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Packaging opportunities exist - even in tough times

John Kalkowski, Editorial Director -- Packaging Digest, 10/1/2008 2:00:00 AM

The economy is so fragile and volatile right now that I'm almost reluctant to write about it. Everywhere, it seems, there is dire news. By the time this article arrives on your desk, we could be in a depression or on the road to recovery.



At the Packaging Machinery Manufacturers Institute annual meeting in September, the question of the economy's direction was on the lips of most of the equipment industry's leaders who were in attendance. For many in packaging, 2008 has not been a bad year—so far. Packaging is considered somewhat recession-proof. After all, people must buy food, medicine and clothing—the big drivers of retail spending.

Alan Beaulieu, a senior analyst at the Institute for Trend Research, did not paint a rosy picture for the group. In fact, some of the numbers he put up were downright scary. For instance, he said, the U.S. national debt limit currently is $11.3 trilllion, but that may have to rise significantly if a bailout of the financial industry is enacted. Meanwhile, the country's Gross Domestic Product stands at about $14 trillion for the year. This debt burden is definitely a drag on the economy.

That's not all. Beaulieu said real inflation is currently about 5.4 percent. With unemployment rising and inflation at levels not seen in years, the Federal Reserve will have to address these dual issues. But in what order?

Another theme arose: No matter how bad the economy gets, eventually it must get better. Beaulieu pointed out that the U.S. still accounts for 25.8 percent of the world GDP, and remains the leading exporter of manufactured goods, with 9.8 percent of the world's total. And even though American workers are highly paid in comparison to workers in most countries, we are the most productive in the world (except for those in tiny Norway). With the U.S. dollar weak for the foreseeable future, Beaulieu suggested that packagers and their suppliers are poised to take advantage of globalizing trade. One story this month (p. 96) relates how Zebco is returning some of its packaging operations from China to the U.S. because it's now more competitive to produce in this country.

So be prepared for tough times but look for growth opportunities. Cut inventories. Increase penetration at viable accounts. Make sure there's reason for customers to stay loyal. Partner with strong vendors. Beaulieu closed quoting Oliver Wendell Holmes: “To reach a port we must sail, sometimes with the wind, and sometimes against it. But we must not drift or lie at anchor.”

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