The folding carton industry is currently facing many challenges. Christian Schiffers, Managing Director of the FFI, the Folding Box Industry Association in Germany, has represented the industry in the national and international arena for more than a decade. In an interview with Roland Rex, Head of Customer Focus and Business Development at WEIG, he shares in-depth insights into the current challenges and trends in the industry – from the energy crisis to the no-plastic trend to the latest regulatory requirements.
Learn more about the most important developments in the folding box market in our video.
The interview was conducted in German. The translated transcript is available below the video.
Rex: Mr Schiffers, thank you very much for being available for this short interview.
Schiffers: With pleasure, Mr Rex. Good morning.
Rex: You are the Managing Director of FFI, the Folding Box Industry Association in Germany. The FFI is the largest national association of the industry in Europe. And in your function, you represent the interests of the German folding box industry in numerous committees at national, but also at European level. What are currently the big issues surrounding folding box packaging, Mr Schiffers?
Schiffers: I don’t think the German folding box industry currently has a special role compared to all other industries, trade, commerce and crafts. Of course, we are just as affected as the other industries by the uncertain developments on the raw materials markets and in energy supply, in energy prices. And this is indeed something that the industry, the companies, are very much concerned about at the moment: securing the energy supply, ensuring the supply of raw materials, also under the aspect of price increases, and then of course communicating this to the customers appropriately.
Apart from that, we still have to deal with professional supply chain management to supply brand manufacturers and retailers with folding boxes. The COVID crisis and then the war in the Ukraine have had a very strong positive as well as negative impact on the supply chains in individual segments which the folding box industry supplies, with strong volatilities in a market that was otherwise relatively predictable until the COVID crisis, because 80 percent of folding boxes are intended for and used in fast-moving consumer goods such as food, pharmaceutical products and cosmetics, or in the area of to-go supply. So, the COVID crisis has had a very strong impact on this demand behaviour, and this in turn has had a very strong impact on the supply chains – in both a positive and negative sense. And we are still in the process of trying to align the supply chains through intensive communication with the suppliers and with the customers.
In some cases, there was very strong demand from the branded goods industry for folding box packaging or fibre-based packaging. And here, unfortunately, the supply possibilities with folding boxes were not available in some cases, so that we now naturally focus our attention on bringing this back into line.
And then perhaps a very practical problem that is also still connected to the pandemic: You know, the infection rates go up and down. Now, an increase is expected again in autumn. Although we also had numerous reports from companies over the summer that there were waves of infections running through the companies. This means that maintaining production activities is still a great challenge in the working day situation. So, these are the big issues that keep us busy currently.
Rex: So there are a lot of operational issues: keeping up production activities, ensuring supply … How can the folding box industry benefit from the clearly perceptible no-plastic trend?
Schiffers: Yes, the question is of course related to what we have just discussed. This is not only an operational activity or an operational aspect. There are actually also strategic aspects. And when we say that in the past, for example, we were not able to process or deal with customer requests for additional folding boxes, the question arises: Is this related to this no-plastic discussion, that customers want to switch more and more to fibre-based packaging or that they want to increase the fibre content in composite packaging?
And one can see that we can benefit – or have already benefited – if you carry out your own store inspections. For example, in the fruit and vegetable sector, where we can already see conversions to fibre-based packaging, or in the beverage sector. Beverages perhaps even more so, if we look at the whole question from a European perspective, abroad. In Germany, we have a very high proportion of reusable glass packaging for beer, water and soft drinks. But in other European countries there is a lot of one-way packaging, and we hear from partner markets that there is a great demand from brand manufacturers in the beverage sector to make the switch. So of course, it depends on reliable cooperation that we can also provide such quantities in the future. But all in all, I don’t think it’s a case of plastic bashing, but there is a general desire in society for more sustainable packaging solutions. And we can offer them. And in this respect, the folding box industry, but also other fibre-based industries, can definitely benefit from this in the future.
Rex: What role does the topic of composite packaging and the recyclability of composite packaging play in this context?
Schiffers: Well, the indisputable advantage of plastic packaging is of course that it has very good barrier properties, for example against water vapour, against oxygen, against UV or against grease permeability. The important thing to know, however, is that it is often and mostly only plastic-on-plastic composite packaging, i.e. also plastic composites in that sense. And these are not recyclable. Mono-plastic packaging is very recyclable and makes a good recyclate. But plastic-on-plastic composites are not.
The advantage of the paper composite is that we have the fibre content, i.e. the fibre substrate, which is formative, which can be printed well, which forms the structural unit. And this can be combined with a minimal amount of plastic to facilitate this barrier property. And on the positive side, such composites can be processed very well in standard systems of the recovered paper processing industry, i.e. they can be recycled. Numerous studies that we have carried out, but also other paper processing associations, prove this. The fibre material from such composites can be recovered, it can be reused for new paper products, for new fibre-based packaging. And in this respect, such paper composites actually have a very good recyclability. Of course, in the defibration process, the fibre material is recovered as a recyclate, but the polymer material cannot be recovered because we have different types of plastic in the recovered paper stream and separation is not possible here. This means that the only option is disposal or thermal recovery.
And if you take a look at such composite packaging: For example, we have a coated folding box that consists of 95 percent by mass of cartonboard and five percent by mass of a plastic material, a polymer material or an aluminium material, then the recyclability is almost 95 percent, namely in relation to this fibre content. And I think that illustrates (and the studies also prove this) the very good recyclability of fibre-based composite materials.
Rex: Are there any new regulatory projects in this context that pose new challenges for the folding box industry?
Schiffers: Yes. Let’s look at this example that I just mentioned, this so-called 95-5 rule, which has been around for many decades. A paper composite consists of 95 percent or more paper or cartonboard and less than five percent by mass plastic. This can then still be considered mono-PPK, PPK stands for paper, cardboard and carton. It has to be licensed for disposal as paper. And the designated disposal route is the paper bin, in Germany mostly the Blue Bin at the private end-user. If, on the other hand, the proportion of foreign material is five percent or more by mass, then this packaging loses its mono status and becomes a composite and has to be licensed as a composite, which is significantly more expensive for the branded company than pure 95-5 packaging. And it must then be collected as such in the light packaging fraction – which in Germany is the Yellow Bag or the Yellow Bin.
And in a major study that we conducted with partner associations, we showed that for decades consumers have been throwing such composite packaging, for example 90-10 packaging, which actually belongs in the Yellow Bag, into the Blue Bin because they perceive it as paper packaging. And for just as long, for decades, such composite packaging has been successfully processed and recycled by the recovered paper processing industry. On the other hand, 30 percent of paper packaging unfortunately ends up in the residual waste. Perhaps because there are product adhesions and the consumer then decides: it is more likely that this is supposed to go into the residual waste. And only 20 percent of the composites intended for the Yellow Bag actually end up in the Yellow Bag.
The problem is, again, that no recovered paper processing factory wants this waste. Why? The Yellow Bag is considered a wet collection. This means that a lot of contamination of the fibre material takes place here. And not from the actual food content, 80 per cent of the contamination comes via the Yellow Bag onto such fibre composites. And then nobody wants this material. And the regulatory challenge here is to prove – perhaps initially through research projects that are already underway – that this fibre material can still be recovered through appropriate purification processes, and that it can be used for food applications later on. Because that is the crux of the legal regulation at the moment: the paper in the Yellow Bag must not be used in fibre-based packaging for food applications. So that is a challenge in this area that we have to deal with. It’s something very specific. I can understand that.
Other challenges, topics that we are dealing with … here we are again similar to the rest of the industry, for example when it comes to the EU taxonomy. There will be more bureaucracy for companies in Germany and Europe as a whole in terms of the validity of their environmental reporting, because this will also be the basis for investor decisions. So new bureaucracy is to be expected here.
And one topic that we are also very busy with at the moment, when it comes to events, to information, is for example the supply chain law. Or the supply chain laws as we have a German and a European one. This only applies to companies above a certain size and is not applicable for most folding box manufacturers. But we all know that as soon as a branded company or a retailer demands this from certain suppliers because it is a legal requirement, it immediately transfers to all suppliers. And these obligations to provide proof that the suppliers of the folding box industry comply with social and sustainability standards in their countries present us with another challenge: How do we analyse this ourselves? How do you ask suppliers for this information? How do you document this when government controls then take effect here?
So, these are issues that we are dealing with intensively at the moment.
Rex: The regulation tsunami, as some people call it, will also hit the folding box industry. It’s rather unstoppable, yes.
Schiffers: A tsunami often consists of several waves and I have the feeling that we are already in the first or second wave and that there will be others, of which we do not know how many.
Rex: Perhaps a completely different topic at the end. In the past one or two years we have seen a high consolidation dynamic in cartonboard and folding boxes. How do you expect this to continue? What does that mean for the industry as a whole?
Schiffers: Yes, that’s hard to say. We can only make assumptions. Years ago, it was said that we were going to have a wave of consolidations. I have been in this position at the FFI for one and a half decades now, and perhaps not so much happened in the first ten years. But the dynamics have clearly increased in the last one, two or three years. As an association, we naturally have relatively little insight into the strategic considerations and discussions of the companies themselves, but only receive the information afterwards, when the corresponding reporting takes place.
We have a heterogeneous market. We have to realise that. This market is still heterogeneous. If we look at the whole thing from a European perspective: there are about 1,000 folding box manufacturers in Europe, roughly estimated – folding box manufacturers in the form of companies and groups. And the ten largest groups, i.e. one per cent of the market, already share 50 per cent of the total turnover. That means the other 99 per cent share the rest or the other half of this European market. That is a total market of 10 billion euros in turnover. Personally, I can well imagine that there will be more reports of company mergers in the next few years.
We are in the situation where the folding box is not rocket science. People keep talking about “me too”. This means that the USP is often difficult for many companies to present. In this respect, the industry is very much driven by costs and profitability. And these circumstances will certainly have an influence on the future success of each individual company. And I can imagine that if there is no strategic focus on certain markets, on certain technologies, on sales segments or even on regions, then in such an area there may be reports that there will be mergers or takeovers in order to use the corresponding economies of scale. So that would be my cautious assessment.
Rex: Mr Schiffers, thank you very much for your interesting comments. All the best.
Schiffers: With pleasure, Mr Rex. All the best to you too.
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