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Packaging Industry TrendsDavid Scheible, Chairman and CEO of Graphic Packaging International, Inc.David Scheible, Chairman and CEO of Graphic Packaging International, Inc.
This information is confidential and proprietary to Graphic Packaging International, Inc.Any reproduction or distribution to any third party is prohibited©2015 Graphic Packaging International, Inc.
Global Facts about GPK
$4 4b$4.4bnSales in 2015(NYSE: GPK)(NYSE: GPK)
13,000employees
This information is confidential and proprietary to Graphic Packaging International, Inc.Any reproduction or distribution to any third party is prohibited©2014 Graphic Packaging International, Inc.
Vertically integrated business drives cash flow
Achieve sustainability from the mill to the consumer.
• Packaging designed with consumer in focus• Packaging that improve consumer experience• Packaging that runs efficiently in our customers facilities
Packaging Solutions
• Packaging that runs efficiently in our customers facilities• Packaging incorporating unique board properties• Packaging designed and sourced sustainably
A “Global” & Integrated
Packaging Machinery
A Global & Integrated Supply Chain to Our Customers
Fibre Supply Paper Production Global Innovation
Carton Converting
This information is confidential and proprietary to Graphic Packaging International, Inc.Any reproduction or distribution to any third party is prohibited©2014 Graphic Packaging International, Inc.
©2014 Graphic Packaging International, Inc.This information is confidential and proprietary to Graphic Packaging International, Inc.
Any reproduction or distribution to any third party is prohibited
Global expansion based on a proven strategic model
U.S. and Canada43 Locations
Central & South America 4 Locations
Europe11 Locations
Pac Rim3 Locations
This information is confidential and proprietary to Graphic Packaging International, Inc.Any reproduction or distribution to any third party is prohibited©2014 Graphic Packaging International, Inc.
©2014 Graphic Packaging International, Inc.This information is confidential and proprietary to Graphic Packaging International, Inc.
Any reproduction or distribution to any third party is prohibited
European key facts
Verticallyyintegrated
Convenience•Food•Retail•Food to go
Consumer Products •Branded Food•Household & Personal Care•Non-Food•Confectionery & Spirits•Pet Food
Beverage•Beverage Multipack Cartons•Packaging Machinery Systems
•Microwave Technology
This information is confidential and proprietary to Graphic Packaging International, Inc.Any reproduction or distribution to any third party is prohibited©2014 Graphic Packaging International, Inc.
©2014 Graphic Packaging International, Inc.This information is confidential and proprietary to Graphic Packaging International, Inc.
Any reproduction or distribution to any third party is prohibited
The global economy is recovering unevenly.
Developed economies are leading the …while developing economies Developed economies are leading the Global GDP growth…
…while developing economies have slowed.
This information is confidential and proprietary to Graphic Packaging International, Inc.Any reproduction or distribution to any third party is prohibited©2014 Graphic Packaging International, Inc.
©2014 Graphic Packaging International, Inc.This information is confidential and proprietary to Graphic Packaging International, Inc.
Any reproduction or distribution to any third party is prohibited
Source: IMF, RISI, 2015.
Europe is no exception in this recovery
Estimated Q4 2014
% %
Estimated Q4 2014
-2.9% to - 4.6% (World Bank)
Q0.2%
Estimated Q4 2014
This information is confidential and proprietary to Graphic Packaging International, Inc.Any reproduction or distribution to any third party is prohibited©2014 Graphic Packaging International, Inc.
©2014 Graphic Packaging International, Inc.This information is confidential and proprietary to Graphic Packaging International, Inc.
Any reproduction or distribution to any third party is prohibited
0.7%
The world is aging. By 2050 people aged 65 years old and older will outnumber children under 14 for the first time in human history.
The proportion of people aged 65+ by country in 2015 and 2050
This information is confidential and proprietary to Graphic Packaging International, Inc.Any reproduction or distribution to any third party is prohibited©2014 Graphic Packaging International, Inc.
©2014 Graphic Packaging International, Inc.This information is confidential and proprietary to Graphic Packaging International, Inc.
Any reproduction or distribution to any third party is prohibited
Source: IMF, RISI, 2015.
Changing demographics are driving consumer trends
742.5 millionP l i E i 2013
% of demographic breakdownEurope 2013
People in Europe in 2013
The majority of the population are aged 15-64 however there’s a rise in the %
0-14yrs
15-44yrs
45-64yrs15-64, however there s a rise in the % of 65s living in Europe.
The overall trend of demographic
65+ yrs
g pchange is that of an ageing continent. The region with the largest percentage (27%) is Liguria in Italy.
For total Europe the split between male and female is fairly distributed.
This information is confidential and proprietary to Graphic Packaging International, Inc.Any reproduction or distribution to any third party is prohibited©2014 Graphic Packaging International, Inc.
©2014 Graphic Packaging International, Inc.This information is confidential and proprietary to Graphic Packaging International, Inc.
Any reproduction or distribution to any third party is prohibited
Source: Views of the World, geohive
Global middle class continues to rise, and so will consumer spending.consumer spending.
Middle Class Consumer Spending
• The world’s middle class will swell from 2 billion to almost 5 billion by 2030, with most of that growthwith most of that growth coming from developing countries.
• Global middle-class spending should rise from $21 trillion today to $51 trillion in 2030trillion in 2030.
This information is confidential and proprietary to Graphic Packaging International, Inc.Any reproduction or distribution to any third party is prohibited©2014 Graphic Packaging International, Inc.
©2014 Graphic Packaging International, Inc.This information is confidential and proprietary to Graphic Packaging International, Inc.
Any reproduction or distribution to any third party is prohibited
Source: OECD: The Organization of Economic Co-operation and Development.
Consumer trends are changing faster
Consumer Needs have notConsumer Needs have not changed..
• What they Want: Offer to meet Shopping MissionShopping Mission
• When they Want it: Omni-channel Accessibility
• At the right Price: Value
But the level of expectation isBut the level of expectation is growing and the rate of change is exponential.
This information is confidential and proprietary to Graphic Packaging International, Inc.Any reproduction or distribution to any third party is prohibited©2014 Graphic Packaging International, Inc.
©2014 Graphic Packaging International, Inc.This information is confidential and proprietary to Graphic Packaging International, Inc.
Any reproduction or distribution to any third party is prohibited
The young consumer is different. Snacking and meals on-the-go are a growing part of today’s busy way of lifeon the go are a growing part of today s busy way of life
• Consumers look for products that are a source of protein and grab-and-go eating.
• 80% of grab-and-go consumption happens in the morning or midday.
• There is a blurring between a snack and a meal. Globally, 45% of people admit to snacking instead of eating a meal — 52% for breakfast, 43 % f % f% for lunch, and 40 % for dinner.
• Snacks available in multi-packs or pre-packaged in individual portions fit consumers' need forin individual portions fit consumers need for convenience.
• Regardless of the type of snack, consumers are g yp ,snacking three or more times per day, which represents a 12% increase from 2010 to 2013. And, 60% of consumers are snacking after noon.
This information is confidential and proprietary to Graphic Packaging International, Inc.Any reproduction or distribution to any third party is prohibited©2014 Graphic Packaging International, Inc.
©2014 Graphic Packaging International, Inc.This information is confidential and proprietary to Graphic Packaging International, Inc.
Any reproduction or distribution to any third party is prohibited
New Packaging is reflecting these trends
• Visually appealing
• Award winning
• Reverse print solutions available
• Low migration inks
• User friendly designs
• Retail and food service solutions
This information is confidential and proprietary to Graphic Packaging International, Inc.Any reproduction or distribution to any third party is prohibited©2014 Graphic Packaging International, Inc.
©2014 Graphic Packaging International, Inc.This information is confidential and proprietary to Graphic Packaging International, Inc.
Any reproduction or distribution to any third party is prohibited
Some consumer trends that are increasingly important in Europe
Rise in over 65s
Increase in people living alone
g y p p
65s living alone
• Bigger fonts • Clear instructions • Single portionsClear instructions• Inclusive design • Smaller portions • Easy cooks
Single portions • Reseal and reuse • Reduce food and
packaging waste Multichannel
Growing population
Consumer research
activity population
(9bn people by 2030)
research
• Concerns over• Understand
demands fromConcerns over food shortage
• Sharing features• Longer shelf life
id
demands from consumer
• Adapting to changing lifestyles
d t d
This information is confidential and proprietary to Graphic Packaging International, Inc.Any reproduction or distribution to any third party is prohibited©2014 Graphic Packaging International, Inc.
©2014 Graphic Packaging International, Inc.This information is confidential and proprietary to Graphic Packaging International, Inc.
Any reproduction or distribution to any third party is prohibited
to avoid waste and trends
UK retail shape of chain & growth reflects these changes
Convenience formats have led to more footage being dedicated to higher margin
these changes
dedicated to higher margin, pre-packed product sectors -FTG, Deli and Meal Solutions
O li l ti tOnline sales continue to grow, but without cannibalising store-based sales – a true ‘Omni-channel’ environment is developing
Still much of %MS remains in large formats which arelarge formats, which are moving footage to fresh, counter offers
Product Range Segmentation &Product Range Segmentation & & Tiers – simplification versus proliferation
This information is confidential and proprietary to Graphic Packaging International, Inc.Any reproduction or distribution to any third party is prohibited©2014 Graphic Packaging International, Inc.
©2014 Graphic Packaging International, Inc.This information is confidential and proprietary to Graphic Packaging International, Inc.
Any reproduction or distribution to any third party is prohibited
Shopper Mission & Convenience RetailingInfluenced by leading supermarket operators in
Europe, socio-economic factors continue to support this model.
Driven by global
forecourt operators. Primary
focus remains on food-on food
to-go
Led by a greater demand for immediacy of purchase, this model suits densely populated,
This information is confidential and proprietary to Graphic Packaging International, Inc.Any reproduction or distribution to any third party is prohibited©2014 Graphic Packaging International, Inc.
©2014 Graphic Packaging International, Inc.This information is confidential and proprietary to Graphic Packaging International, Inc.
Any reproduction or distribution to any third party is prohibited
purchase, this model suits densely populated, busy urban areas
Shelf impact is becoming a multichannel world
Manipulate channelThink about how products are visually presented across channels
We need to:Think about how products are visually presented across channels
Disrupt
Engage
Communicate
Convince
In-store Online
This information is confidential and proprietary to Graphic Packaging International, Inc.Any reproduction or distribution to any third party is prohibited©2014 Graphic Packaging International, Inc.
©2014 Graphic Packaging International, Inc.This information is confidential and proprietary to Graphic Packaging International, Inc.
Any reproduction or distribution to any third party is prohibited
These trends are affecting what we drink• Global Beverage Market is
expected to grow at 3.5% CAGR through 2018.
• Declining in developed countries.
• Emerging regions will be the Imports 14%
High End27% growthg g g
accelerators of the industry, but since these are lower priced markets, volume growth is expected to exceed
ImportsCraft Others
14%17%15%
• There was a 15% growth in number of
Beer Volume (mn. liters)
growth is expected to exceed value growth. Premium
10% decline
growth in number of operating breweries in 2013.
• Today almost 3,000
CA
GR
14
-17
Sub Premium12% decline
y ,craft breweries in US
• Craft beer sales
CAGR 10-13
12% decline were over $14 B in 2014
This information is confidential and proprietary to Graphic Packaging International, Inc.Any reproduction or distribution to any third party is prohibited©2014 Graphic Packaging International, Inc.
©2014 Graphic Packaging International, Inc.This information is confidential and proprietary to Graphic Packaging International, Inc.
Any reproduction or distribution to any third party is prohibited
CAGR 10-13
Changing consumer trends are driving global investments and consolidation of the CPGs…
The Food Institute recorded 311 mergers in 2013, roughly the same number as 2012.
I t t $470M
Potential Mega-Brewer
• Investment= ~ $470M• Timing= Q4 2017• 7th Brewery in Mexico
• $500 million over the next several $500 million over the next several years
• It has invested $1.2 billion in Indonesia over the last 25 years.
=+
This information is confidential and proprietary to Graphic Packaging International, Inc.Any reproduction or distribution to any third party is prohibited©2014 Graphic Packaging International, Inc.
©2014 Graphic Packaging International, Inc.This information is confidential and proprietary to Graphic Packaging International, Inc.
Any reproduction or distribution to any third party is prohibited
… which is having an affect on the supply base...North American Folding Carton Market
2001 2015
Graphic Pk
IP8%
G hi
Smurfit Stone
8%
RWD5% IP
7%Pkg40%
Graphic Pkg13%
RKT/
Other30%
Rock-Tenn
MWV7% Other
51%
MWV22%
9%
This information is confidential and proprietary to Graphic Packaging International, Inc.Any reproduction or distribution to any third party is prohibited©2014 Graphic Packaging International, Inc.
©2014 Graphic Packaging International, Inc.This information is confidential and proprietary to Graphic Packaging International, Inc.
Any reproduction or distribution to any third party is prohibited
European carton prospects are positiveThe Global Context
The European carton market accounts
Overall Prospects For Cartons
Over the last 5 years, European demand The European carton market accounts for 16.8% of the global market and will continue to lose share, declining to 15.4% by 2018, as the emergent
t i f th ld ti t
y , pfor cartons declined by -0.3% in volume and -0.1% in value. Volume output is forecast to grow by an average 1.7% p.a.,
ith C t l E i t 3 4%countries of the world continue to develop.
with Central Europe growing at 3.4% p.a., and Western Europe averaging 1.5% p.a.
The Main Opportunities and Challenges
Economic and Business Prospects
Despite a broadly static market, significant growth opportunities exist for carton makers to provide creative
p
Following 18 months of recession, GDP across Europe is forecast to grow at an average 1 8% p a but the recovery inp
solutions for luxury products/premium brands, convenience foods and snacking/”food-to-go” applications, involving shorter and shorter run lengths
average 1.8% p.a., but the recovery in the debt ridden Eurozone is not without its risks.
This information is confidential and proprietary to Graphic Packaging International, Inc.Any reproduction or distribution to any third party is prohibited©2014 Graphic Packaging International, Inc.
©2014 Graphic Packaging International, Inc.This information is confidential and proprietary to Graphic Packaging International, Inc.
Any reproduction or distribution to any third party is prohibited
involving shorter and shorter run lengths.
Source: ECMA - European Carton Prospects Report 2014
Global network of design & innovation
Leeds Design Centre Leeds Design Centre
Bardon Innovation Centre
Bardon Innovation CentreCarol Stream
Innovation CentreCarol Stream
Innovation Centre
Igualada Development Kitchen
Igualada Development KitchenAtlanta Innovation CentreAtlanta Innovation Centre
Denver, ColoradoR&D Centre
Denver, ColoradoR&D Centre
This information is confidential and proprietary to Graphic Packaging International, Inc.Any reproduction or distribution to any third party is prohibited©2014 Graphic Packaging International, Inc.
©2014 Graphic Packaging International, Inc.This information is confidential and proprietary to Graphic Packaging International, Inc.
Any reproduction or distribution to any third party is prohibited
GIC Europe, Bardon UK
Inspire Conceptualisesp e Co cep ua se
Interact Research Innovate
This information is confidential and proprietary to Graphic Packaging International, Inc.Any reproduction or distribution to any third party is prohibited©2014 Graphic Packaging International, Inc.
©2014 Graphic Packaging International, Inc.This information is confidential and proprietary to Graphic Packaging International, Inc.
Any reproduction or distribution to any third party is prohibited
Leads to Award Winning packaging…
UK Packaging Awards 2014Awards 2014 winner: Best New Concept Award
Quesadilla
This information is confidential and proprietary to Graphic Packaging International, Inc.Any reproduction or distribution to any third party is prohibited©2014 Graphic Packaging International, Inc.
©2014 Graphic Packaging International, Inc.This information is confidential and proprietary to Graphic Packaging International, Inc.
Any reproduction or distribution to any third party is prohibited
We are having success with our approach: EBITDA increase, debt reduction, growth in EPS and share price.
EBITDA has increased by 28% Net Debt has decreased by 45%Net debt:
$
increase, debt reduction, growth in EPS and share price.
• 2009: $2.6B
• 2014: $1.8B
Earnings per Share has increased by $0.64 11x share price increase well above peers
Share Price
$14.55
12
16
Share Price
$1.25
0
4
8
This information is confidential and proprietary to Graphic Packaging International, Inc.Any reproduction or distribution to any third party is prohibited©2014 Graphic Packaging International, Inc.
©2014 Graphic Packaging International, Inc.This information is confidential and proprietary to Graphic Packaging International, Inc.
Any reproduction or distribution to any third party is prohibited
2009 2014
A leader is one who knows the way,A leader is one who knows the way, goes the way, and shows the way.
John Maxwell
This information is confidential and proprietary to Graphic Packaging International, Inc.Any reproduction or distribution to any third party is prohibited©2014 Graphic Packaging International, Inc.
©2014 Graphic Packaging International, Inc.This information is confidential and proprietary to Graphic Packaging International, Inc.
Any reproduction or distribution to any third party is prohibited
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