BOTTLING LINE MACHINERY (Excluding Associated Filling, Capping, and Sealing Machinery)

Transcription

1 Packaging Machinery Shipments & Outlook Study BOTTLING LINE MACHINERY (Excluding Associated Filling, Capping, and Sealing Machinery) Definition: Machinery designed to convey, place, feed, accumulate, orient, unscramble, wash, sterilize, rinse, collate, and clean bottles and cans used for liquid and dry products. The category excludes filling, capping, and sealing machinery sold as part of the bottling line. Segmented by: Bottling Line Conveyors and Accumulators; and Bottle Placing, Feeding, Rinsing, Washing, Collating, Orienting, Unscrambling, and All Other Related Machinery. U.S. BOTTLING LINE MACHINERY SHIPMENTS SURGE IN 2005 The aggregate value of U.S. bottling line machinery shipments, as defined, surged ahead by +25 percent in 2005 to an estimated $380 million. The sharp increase, which was produced entirely in the U.S. domestic market, signaled a resumption of the heady growth-spurt pattern witnessed over the past 10 years. And this occurred despite a -10 percent fall in exports, (which had previously swelled by more than +52 percent in 2004). Therefore, the export growth-deficit was offset by a +42 percent increase in shipments to the U.S. domestic market. The order backlog at yearend stood at $124 million, which was equivalent to 32.6 percent of total 2005 shipments, up from $114 million at the end of YEAR GROWTH TREND 6.6% Share of Total Industry $ Volume Figure 6, which traces the history of U.S. bottlingline machinery shipments over the past 11 years, reveals that much of the period was characterized by substantial spikes in bottling line machinery growth, with 2005 a prime example. The extremes have been largely the result of major projects initiated by breweries, carbonated beverage bottlers, and especially bottled water start-ups and expansions in the U.S. Prior to 2000, year-to-year changes in the growth of bottling line machinery shipments closely tracked those of the total packaging machinery industry as a whole. But as Figure 6 also illustrates, the historical pattern was broken with a disconnect in 2000 as bottling line machinery shipment growth far outpaced the aggregate market rate through 2002, and conversely, bottling line shipments declined in 2003 when the total market grew. Nevertheless, the relationship between bottling line machinery growth and total industry growth remains somewhat correlative and coincidental, since bottling line operations have been fundamental to some of the more dynamic marketing, product development and packaging trends that have evolved over the past few years. By the same token, however, bottling line machinery demand has traditionally been dependent on essentially five sectors of the overall domestic market for the preponderance of annual demand foremost beverages and foods followed by pharmaceuticals, chemicals and personal care products. It has also been subject to the vagaries of the export market, which itself has been influenced by fluctuations in the U.S.$ exchange rate, world economic conditions and cycles of foreign demand within the traditionally key end-use market sectors. BASIS FOR THE DATA THE SURVEY'S RESULTS Shipment data and estimates for 45 companies identified as manufacturers of bottling line machinery (as defined) were tabulated in connection with this study.

2 Bottling Line Machinery 23 FIGURE 6 ANNUAL GROWTH OF U.S. BOTTLING LINE MACHINERY SHIPMENTS COMPARED WITH TOTAL U.S. PACKAGING MACHINERY SHIPMENT GROWTH % 25% 20% 15% U.S. Bottling Line Machinery Shipments 10% Total U.S. Packaging Machinery Shipments 5% % Change 0% -5% % -15% A summary of the sample's composition appears in Table 6 at the end of this section. The value of shipments attributed to the 45 companies amounted to $318 million, of which 25 PMMI members represented TABLE 4 Average And Median Dollar Values Of 2005 Bottling Line Machinery Shipments (Shipments Per Manufacturer Based On Survey Data) 2005 Shipments Machinery Average Median Total Bottling Line Machinery Bottling Line Conveyors and Accumulators Bottle Placing, Feeding, Rinsing, Washing, Collating, Unscrambling, and All Other Related Machinery US$ Millions $166.3 million. The unambiguous nature of the 2005 growth is reflected in the bar chart of Figure 7 which indicates that nearly three quarters of the machinery category's manufacturers (72%) reported an increase in total bottling line machinery shipments for the year. Moreover, the increase-decrease breadth for manufacturers of bottling-line conveyors and accumulators the larger of the two sub-categories had 71 percent reporting an increase versus 29 percent with a decrease. And the feeding, placing, unscrambling subcategory was also heavily weighted to the plus side as two-thirds showed higher billings versus 22 percent with lower billings and 11 percent no change. In the aggregate, the percent-change data ranged from a low of percent (decline) to a high of +116 percent (increase). Table 4, which lists the manufacturers' average and median values of shipments for this category's machinery, provides another clear indication of the strength behind the 2005 numbers. For a comparison of the 2005 table with the corresponding table for 2004 (in which total shipments were up by a mere +2.4 percent) will show that both the averages and medians

3 Packaging Machinery Shipments & Outlook Study FIGURE 7 PERCENT OF COMPANIES REPORTING AN INCREASE, DECREASE, AND NO CHANGE IN BOTTLING LINE MACHINERY SHIPMENTS 2005 VERSUS 2004 % Reporting Increase TOTAL Bottling Line Machinery 8% 20% 72% % Reporting Decrease % Reporting No Change 71% Conveyors and Accumulators 0% 29% 67% Feeding, Placing, Unscrambling, etc. 11% 22% 0% 10% 20% 30% 40% 50% 60% 70% 80% increased sharply across the board in For example, average total shipment value (per manufacturer) of $6.651 million in 2005 was higher than the $4.775 number in Similarly, the 2005 bottling-line conveyor sub-category average of $7.849 million compared favorably to the 2004 average of $4.495, as did the placing, feeding, rinsing, etc. sub-category with an average of $3.132 million in 2005 versus $2.214 in The year-to-year comparisons of median shipments also revealed sharp increases for SHIPMENTS BY TYPE OF BOTTLING LINE MACHINERY The projected estimates of bottling line machinery shipments in total and by the two principal machinery sub-categories are presented in Table 5 according to five sets of criteria. As traditionally reported, shipments of conveyors and accumulators ($283 million in 2005) accounted by far for the larger share of the total dollar volume. The other sub-category consisting of bottle placing, feeding, rinsing, washing, collating, unscrambling, and all other function-related machinery was responsible for $97 million of the total. It is significant to note that shipments for both sub-categories were up by nearly the same double-digit rates and both also benefited entirely from a pick-up in demand from the U.S. domestic market, which offset respective declines in exports. With regard to the unit-shipments totals, it is important to point out as in prior years that the data represent the approximate number of systems reported billed in Moreover, the unit numbers can fluctuate independently of the dollar values from one year to the next, often without any reason behind the divergence. The conveyor and feeding, placing, orienting, et al machinery categories are the most difficult to define in terms of individual units owing to the broad diversity and sizes of systems that are sold; therefore, they are meaningful more as indicators of the annual volume rather than as precise measures of output. Nevertheless, assuming that the unit quantity projections are reason-

4 Bottling Line Machinery 25 able for 2005, the data point to two important developments. Foremost, with the quantity of conveyors and accumulators nearly unchanged from that of 2004 (1,741 versus 1,745), it appears that considerably more expensive systems were billed in 2005 than in The average bottling line conveyor/ accumulator system in 2005 was billed at $162,550, up sharply from $129,513 in Conversely, the average feeding, placing, orienting, system declined from $76,471 in 2004 to $66,529 in 2005, nearly matching the $66,231 average recorded in 2003, and was far less than the $90,700 level recorded in As noted in prior reports, there had been a concern that the true value of bottling line machinery shipments may have been understated because of the possibility that some respondents may have been lumping all conveying, feeding, placing, machinery, etc. (including some bottling lines) into the conveying machinery category rather than into bottling line machinery. In that regard, efforts to limit misreporting are being conducted on an ongoing basis through comprehensive reviews of the data and by follow-up contacts with respondents. TRENDS, FACTORS, AND DEVELOPMENTS AFFECTING THE MARKET Several trends, factors and developments in 2005 worked collectively to produce the year's results. Appearing in order of relative importance, the following are believed to have exerted the most impact. Positive Trends, Factors and Developments A. Surge in U.S. domestic demand With an increase of +42 percent, bottling-line machinery shipments to U.S. domestic market customers represented the bulwark of the year's growth. While a significant portion of the surge was attributed to the release and completion of several large projects, demand derived from small-to-medium size lines also was well represented in the 2005 volume as well. "More favorable economic factors influenced purchases of machinery causing a release of pent-up demand." "Stronger economy in 2005 was the main reason we grew." B. Sales of more expensive conveyor and accumulator systems As witnessed in 2004, larger, more expensive conveyor and accumulator systems were sold and shipped in 2005, which translated into a higher average billing per unit sold. The increase resulted from the trend among customers to seek single-source suppliers for their bottling operations as well as to require custom options on their equipment. The average system in 2005 was billed at $162,550, up sharply from $129,513 in C. Continued stimulus from installation of faster filling, capping and labeling machines End-users continued to replace existing bottling line conveyors and related machinery with a new generation of systems needed to accommodate the higher speeds of new fillers, cappers and labelers. The new units, which replaced older standalone fillers and monoblocs, are rated over 50 percent faster than those of just a few years ago. Please note that U.S. shipments of liquidfilling machinery grew percent in 2005 following a percent gain in "More high-speed lines require higher speed equipment, such as the rinser we offer." D. Another increase attributed to beverage product applications According to the data, shipments linked with beverage products applications accounted for 76 percent of the market for U.S.-made bottlingline machinery in 2005, up from 73 percent in Recent active applications of particular note include: varieties of pure and flavored bottled water; energy drinks, vitamin drinks, liquor, juices, meal replacement drinks, and low alcohol drinks. "The beverage market was very favorable; we sold a large number of bottle washers." E. Positive effect of the single-serve product trend As in recent years, end-users have had to either add or transform existing bottling lines to accommodate the increased quantity of single-serve containers to be filled for both food and beverage producers. F. Ongoing high frequency of changes in container configurations, sizes and materials Further attention to container appeal and functionality in 2005 resulted in the further introduction of many varieties of container sizes (e.g., single-serve and large economy

5 Packaging Machinery Shipments & Outlook Study TABLE 5 U.S Bottling Line Machinery Shipments, Exports, And Order Backlog By Type Of Machinery PERCENT CHANGE TOTAL Industry In $ Shipments Unit U.S. Order BACKLOG 2005 Shipments 2005 Vs Shipments EXPORTS 12/31/05 Machinery ($ Millions) (%) (#) ($ Millions) ($ Millions) Bottling Line Conveyors and Accumulators , Bottle Placing, Feeding, Rinsing, Washing, Collating, Unscrambling, and All Other Related Machinery , Total Category , size) and shapes/configuration (e.g., designer tubes for skin care products, contoured grip for beverage containers, beer in aluminum bottles, etc.) during the year. This resulted in orders for either additional machinery to handle new SKUs or for replacement machinery with greater changeover flexibility. G. Further emphasis on improving efficiency and productivity In addition to their focus on increasing bottling speed, end-users sought to replace older bottle conveying, feeding and related equipment for the purpose of improving efficiency and productivity. This factor continues to be prominent in domestic demand especially when linked with replacement of other kinds of bottling line equipment. H. New bottling-line machinery introductions Manufacturers with good growth in 2005 attributed some of their increased billings to the introduction of new machinery models and systems during the year especially at Pack Expo. In addition to improvements and innovations featuring the advantages of faster speed capabilities as well as better control capabilities (expanded plc, servo and variable frequency device control), better wash down capabilities, gentler product handling, among many others, the new introductions also included lower cost "economy" models, and smaller footprint configurations. "We expanded our line of machinery, replaced some with better technology, and stepped up our marketing efforts." Negative Trends, Factors, and Developments A. Lull in exports As the data clearly indicate, export shipments of bottling line machinery were lower in 2005 after a period of growth. B. Vacuum in demand left by completion of several very large projects C. Intensifying competition from lower-priced equipment D. Continued negative impact of used and rebuilt system sales at the expense of new machinery shipments. BOTTLING LINE MACHINERY SHIPMENTS BY TYPE OF CUSTOMER Approximately 85 percent of the bottling line machinery shipments in 2005 were made directly to end-users, either via company-based sales representatives or manufacturers' representatives, down from 89 percent in 2004 and still well below the 90 percent level recorded in The amount attributed to others (including other manufacturers, engineering contractors, and systems integrators) amounted to 10 percent of the total (up from eight percent in 2004). The volume channeled through distributors represented approximately five percent. "Pack Expo 2004 helped us in 2005."

6 Bottling Line Machinery 27 FIGURE 8 U.S BOTTLING LINE MACHINERY SHIPMENTS BY MARKET SEGMENT (Percent of Total Dollar Value) Household Chemicals 1% Foods 8% Toiletries & Cosmetics 5% Beverages 76% Pharmaceuticals 10% FIGURE 9 HISTORICAL TREND OF MARKET SEGMENT BREAKDOWN FOR U.S. BOTTLING LINE MACHINERY (As a Percentage of Total Dollar Shipments) 90% Percent of Total Shipments 80% 70% 60% 50% 40% 30% 20% 10% Foods Household Chemicals Toiletries & Cosmetics Pharmaceuticals Beverages Other Chemicals 0%

7 Packaging Machinery Shipments & Outlook Study BOTTLING LINE MACHINERY SHIPMENTS BY MARKET SEGMENT The pie chart of Figure 8 presents a breakdown of the industry's 2005 bottling line machinery shipments by market segment based on the study's data, and the line chart of Figure 9 traces the most recent seven-year history of the industry's market segment breakdown. While very little changed short term in the market segment composition from 2004 to 2005, the beverage products segment continues to maintain a position of overwhelming dominance as the leading customer for bottling line machinery. BOTTLING LINE MACHINERY FORECASTS U.S. shipments of bottling line machinery are forecast to grow at an average annual rate of 2.7 percent over the next three years - from an estimated $380 million in 2005, to approximately $412 million by 2008 in constant 2005 dollars. As the bar chart of Figure 10 illustrates, the bulk of the gain will be recorded in The outlook is based largely on the following key expectations and assumptions. (Please refer back to discussion of trends and developments for elaboration on certain forecast points.) The Case for Growth A. Additional switching to alternative container materials, sizes and shapes, prompting replacements and additions of bottling lines B. Continued strong cash positions of major customers C. Expectation of several major projects materializing during the period D. Sustained high level of equipment replacement activity linked with technological advances and innovations E. Improvement in exports tied to expected weaker U.S. dollar and healthier global demand F. Further derived demand from installation of new, faster filling, capping and labeling machines FIGURE 10 FORECAST OF U.S. BOTTLING LINE MACHINERY SHIPMENTS (Constant 2005 Dollars) $ Millions

8 Bottling Line Machinery 29 G. Predicted growth of the U.S. economy - albeit strongest at end of period Please see "Macroeconomic Assumptions" in Executive Summary H. Continued trend favoring larger conveying/ accumulating systems and more expensive machines I. Unabated flow of new food, pharmaceutical, personal care and beverage products and SKU introductions into the pipeline J. Further improvement in pharmaceutical market segment demand and a pick-up in neutraceuticals K. Relatively large order backlog carried into 2006 L. Sustained strength of the dynamic beverage growth sectors A. Impact of low-cost imports and used machines on new machinery sales B. Weaker than expected economic growth C. Accelerated consolidation of the food and beverage industries D. Slower than predicted growth of foreign economies SURVEY PARTICIPATION AND COMPANY SECONDARY RESEARCH Table 6 summarizes the participation and methodology of data collection for the survey phase of the study. Potential Growth-Limiting Factors In addition to the ever-present potential for exogenous or unforeseen developments that could derail economic growth and destabilize confidence, demand for bottling line machinery could also be limited by the following other potential detriments to growth: TABLE 6 Survey Participation And Company Secondary Research (Bottling Line Machinery Manufacturers) Status Number of Companies PMMI Members Completed The Questionnaire 25 Company Shipment Estimates Developed Through Secondary Research 20 Total Companies 45