Exploring opportunities in folding carton

The folding carton market can be segmented into two primary classifications, food and non-food items.

• Vertical markets classified under food include: Beverages, cereals/milled grains, confectionary, dairy, dry foods, frozen foods, meat, perishable baked goods, and retail carry out.

• Vertical markets classified under non-food include: Cosmetics and toiletries, hardware and household supplies, converted paper products, pharmaceuticals, recreational and sporting, soap and detergent, tobacco, and miscellaneous.

Influenced by inflation, consumer purchasing adapts

Following a glut of consumer spending, packaging company executives began pointing to consumers pulling back on purchases in 2023—particularly later in the year. Consumers were not just reducing purchases; they were also “trading down” and purchasing more cost-effective pack sizes and store brand products instead of branded or luxury goods.

Sustainability

Sustainability is a key area of focus, due to Environmental, Social, and Governance (ESG) as well as a growing interest from a younger, more environmentally conscious consumer. Clear communication about the recyclability of paper-based products is vital for educating consumers and stakeholders.

A shift from traditional plastics packaging towards paper-based alternatives

In many sectors, there are commitments to ensuring recyclability, using more recycled materials and reducing excessive packaging. For individual cartons, packaging materials must be made to be fully recyclable, and materials cannot be mixed within the same carton with the addition of materials that cannot be recycled.

Supply assurance

Does the packaging buyer have confidence in your organization as the packaging supplier to provide agility and responsiveness in the delivery of innovations in affordable sustainable solutions? Packaging suppliers believe the ability to respond to sudden market changes is also crucial for success in today’s highly competitive and dynamic market. One example is the impact social media is having on consumer behavior. The ability to swiftly launch new products, embrace frequent brand updates, and accommodate changes in brand packaging are integral to business success in an ever-evolving marketplace.

Packaging design and development

Structural design plays a critical role in the packaging value chain. The aesthetic and finished appearance requirements of the package must undergo rigorous testing to ensure the fit for use requirements for the end product can be met through production, distribution, and at the consumer level. New materials and processes pose new challenges to packaging designers, as well as to packaging producers. The challenge from packaging buyers is clear: they desire greater sustainability and less waste in all packaging. Folding carton suppliers are being asked to replace plastic packaging with fiber-based packaging for liquid products, such as shampoos and perfumes. This creates challenges and opportunities for the supplier. The package must meet specific requirements, such as ensuring durability throughout its shelf-life, integrity during transportation, and resilience in the humid environment in which they are often used and stored.

The manufacture and delivery of folding carton has been dominated by traditional folding carton converters for years. That’s not to say they are the only participants. Converters from other packaging segments such as corrugated packaging, flexible packaging, and narrow web labels have found opportunities in folding carton through their existing customer base. Commercial printers have done the same.

Digital printing is a catalyst for creating this opportunity. The business model followed by most packaging converters is built around the delivery of high volume at low cost. As a result, converters have internal thresholds or “sweet spots” relative to target volumes for incoming orders. If the order volume is met, the converter responds. If not, they typically pass on the order unless it’s coming from a current customer whose business they are trying to retain. Research conducted by Keypoint Intelligence first in 2019 (and followed up in 2022) among folding carton converters revealed the following:

• In 2019, the converters interviewed defined short run as being 7,300 cartons or 4,800 sheets (typically B1). This low volume/short run segment represented 15% of annual volume and 25% of annual production jobs.

• In 2022, the same group defined short run as being 5,000 cartons or 4,000 sheets. This low volume/short run segment now represented 25% of volume and 35% of jobs.

• All respondents agreed the low volume/short run segment was, at times, a “necessity” of doing business.

What was surprising is how they dealt with this segment. The following question was asked: “To the extent possible, we try to limit our participation in the short run/low volume segment to requirements leading to larger orders or where required by customers.”

• 51% Strongly agreed

• 33% Strongly disagreed

• 16% were neutral

The reason: productivity impact. Remember, the converter business model is built around the delivery of high volume at low cost. A significant piece of delivering low-cost is through the repetition of orders requiring minimal administrative or organizational support. Many customers requiring/desiring short run/low volume requirements also have high maintenance needs consuming organizational time. Most converters are simply not set up to provide high levels of service to small customers. The 33% of converters that strongly disagreed with the above statement are the exception, as many have put in place the infrastructure to specialize and pursue these requirements. This is also the area of participation for other converters and commercial printers seeking “specialized” participation in packaging, where service is the key attribute rather than product.

Packaging demand is typically generated from the manufacturing sector, folding carton is no different. We began this paper by identifying the key vertical markets driving demand for folding cartons. Figure 2 expands on this topic by demonstrating the consolidated nature of different vertical markets. Keep in mind that we are tracking at the firm level, not the site or producing level. Folding carton converters focus on the volume players, or those appearing in the “Top #” column that typically control over 75% of industry revenue.

Figure 2: Vertical Market Overview

As stated earlier, the top volume buyers are well served and taken care of. The “opportunity” area is for those companies outside the top 75% of volume.

In the US, small businesses are recognized as a key contributor to the health and well being of the US economy. The US classifies businesses by employee size, enterprise, small business, and micro businesses. Figure 3 depicts the firms, establishments, and percentage of employees by classification.

Figure 3: Firms, establishments, and employment by classification

There are approximately 7.6 million establishments in total. Enterprises makes up approximately 17% of total establishments.

Figure 4: Establishments by Sector

The manufacturing sector commands most of the attention as it is responsible for the bulk of folding carton demand. However, it’s not the only demand generator. Hospitality and retail are also significant consumers of folding cartons.

Converting was a traditional barrier to entry into folding cartons. While still a barrier, there are different options available to address and remedy the barrier; most are aligned to support digital print and digital workflows. Is it time for you to evaluate the opportunities you may have in folding carton?

Ricoh has recently launched two presses meeting the entry requirements for folding carton production.

RICOH Pro Z75

• A B2 format aligns with the short run/low volume segment of the market.

• A rated output of 4,500 sheets per hour aligns with the volume segment traditional converters try to ignore.

• 400 gsm (24 pt) material capability aligns with most folding carton requirements.

• Four-color capability at 1,200 dpi meets the image requirements of most small to mid-sized businesses.

RICOH Pro C7500

• A smaller, more compact version of the Z75, but with similar capabilities meeting the entry requirements for small to mid-sized purchasers of folding cartons