In 2022 shipments of packaging machinery posted a growth rate of around 12.4% on a year-on-year basis to reach $10.2bn: a continuation of the ‘red hot’ demand seen the year before when shipment growth peaked at 15.8%.
That's according to PMMI’s 2023 ‘State of the Industry’ US Packaging Machinery Report: released as part of Pack Expo Las Vegas earlier this month.
That growth is on the back of the pandemic: disruption from 2020 still continues to affect the market with a backlog of orders as well as a continued strained supply chain. But growth is expected to slow moving forward.
“Backlogs for machine builders had been exceptionally strong since 2020,” says the report. “High demand coupled with production-delaying supply chain constraints pushed backlogs to record levels during 2021 and 2022. Backlogs continued to fuel growth in Q1 of 2023; however, they are expected to decrease as we move through the back half of the year.
“Economic uncertainty and a high interest rate environment has led to conservative spending behavior by many end-users. While projects have not largely been canceled, they are being delayed while the market is in a ‘wait and see’ mentality. This is slowing the growth of shipments in 2023 to a lower, yet healthy, 3.4% for the year.”
From beverages to cosmetics: Different levels of optimism and caution
Against this backdrop, there's a lot of caution against investing heavily at the moment - some sectors are behaving more conservatively than others.
The food industry - which accounted for 43% of packaging machinery shipments in 2022, according to the report – offers few instances of large planned expansions announced so far in 2023 (Tyson’s $1.3bn investment being one of the most notable).
“We believe food manufacturers are in a holding pattern given the current economic uncertainty, which is likely to dampen market growth during 2023 and 2024,” says the report.
The beverage sector – accounting for 15% of investments in 2022 - showed a higher number of planned investments compared to food. “However, the scale of investment was lower than other sectors: growth for this sector is still only moderate over our forecast period.”
The story is similar in the personal care, toiletries and cosmetics industry: which accounted for 5% of the market in 2022. “Like the food sector, investments by manufacturers active in the personal care, toiletries and cosmetics sector has been slow in 2023. The cosmetics portion of this sector, in particular, is struggling. Very little investment activity is present among major cosmetics suppliers in the US... Resultingly, sector growth was sluggish in 2023, underperforming compared to the rest of the market.
“There are bright spots, however. Unilever, manufacturer of Dove products, announced a $400mn investment into nearshoring its production to Mexico during 2023. This signals portions of the market are still investing despite the economic uncertainty present.”
The bright spot in the forecast is for the pharmaceutical industry: a sector making up around 11% of the market.
“The pharmaceutical sector has announced the highest levels of production expansion investments during 2023. A large portion of the biggest pharmaceutical manufacturers have announced capacity expansion in the billions, with the majority of investment going towards expanding capacity in North Carolina. This has pushed our forecasted growth of packaging machine shipments to the pharmaceutical sector up for 2023 and 2024 when compared to others.”
Opportunities and challenges in 2023 and beyond
So what are the strongest areas for packaging machine manufacturers moving forward - and where are the biggest challenges likely to come from?
Rather than being defined by sector, these are determined by 2023 macro trends - which again, are still being impacted by the pandemic hit.
For example, availability of qualified service technicians is ‘one of the toughest challenges facing machine builders’, says the report.
“This is not unique to packaging machinery manufacturers and is in fact present across much of manufacturing. COVID-19 related workforce trends exacerbated the problem, with many service technicians leaving in favor of a more flexible work-life balance.
“Many suppliers are having to re-think strategies regarding hiring and retaining labor. Additionally, many suppliers are leaning on technology like predictive maintenance to help bridge the skill gap. The most successful machine suppliers are adequately supporting programs aimed at attracting, hiring, training and retaining labor while also investing in new technologies which help mitigate labor-related risks to the business.”
For sectors such as cosmetics, smaller packaged snack foods and beverages, a large opportunity for the packaging machinery market continues to come from e-commerce: which boomed during the pandemic and has largely continued on the same trajectory.
“Within the e-commerce landscape, there is a trend toward multi-client order fulfillment centers. This landscape will represent a large growth opportunity for packaging machine builders. Within multi-client order fulfillment, often the first investment in automation goes toward automating the packaging of orders. The throughput requirement and complexity of what is being packaged make a perfect use case for automated packaging machines. Project revenues associated with multi-client order fulfillment are expected to nearly double between 2022 and 2027.”
Demand for sustainable packaging (such as formats using environmentally friendly material or less material altogether) continues to influence machine design - and is expected to continue to do so moving forward.
But for the machine builder, this increases the complexity of machine design and adds additional challenges.
“Firstly, the machine will need to be able to handle more delicate items. Secondly, the machine needs to be adaptive to the changes which will inevitably take place over its lifetime. This need for flexibility has led to an increased level of automation being placed in the auxiliary functions of the machine, like the end-effectors manipulating what is being packaged.”
Another trend that has been encroaching for some time is the growth in use of robotics.
"Robotic systems are growing particularly strong in end-of-line applications. Robotic palletizers, for example, are being used in place of manual labor for lower throughput operations. High throughput operations, like those found in the beverage sector, still often require the capabilities of a conventional palletizer. However, robotic palletizer sales have been growing steadily above conventional due to their broad applicability and low price point.”
The report, released at Pack Expo Las Vegas (Sept 11-13) can be found in full here.