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US caps and closures market in growth phase

07-Jun-2005

The US caps and closures market is forecast to grow to $676m (€551m) in 2011 from revenues of $598m (€488m) in 2004 with consumer preference forcing the industry to switch to plastic from metal and glass, according to projections by a market research group.

"The caps and closures market is in the growth phase and proactive steps to achieve operational excellence and new product developments are likely to help suppliers takeadvantage of dynamic market trends," said Frost & Sullivan in a new report.

The firm found that the caps and closures market remains diverse and fragmented, made up of manufacturers producing a range packaging and closure materials and providing to a wide range ofmarket segments. Changing buyer and consumer needs has resulted in suppliers' having to constantly improve their products.

"The changing consumer demands as far as dispensing of products is concerned, will increase the requirement for more complex and high end closures in the future,"concludes research analyst Ravi Sankar. "Already, the beverage industry, which accounts for close to 40 percent of the demand for caps and closures, is exhibiting a marked preference for plasticcontainers over metal and glass ones."

Most packaging producers have been able to pass on increases in the cost of raw materials to their clients. Increases in energy expenses have to be borne by the suppliers and hassqueezed their profit margins.

Due to the sheer number of product introductions and line extensions, packaging has become a critical component of branding, merchandising and product promotion. In response packaging companies are collaborating with buyers and investing in research anddevelopment to improve package design.

Meanwhile as the US retail market becomes saturated, consumer companies are expanding their operations globally. As a result buyers of caps and enclosures are consolidating theirvendor base to maintain product and supplier consistency worldwide.

"However, while acquiring capabilities to supply their clients on a global scale, small and medium-sized vendors might find it difficult to improve productioninfrastructure and reduce supply prices, making them strong targets for takeover by bigger participants," the firm said.

As a result, supply consistency in terms of timeliness, quantity, and quality is a major competitive factor in the US plastic caps and closures market, the firm said.

"The supply of certain types of packaging materials such as continuous thread and tamper evident type of closures has become commoditized," the firm said. "Standardizationin product features has meant minimal product differentiation and pricing has thus become a key determinant of supply contracts. In addition, rising raw material and energy costs has affectedmanufacturing expenses and supplier margins."