 per ton average surcharge for uncoated recycled paperboard products in the U.S. and Canada because of higher energy costs, effective Monday.

The spike in plastic resin prices is the cap on a long-term trend. According to BMO Research, five-year price hikes for major resins ranged from about 12% for polyethylene terephthalate (PET) to a whopping 70% for polypropylene (PP).

Corrugated is feeling the pinch, too. According to a recent survey of corrugated container producers nationwide by investment research firm Longbow Research, all eight major North American containerboard producers, representing about 76% of North American containerboard industry capacity, announced a containerboard price hike of $55 per ton, effective July 1. The report noted that although a similar price initiative in March failed, stronger demand this summer would make this one stick, according to a majority of container producers. In the wake of those price hikes, International Paper and Smurfit-Stone Container have both announced plans to raise prices for corrugated containers.

It’s questionable whether converters of flexible and rigid plastic packaging will be able to pass along their material price hikes so readily, at least in the short term. Because the plastics converting industry is much less concentrated than its fiber counterpart, end users can always look for a lower-priced alternative. But if oil and energy prices continue to remain at record highs, eventually end users will have to assume their share of the burden.

TOP DEVELOPMENTS

Organic products grow faster than natural
Retail sales for health and wellness-oriented consumer packaged goods in the U.S. reached $102.75 billion, according to the Natural Marketing Institute. While functional/fortified foods make up almost one-third of all industry sales, organic foods/beverages grew 25% over 2006, while natural foods/beverages grew only 4%.

FDA declares HFCS ‘natural’
The Food and Drug Administration (FDA) told the Corn Refiners Association that it will not object to the use of the term “natural” on products containing high fructose corn syrup. The FDA accepted the industry’s reasoning that HFCS does not contain color additives or artificial or synthetic ingredients.

Frozen novelties’ sales growth outpaces ice cream
Frozen novelties are seeing stronger growth than regular ice cream, according to a Mintel report. Ice cream sales in 2007 were 3.9% behind sales from 2002, while frozen novelties grew 7.2% between in that period. At the same time, ice cream accounted for nearly 60% of 2007 sales for frozen desserts in general, while frozen novelties made up 36%.

NEW PACKAGES

Ritz box dispenses wrapped stacks
Kraft Foods has come out with new packaging for Ritz crackers that allow single-serve packs to be dispensed from a standup paperboard container. The Grab ‘n Go Dispenser holds eight film-wrapped packets of crackers, trade-named Fresh Stacks, with about 15 crackers per stack. Consumers stand the carton on end vertically and tear out the scored bottom of the front panel, creating an opening through which the stacks can be extracted, in the manner of a refrigerator dispenser for soda cans. A carton of Ritz Fresh Stacks retails for a suggested $3.79.

Dibs available in single-serve bags
Dibs, the bite-size candy-coated ice cream novelty from the Dreyer’s unit of Nestlé, now comes in single-serve, easy-open pouches. The Snack Bag, containing 2 ounces, comes 10 to a paperboard carton. Available in vanilla and Nestlé Crunch flavors, the carton goes for a suggested $4.99 to $5.99. That works out to 25 to 30 cents an ounce, which is actually cheaper on a per-ounce basis than the existing 9-ounce carton for $3.99 (44 cents per ounce).