Investors were seemingly buoyed by the scope of Sealed Air Corp’s Reinvent SEE strategy, centered on growing market share and moving into adjacent markets at greater speed. Its share price rose following the announcement in December 2018 and — after various ups and downs — ended 2019 at USD 39.83, up from USD 35.32 on 2 January.
Among the highlights of Reinvent SEE is its focus on investing in technology to double the company’s rate of innovation over the next five years. The global packaging company also announced a three-year restructuring programme, with total annualised savings of between USD 215m and USD 235m expected by the end of 2021.
Against this backdrop, experts interviewed by Third Bridge Forum in 2019 pointed to a number of trends across the packaging industry that are materialising as opportunities and challenges for the US-based company.
Within food packaging, Sealed Air already has a “very strong” foothold in the shrink bag market for items such as fresh meat. But although that market is large and stable, growth “could be as small as 1%”, according to one expert. By contrast, flexible packaging is growing at an annual rate of 4.3%,1https://www.smithers.com/en-gb/resources/2018/jan/what-s-causing-a-shift-to-flexible-packaging-types reflecting increasing consumer appetite for convenience food or “healthy small portions”. The convenience food space therefore represents a significant growth opportunity for the company. Although Bemis is a strong competitor, Sealed Air is well placed to gain additional share because the market is expanding. It could even be a “disruptor”, the specialist added.
Sustainability is a central focus and a challenge not just for Sealed Air but any flexible packaging company today, as the fight against single-use plastics and other non-recyclable materials intensifies. Pressure from brand owners and regulators as well as consumers is mounting “like never before” to shift to more sustainable solutions. Sealed Air has certainly been gearing up to address these demands, as demonstrated by its 2025 Sustainability and Plastics Pledge, announced in October 2018. Among its goals is to design packaging that is 100% recyclable or reusable, and achieve 50% average recycled content across all solutions, by 2025. The company also joined the Alliance to End Plastic Waste in July last year, is part of the Ellen MacArthur Foundation’s New Plastics Economy initiative, and has signed the New Plastics Economy Global Commitment.
In addition to sustainability, food processors are battling challenges related to costs and labour scarcity. Although they pay well, staff turnover is high and the work can be dangerous. Yet Sealed Air is very well positioned here; in August 2019, the company completed its acquisition of Automated Packaging Systems, Inc. (APS), which manufactures bagging systems and has sites in the US and UK. The investment will allow Sealed Air to better serve the e-commerce, fulfilment and food packaging markets by leveraging APS’s technological expertise in engineering and automation.
The seafood market is also a bright spot — a USD 1bn opportunity, according to the company. Sealed Air believes it may have a solution that will enable unfrozen fish to be kept fresh for as long as a couple of weeks. While this may take some time to come to fruition, this niche could become very lucrative if Sealed Air establishes a proprietary position.
Overall, the food packaging sector is “extremely reliable even through a recession” and should continue to be attractive for incumbent and newer players alike. On the product packaging side, although e-commerce has been a boon for the market, the risks associated with poor sustainability performance are higher than in food packaging. For example, one expert highlighted that Ranpak can do “almost anything with paper” that Sealed Air does with plastic.
Furthermore, companies need to bolster their branding and marketing efforts while using less, or more sustainable, material. Giving someone the experience of the product “before they’ve even opened it” is going to be crucial to stand out in the crowd, and winning business with big companies like Amazon will require gathering data to identify what products they might need next.
Speaking broadly about the health of the company, one expert suggested that 2019 was an exciting year but that growth wouldn’t necessarily come from the US. Rather, there are “untapped gold mines” elsewhere, particularly in Asia, where food packaging is not widely used as yet.
Meanwhile, given the UK is a significant market for the company — representing approximately USD 200m in annual sales — Brexit is a big concern. A hard Brexit in particular could hamper Sealed Air’s supply chain if World Trade Organisation tariffs are introduced.
Regional opportunities are also available for Australia-based Amcor, it having recently acquired US-based Bemis. The combined company is now three times the size of Sealed Air and can therefore scale and expand with greater ease, representing a major shift in the competitive landscape. This also makes it the largest packaging company buying resin from a few suppliers: Dow, ExxonMobil and Lyondell. Similarly, Berry Global Group, Inc. completed its acquisition of RPC Group Plc in July last year, enabling the two companies to “globally scale products anywhere in the world”. Both newly-merged companies may hold the upper hand when it comes to buying resins and pushing back on price increases.
Although Sealed Air is in a positive overall position, there is always the threat of the industry being swept away by a new entrant or competitor offering low-cost, high-performing and flexible plastic packaging that excels on sustainability measures seen thus far. While market players are “nibbling around the edge of that”, expert opinion holds that no one has “really hit the bullseye”.
Read other articles in the series on Thomas Cook, Boeing, PG&E, Babylon and Disney.
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