The personal care packaging market is growing steadily and is driven by the innovative design and flexibility of packages. Plastic containers dominate this market, followed by glass and metal containers while tubes are another package type that is emerging and substituting the traditional materials in a number of applications. The market is facing challenges in the form of pricing pressures and industry consolidation. The influence of the booming personal care market and newer range of product introductions, however, negates the detrimental effect and aids in the growth of the market.
Frost & Sullivan finds that the U.S. Personal Care Packaging Markets earned revenues of $3.04 billion in 2005 and estimates this to reach $3.97 billion in 2012.
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Innovation in packaging design is a key factor influencing the personal care packaging market. Personal care manufacturers target products in unique shapes and sizes combined with newer decorating and labeling features. In this consumer driven market, “Shelf Appeal” becomes the need of the day, pushing manufacturers to provide packaging solutions that are customized, exclusive and unique.
The personal care packaging market is driven by flexibility in design and innovation. Since the personal care market is dynamic, the packaging suppliers need to innovate constantly in order to survive and grow in this market.
“There are numerous personal care products available in the market, and thus the key differentiator is in its package. The shape, size, color and the total look of the product has become the selling point of personal care products,” says Frost & Sullivan Research Analyst, Anupama Ramaswamy.
The primary reasons for increased pressure on profit margins of suppliers are the end users who are large companies forcing packaging suppliers to keep prices low. Several end users are consolidating and thus, becoming larger. As a result, the number of end users is decreasing and strengthening their position.
Lastly, these large companies are moving toward reducing the number of suppliers to lower their operations and to maintain low overheads to cut down procurement costs, therefore, making the marketplace more competitive.
“Greater bargaining power of customers puts pressure on profit margins of personal care packaging companies. The large buyers can exert strong bargaining pressure on their suppliers to get the lowest possible price. As the personal care market becomes increasingly competitive, the large multinational customers constantly exert pressure on their packaging suppliers to keep the prices low. Therefore, the profit margins of packaging companies become extremely tight,” says Frost & Sullivan Research Analyst, Raja Prasanna.
To tackle such an important challenge, small and medium sized companies need to invest in niche market segments thus avoiding the impact of price reduction pressure from consumers. Larger packaging companies that invest in mass production need to increase capacity, thus aiding them in the advantages of lower cost. This strategy will do the counter effect in controlling the challenge of price pressures.
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