Rabobank: Europe’s corrugated packaging industry set for consolidation
(The Netherlands, 05 Jul 2017) Europe’s fragmented corrugated packaging industry is expected to enter a period of consolidation prompted by slim margins and firms’ need for a wider geographical presence, according to Rabobank.
Analysts at the specialist food and agribusiness bank have predicted that the number of mergers in the sector is expected to remain at record high levels. Some ten deals have been completed or announced between January and June 2017 – more than three times the number in all of 2011. Next to high activity levels within Europe, the bank expects large European producers will continue looking for opportunities overseas, as demonstrated by DS Smith’s recent agreement to acquire Interstate Resources in the US.
Such consolidation is similar to trends in the US market witnessed during the last two decades. However, a number of factors mean consolidation is not expected to take place as fast in Europe, according to Rabobank.
In its paper, “The European corrugated packaging industry – moving towards the US market structure”, the bank highlights the key drivers behind the consolidation of the fragmented European market.
The first of these is increased margin pressure, which is forcing European players to operate more efficiently and seek to increase their market power.
Second, a consolidated customer base means buyers are increasingly looking for pan-European coverage from their suppliers, including packaging companies.
Finally, the location of production plants, which must be near customers, is driving change. Corrugated board sheets are typically economically viable for a distance of up to 400km, but preferably within 200km. This has led to larger players acquiring smaller competitors in more convenient locations.
Natasha Valeeva, report author and supply chains analyst at Rabobank, said: “The European market has witnessed some notable M&A deals in recent years, but we expect more in the future as firms respond to headwinds in what is still a very fragmented sector. (Source: press release)