It's shaping up to be a pretty good year for packaging equipment sales. The Packaging Machinery Manufacturers Institute (PMMI) predicts a 4.0 percent increase this year, with the food industry doing its part and the beverage category doing even more.
PMMI in January and February surveyed 424 decision-makers responsible for 12,251 packaging lines in 1,814 plants throughout all key segments of the
Figure 1: Packaging machinery's annual growth, in percent.
As figure 1 shows, the predicted 2004 growth follows two successive year gains after the downturn in 2001. PMMI considers this confirmation that the recovery now in progress is indeed genuine. In addition to the emergence of generally favorable economic developments that are providing end users with the well-needed confidence to commit capital funds for investment in machinery and equipment, corporate profits are rising substantially and optimism within the market continues to improve, the association says.
Of the eight defined market segments studied, six -- beverages, chemicals, durables, foods, personal care and converters , are expected to increase expenditures for packaging machinery this year (see figure 2). They collectively account for more than 81 percent of the machinery industry's annual dollar volume.
Conversely, machinery sales to the non-durables/soft goods and pharmaceuticals/medical products segments are forecast to be off slightly; although the volume of demand to the pharmaceutical/medical products segment will nevertheless remain substantial , at or near last year's level.
Figure 2: How the segments are doing.
At the time of the interviews, 33 percent of the respondents reported plans to spend more on packaging machinery this year than last, and 28.7 percent indicated they intend to spend less.
Of significant note, PMMI says, those planning to allocate roughly the same dollar amount as in 2003 fell to 32.5 percent from 34 percent in the prior year. This is the first year since the inception of the Purchasing Plans Study that the "no-change in spending" group did not represent the clear plurality of respondents, a development that possibly signals a shift away from the pervasive mood of extreme caution that has plagued the market for many years.
By the same token, PMMI cautions, the data also suggest the market is not yet fully out of the woods, as reflected in the fact that the proportion of companies/plants expecting to spend less for machinery in 2004 (28.7%) is actually higher than the 27 percent recorded last year. Moreover, as reported in 2003, while the majority of end users look ahead to the future with optimism, many also still remain concerned about economic and geopolitical uncertainties clouding the market environment. Nevertheless, the abundance of positive factors expected to influence demand for packaging machinery in 2004 clearly outweighs the presence of lingering negatives.
Figure 3: Why they're spending.
There were 11 identified reasons why respondents planned on spending more on packaging machinery:
? Customers continue to replace older packaging machines with new models. Replacement of older machinery with current higher-tech models remains a priority in the market; for customers have overwhelmingly come to recognize the value of the new technology as a vehicle for improving productivity. Therefore, a large number of packaging machines will be targeted for replacement in 2004, as they were in 2003. "We're looking to gain a competitive edge through increased productivity by incorporating new machinery into our lines," said a manufacturer of toothpaste and oral care products. "Our plant is replacing machinery this year specifically to avoid downtime caused by breakdowns," added a beverage bottler.