Canada: Packaging Equipment Industry Overview

Stefan Popescu David Kwok August 2010

Summary
The Canadian Packaging Equipment (PKG) industry, with an estimated value of US$ 475 million in 2009, represents an important part of the Canadian manufacturing sector. More than three quarters of this industry is generated from imports with 45 percent of total imports originating from the United States. After several years of solid growth, the industry recorded a significant decrease in 2009, affected by the general economic slowdown. This report examines the market trends of the PKG industry and product segments that will continue to offer prosperous export opportunities for U.S. manufacturers.

Market Demand
The future of the PKG industry is heavily dependent on the expected performance of the sectors of the Canadian market that it supplies. Consumer demand for packaged food and consumer goods is the main driver for the PKG industry. A large majority of total packaging equipment sales is made to companies that require equipment for packaged food and consumer goods. The slower consumer demand of 2009 combined with the end of cycle of several years of strong growth in the industry resulted in cutback and postponements of investment in new equipment in the packaging sector. The Canadian manufacturing industry faced difficult times in 2009. Few sectors are more energyintensive or more exposed to competition from countries with low labor costs. The strong Canadian dollar and high material costs have taken a toll on the overall performance of the PKG industry. Total manufacturing activity decreased in 2009 but is expected to rebound in 2010. The recent change in the monthly trend recorded by Statistics Canada indicates a modest growth in 2010, with manufacturing expected to expand. The recently developed PACsecure standards may also have an effect on market demand in the PKG industry in Canada. PACsecure standards are voluntary food packaging-specific safety standards promoted by the Canadian Packaging Association (PAC) designed to help packaging converters harmonize with the international protocol long used by the global food and beverage industry: Hazard Analysis Critical Control Point (HACCP). PAC promotion of PACsecure standards may increase demand for new upgrades or additional components in the PKG industry in order to bring current machinery to PACsecure standards.

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Market Data
The estimates for 2010 are based on the trends of the most recent 24 months of statistical records for the product groups HS 842230, HS 842240, and HS 842290, which make up the packaging equipment industry. 2010 (Estimated) 487 418 296 365 164

2006 Total Market Size Total Local Production Total Exports Total Imports Imports from the U.S. 482 422 327 386 162

2007 558 476 334 416 179

2008 600 510 348 438 189

2009 475 387 280 368 164

In millions of US$ (Current Dollars); source Statistics Canada

In 2009, the market-size recorded a 21 percent decrease compared with 2008. Eliminating re-exports and counting shipments for domestic use, the market development by the main sources of supply is illustrated in the following chart. The market decrease had the biggest impact on the local production but imports were also reduced.

(Source of Data: Industry Canada Trade Data online and Statistics Canada, manufacturing data tables) Imports from the U.S. were valued at US$ 164 million in 2009 and represented 45 percent of total imports. In 2009, the PKG industry experienced a decrease in both overall market size and total imports from the U.S.

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The PKG market industry is composed of 3 main segments with a relatively volatile distribution for the past recent years. AT present, the largest share of the market is the segment of machinery for filling, closing, sealing, or labeling. While other packing or wrapping machinery and parts for packaging machinery segments decreased considerably in 2009, the market of machinery for filling, closing, sealing, or labeling segment recorded a 1.6% increase in 2009. The other packing or wrapping machinery segment was the largest in the previous years but decreased considerably in 2009 and is the second largest segment of the PKG industry in 2009. The segment of parts for packaging machinery is the third largest segment of the PKG industry in 2009. Total imports of machinery for filling, closing, sealing, or labeling were valued at 152 million in 2009, of which 42 percent originated from the U.S. This segment represented 42 percent of total imports in 2009. Total imports of other packing or wrapping machinery were valued at 118.8 million in 2009, of which 50 percent of total imports came from the U.S. This segment represented 32 percent of total imports in 2009. Total imports of parts for packing machinery were valued at 96.8 million in 2009, 43 percent of which came from the U.S. This segment represented 26 percent of total imports in 2009.

2009 PK Market - Regional Distribution G

Prairies British 7% Columbia 6% Maritimes 2%

Quebec 30%

Ontario 55%

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The regional distribution of the PKG industry is estimated based on imports, which by far have the biggest weight in the total market. In 2009, the regional market distribution demonstrates a high concentration in Ontario, with 55 percent of the total market. Quebec was the second largest with 30 percent market share. The Prairie Provinces (Manitoba, Saskatchewan, and Alberta), British Columbia, and the Maritime Provinces (Newfoundland and Labrador, Prince Edward Island, Nova Scotia, and New Brunswick) held relatively low market shares. U.S. companies make up a large share of Canadian PKG importers. Foreign competition is growing in this sector and gaining ground. While U.S. and European imports decreased, China and South Korea made inroads into Canadas PKG market.

Best Prospects
Some of the best prospects in the PKG equipment industry, showing significant increases over previous years, include: Labeling Machines (HS 8422300020) Year-to-date (YTD) June 2010, imports are valued at US$ 6.7 million, a 78 percent increase over the previous year. U.S imports have reached US$ 2 million, a 23 percent increase over 2009 and represent 29 percent of the total imports of this group. Bottle Filling Machinery (HS 8422300049) YTD June 2010, imports are valued at US$ 6.7 million, a 572 percent increase over the previous year. U.S imports have reached US$ 3.6 million, a 406 percent increase over 2009, representing 54 percent of the total imports of this group. Other Containers Filling Machinery (HS 8422300052) YTD June 2010, imports are valued at US$ 6.3 million, a 261 percent increase over the previous year. U.S imports have reached US$ 2.7 million, a 154 percent increase over 2009, representing 42 percent of the total imports of this group. Box Filling Machinery (HS 8422300059) YTD June 2010, imports are valued at US$ 22.8 million, an 88 percent increase over the previous year. U.S imports have reached US$ 11.8 million, a 72 percent increase over 2009, representing 52 percent of the total imports of this group. Other Filling Machinery (HS 8422300090) YTD June 2010, imports are valued at US$ 30.5 million, a 137 percent increase over the previous year. U.S imports have reached US$ 17 million, a 167 percent increase over 2009, representing 56 percent of the total imports of this group. Other product groups also have interesting opportunities for U.S. manufacturers. The U.S. Commercial Service can assist in identifying these opportunities and in developing the business in the Canadian market.

Key Suppliers
Most of the major global manufacturers of packaging equipment have a presence in the Canadian market, including but not limited to the following companies: Bizerba Canada Inc. Elopak Canada Inc. Nordson Canada Limited Ropak Canada Inc. Tetra Pak Regarding the top supplying countries during the past 5 years, the U.S. and EU countries have experienced slower growth compared to China and South Korea which have more than doubled their import volumes.

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Prospective Buyers
Companies involved in packaged food and consumer goods are generally the main purchasers of PKG industry products. The market is highly consolidated and the higher the level of complexity and technology of the equipment, the lower the number of market players. Out of a very large number of PKG importers, approximately 25 companies account for more than 40 percent of total imports. The U.S. Commercial Service offers specific programs that assist U.S. companies in identifying and facilitating contacts with potential Canadian buyers and business partners.

Market Entry
The United States and Canada enjoy a long tradition of co-operative and lucrative trade. The North American Free Trade Agreement (NAFTA) provides a very favorable framework for U.S. importers who face no significant trade barriers such as tariffs or import quotas that might affect imports of PKG products into Canada. With most PKG industry products, there are no significant labeling and regulatory issues, with the requirements being similar to those in the U.S. However, for products destined to be marketed to consumers, labeling issues should be considered, mainly language regulations (bilingual English and French requirements) under the Consumer Packaging and Labeling Act. Standards used in Canada are the same or similar to the ones used in the United States. Certain certifications however, may be required: mainly the CSA (Canadian Standards Association) and the ULC (Underwriter Laboratories of Canada) depending on the type of equipment and components. Safety regulations are also similar and the certification authorities are with provincial organizations. Additional information on standardization and labeling regulations, including web addresses for Canadian standard and certification organizations are available in the Country Commercial Guide at Doing Business in Canada CCG 2010 Chapter 6: Trade Regulations and Standards. In addition, further information on market access can be found on Industry Canadas website at www.ic.gc.ca. Entering the Canadian market requires the manufacturer to meet the needs of the end-user, as well as those of government specifications. Provided the product has already obtained the required certifications,

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a manufacturer-representative is generally the best vehicle to penetrate the market. Distributors with strong relationships in the PKG industry are aptly situated to facilitate product entry or improve presence. Additionally, given the advantage held by U.S. firms in R&D, there is room for U.S.-based production companies to establish working relationships with Canadian-based companies who may have an established market share or who can impart industry knowledge.

Associations
Packaging Association of Canada (PAC) http://www.pac.ca/ Packaging Machinery Manufacturers Institute (PMMI) http://pmmi.org/

Trade Shows/Conferences
Lemballage vert au Qubec (Montreal, QC, September 9, 2010) Niagara-on-the-Lake Packaging Summit (Niagara-on-the-Lake, ON, September 17 19, 2010) PACK EXPO International 2010 (Chicago, IL, October 31 - November 3, 2010) PAC Green Den at PACK EXPO (Chicago, IL, November 2, 2010) PACKEX Advanced Manufacturing Trade Show (Toronto, ON, June 21 23, 2011)

For More Information

The U.S. Commercial Service in Toronto, Canada can be contacted via e-mail at: Stefan.Popescu@trade.gov; Phone: +1 416 - 595 5412 ext 223; Fax: +1 416 - 595 5419; or visit our website: www.BuyUSA.gov/Canada

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