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Cost of materials causing shifts

Survey shows that manufacturers are indeed feeling the effects of cost increases in packaging materials. Changing specs and suppliers are two remedies.

Pw 12482 Cost Chart1

For months, the editors at Packaging World have seen a flood of announcements of price increases for virtually all types of packaging materials and containers, from steel to paper to resin and film costs. But it’s difficult to know how many of these increases have “stuck” and were enforced. In July, PW surveyed manufacturers about higher packaging prices via its Web site, Packworld.com. Information about the respondents to the survey can be found in the sidebar, Who participated in survey, on p. 51.

The primary results of the survey are shown here in several charts. In the survey, respondents were given a list of 14 different types of packaging products, including machinery and services. Although the charts don’t display all 14 product types, they do reflect the responses by the largest number of participants.

For example, in Chart 1, we’ve grouped together as “other” seven of the product types that reflected the fewest number of responses. Increased prices on void-fill materials were identified by only about 2% of respondents, and glass, aluminum, and steel container prices were listed as higher by fewer than 4% of respondents, respectively.

It’s interesting to note that the answers changed a bit when the survey inquired about the product categories with the largest price increases (see Chart 2). Although many of the answers corresponded to the earlier list, plastic containers, packaging equipment, and even steel containers were mentioned far more often.

Packaging driving product pricing?

The survey also asked whether packaging costs were driving increases in product selling prices. Although nearly half (49%) of respondents said there had been no change in the selling price of their companies’ products, 45% said their companies had increased product prices modestly, and more than 6% said that packaging costs had caused significant price increases.

However, this upward pressure on prices did not materially affect company sales, most participants reported. About 64% reported no effect on company sales, and 9% reported that company sales had improved. Still, slightly more than 20% of respondents reported a modest decline in sales, while 7% said a noticeable or significant sales decline was due to increases in packaging costs.

When the survey asked about changes in supplier service over the last year, nearly two-thirds of participants said their companies were experiencing declines in service. Half of these participants cited longer delivery and lead times, while 11% said their companies felt product quality had declined.

However, a full third of respondents felt that supplier service had improved with higher prices for packaging. Some 16% reported improved services, while another 12% reported better delivery and lead times.

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