form fill

Form, Fill, & Seal Packaging Machinery

Industry Insight

Date February 2017

By the numbers

Synopsis

Current trends

  • Market demand for used, good quality, late model equipment remains steady
  • Globally, the bags and pouches segment is projected to grow at the highest CAGR during the next five years, driven by strong demand for lightweight and economical packaging solutions

 

 Projected Values

 

Packaging Machinery Manufacturing Revenue 

 

Market Projecting Modest Growth: Packaging machinery is primarily used by manufacturers of food and beverages, household goods, and pharmaceuticals and medical products, which combined comprised two-thirds of sales in 2016, according to IBISWorld. During the past five years, these sectors have fared well, recording strong post-recession growth and, in turn, creating steady demand for packaging equipment. There are four major categories of machinery: filling, form-fill sealing (“FFS”), and capping; labeling, coding, and identification; case forming, packing and sealing; and wrapping, bundling, and palletizing. Filling, FFS, and capping is the largest segment with nearly one-quarter of industry sales.
 

Growth of packaging machinery manufacturers is expected to accelerate during the next five years, increasing from 1.2 percent annualized growth during the past five years to 1.6 percent from 2016 to 2021. Globally, the most significant growth is expected in China, India, and emerging markets.
 

Secondary market is stable: The secondary market for FFS equipment is currently active and prices are generally stable. While not completely recession proof, the FFS industry benefits from the stability of the markets it serves, especially food and beverage, and pharmaceuticals and medical products. This is why general economic indicators and demographics are very important to the industry’s broader outlook. A strengthening U.S. economy, higher consumer spending, and an aging population are all favorable indicators for growth.
 

For secured lenders, this equipment falls into a relatively stable economic sector and secondary market. Although, like anything else, values do experience ups and downs due to buyer confidence in the economy, we have seen that the market continues to be solid for good quality used equipment.
 

Environmentally Friendly Equipment in Demand: End-users are increasingly looking for packaging machinery with a lighter environmental footprint. Equipment designed to reduce the consumption of packaging materials and ancillary products as well as machines that lower energy consumption, decrease water usage, and cut down on the use of inks and adhesives are likely to have higher recovery values.
 

Configuration Matters: FFS equipment is available in both horizontal and vertical configurations, and the type used is dependent on the product being packaged. Vertical type machines are more common due to the variety of products that can be packaged in this format and the lower investment in floor space. They are commonly used to manufacture standard flow-wrapper bags and pillow packs for snacks. Horizontal machines are more commonly used for pharmaceutical packaging such as blister and mini packs.
 

Specialization of Machines Results in Steeper Discounts on Secondary Market: FFS machinery in particular has a broad use across a variety of industry segments. While every FFS machine is somewhat customized for each particular user, the majority of original cost is in the base machine. Based on the package size being produced, each machine requires a certain set of tooling to produce a customer’s specific package. Horizontal machines are oftentimes utilized for products with more rigid types of packaging. This results in the need for more specific or customized tooling or molds. In these cases, the cost of the tooling and molds may represent a higher percentage of the original cost of the machine. This customized tooling will have minimal recovery value on the secondary market.