Liquid Food Packaging Market Looks Promising, Yet Equipment, Material and Technology Risks Persist

Within the food sector, liquid categories such as beverages and pure milk have been expanding at a remarkable pace, with highly attractive profit returns. That combination is drawing growing numbers of companies into the space and keeping it firmly on their radar.

As a result, the liquid food packaging that supports these products has become a major prize in the eyes of packaging suppliers. But while the market offers strong prospects and substantial margin potential, what risks and hidden pitfalls should companies watch for?

First, barriers to equipment entry are high. Today, many large domestic food manufacturers still rely on core production equipment from multinationals such as Tetra Pak and SIG. These global players hold clear advantages in product quality, technical capability, financial strength, after-sales service and market operations. Many domestic food companies depend on such overseas suppliers for equipment purchasing, spare parts and maintenance. To keep production stable and lower operational risk, they generally avoid changing existing equipment or packaging material suppliers at this stage.

Second, material supply is insufficient. In China, the production of paper-based composite materials for liquid food packaging has yet to develop into a complete industrial chain. For instance, although some domestic firms have attempted to make the paper and heat-seal strips (or sealing strips) required for Tetra Brik, quality remains seriously flawed. Paper and heat-seal strips (or sealing strips) are raw and supporting materials that Tetra Pak tightly controls, and domestic printing companies find it very difficult to source paper from suppliers that serve Tetra Pak. The creasing and perforating machine is essential for Tetra Brik production, yet creasing and perforating components made by domestic machinery manufacturers are still not mature.

Third, multiple technology constraints remain. These constraints are mainly seen in two areas, with carton manufacturing being the most immediate. Cartons used for liquid food place demanding requirements on printing, lamination and forming, as well as on paper, ink and adhesives. They also require high-quality, specialized equipment, professional technical strength and production experience. At present, very few domestic companies can meet this standard.

Fourth, price-ratio pressure is severe. With manufacturing costs rising and market prices falling, Tetra Pak cartons, Combibloc cartons and gable-top cartons are clearly more expensive than plastic bottles, plastic bags and glass bottles. Industry insiders say the dairy industry's average profit margin is only around 10%; for liquid milk, advertising, packaging materials and sales expenses push the margin down to about 3% to 5%. Pure milk, the largest-selling segment, has the lowest profit, and quite a few dairy companies make no money at all on white milk.

For printing companies, the task is to keep reducing packaging costs, raise service levels and advance freshness-preservation and packaging technologies for dairy products and beverages. This can help food companies extend shelf life, overcome the limits of the freshness-preservation radius and build a unified market. Companies must also monitor changing factors such as national macroeconomic policy, raw material price volatility, rising logistics costs, technical staff shortages and mergers and acquisitions in the dairy industry.

This article is reprinted from China Packaging Network (news.pack.cn). Original link: http://news.pack.cn/show-372811.html. Copyright belongs to the original author; it is provided solely for industry exchange and learning.