packaging industry trends - risi · packaging industry trends david scheible, chairman and ceo of...

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


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


©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




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




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.




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




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




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.




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.




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.




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.




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




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




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




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,




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




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




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.

=+




… 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%




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.




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




GIC Europe, Bardon UK

Inspire Conceptualisesp e Co cep ua se

Interact Research Innovate




Leads to Award Winning packaging…

UK Packaging Awards 2014Awards 2014 winner: Best New Concept Award

Quesadilla




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




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




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