RFID’s packaging demands moderate, but steady growth is forecast

Lauren R. Hartman, Senior Editor -- Packaging Digest, 7/1/2007

While the use of radio-frequency identification technology in packaging hasn't exactly beat the band yet, as was first anticipated back in 2001 when Wal-Mart announced its supplier mandate, tag vendors are still being tested by heavy investments in production capacity, and anticipated faster growth in demand than has actually materialized. Findings from a May report by Frost & Sullivan (F&S) indicate that the North American RFID reader market generated revenues of $23.1 million last year. That market will grow to $241.6 million in 2013, predicts F&S, representing a compounded annual growth rate of nearly 40 percent. But the reader market is still primarily driven by Wal-Mart's mandate and the U.S. Department of Defense compliance mandate, F&S indicates. "Continuing mandates from Wal-Mart and other retail stores as well as the U.S Department of Defense to all their suppliers to tag their items is a major driver for the U.S. RFID reader market and the RFID industry in general," says Priyanka Gouthaman, an F&S analyst.

Yet May's RFID Journal Live! 2007 event in Orlando provided a barometer on the technology for users, vendors and analysts who gathered there. The exhibits and presentations were well-attended, and the end users are becoming more sophisticated about RFID technology.

While many companies remain at the pallet/case-tagging stage in the technology, others are moving ahead. The conferences exemplified some of the progress: Purdue Pharma's adoption of near-field, Gen 2 UHF, RFID tags into its pharmaceutical packaging lines to boost efficiency and security, and Cardinal Health's move to equip a pharmaceutical distribution center with RFID technology by the fall, in preparation for legislation requiring tracking and tracing of drugs distributed in that state. And Kimberly-Clark is using an RFID-powered inventory forecasting system to reduce out-of-stock merchandise on store shelves. Speakers emphasized that the more specific, focused and narrow the RFID objective, the better chance it has to succeed.

Editors note: New Editorial Director John Kalkowski launches "Packaging by Design," a blog examining the effects of evolving design trends. Visit www.packagingdigest.com/blogs.