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Packaging economics' pendulum swinging back

Not long after listening to (at least part of) President Clinton’s State of the Union address and my own governor’s State of the State speech in January, I was reminded just how pervasive is the role of economics.

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Yes on politics and public policy but also in our business—the selection of packaging for our products—economics can be the principal factor.

Facing the windfall of the first federal funds surplus that many of us have ever known the President could propose a “something for everyone” Christmas wish list. A few nights later Illinois Governor George Ryan did much the same in his address. And that followed a $12-billion public works initiative announced earlier. One other comparison: Both leaders are operating under a cloud of personal or bureaucratic corruption.

Many of us who make packaging decisions for our companies have lately been operating under similar economic conditions: Prices for many packaging materials have been artificially low for so long that it’s affected (as it should) our selections. Many of us on the buying side of the packaging equation have been enjoying our shopping at essentially what might be called “sale” prices. This appears to be ending.

About 15 months ago I told a Michigan State University packaging seminar that I felt 1999 should be a year of major packaging innovations in no small part due to the low costs of most materials. But I also cautioned attendees that if prices remained low too long supplier investment in research and development would dwindle and would have to be replaced by investments made by end users.

“In every year [of the decade] except 1995 [the paper industry] failed to make enough to justify current investments” George Mead chairman of Consolidated Papers (Wisconsin Rapids WI) told a paper industry publication earlier this year. “So here we are hunkered down with challenges not excitement.” Consolidated makes paper for packaging and other uses. Although most paper producers have been aggressively reducing costs the savings only offset the price declines he says.

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