It's a small flute world: the small flute market, once a high-growth business for corrugated, is advancing at a much slower pace

Paperboard Packaging, May, 2004 by Esther Durkalski

The miniflute market first started its boom in the late 1990s and was expected to grow at phenomenal rates of up to 15 percent per year. In that decade, a series of technological jumps leaped miniflutes into the point-of-purchase and high-graphics consumer packaging markets--markets once dominated by folding cartons. But that pace has slowed to barely a crawl these days, with a varying array of reasons. However, converters are seeking new ways to continue the growth trend.

The first widely used miniflute was E-flute, with a thickness of 0.045 inches. Early advancements in technology, such as the fingerless or quick-change singlefacers, led to the development of F-, N- and G-flute.

But the small flute/high graphics market has become heavily saturated with integrated companies in the last five years. When the market first started, the independents were poised to grow because of the niche ability a smaller plant can offer. But the integrateds are gaining ground in the small flute arena. For example, Georgia-Pacific's acquisition of the specialty box plant Color Box in 2001 gave the company a highly popular market share.

The biggest change in the market is that it "is not dominated by the independents as it was five years ago," says Bob Nebeling, an industry consultant specializing in small flutes, who previously was with the Bobst Group.

"At the moment, a company like Georgia-Pacific has really acquired the best of the best, so far," Nebeling says. "I'm not sure how many other integrated companies are focused on this market. The small flute/high graphics market represents a small piece of the overall corrugated pie. Albeit, it has been and is still a substantially more profitable market than the brown box market, per thousands square foot basis."

According to Nebeling, small flute corrugated had grown at an estimated rate of 12 to 15 percent per year in the market's infancy in the late 1990s. In 1995, it made up approximately 5 percent of the total corrugated market. In 2000, it made up about 9 percent of the total corrugated market. Today, the small flute market represents less than 10 percent of the total corrugated market, Nebeling estimates.

According to a survey conducted by Packaging-Online.com, the official Web site for Paperboard Packaging, only 10 percent of the respondents have entered the miniflute market in the last two years, while in the last five years, 45 percent have entered the market. Twenty percent entered the market five to 10 years ago, and 25 percent entered the miniflute market more than 10 years ago.

Among the key drivers of small flute corrugated are the mass merchandise retailers, such as Wal-Mart, Sam's Club and Costco. All have influenced its growth by demanding that products be packaged in protective containers that possess both stacking strength and high visual appeal, which is largely achieved through fine-line screen graphics.

Point-of-purchase display is still a very important market, but Nebeling is unsure of how well this is going to do in the United States. A lot of products that were traditionally housed in P-O-P displays are now produced offshore. Products like toasters are being produced outside of the United States and the manufacturers of those products have developed their own packaging resources.

When countries like China first became cheaper product-producing nations, the product was made there and shipped and then packaged in the United States. China now has a growing corrugated market so the product and the packaging is made there.

Nebeling is uncertain what influence that will have on the small flute market but he knows "it won't be a positive one."

"Relative to the overall corrugated market, the small flute/high-graphic business is still doing better volume-wise, growth-wise and margin-wise compared to the brown box market," he says.

Evolution, Not Revolution

There are some markets that will continue the miniflute growth trend. John Lingle, president of Innovative Packaging Corp. (IPC), a Milwaukee corrugated plant, says the food market is a growing area for miniflute.

"There will be opportunity in the quick-serve fast food market--strong domestic-based businesses," Lingle says. He sees the growth in that market, as opposed to toys, cosmetics, glassware, and other traditionally manufactured products that have started the offshore move.

In the Packaging-Online survey, respondents say food and high-end graphics are the two biggest markets miniflute products serve, followed by the automotive and retail markets.

Nebeling believes that the packages that sit better in the combined corrugated will grow. Some of the big beneficiary companies of this will be laminated, small flute, high-graphics companies that are manufacturing as sub-contractors to folding carton and sheet plants, Nebeling says. "This is eliminating the necessity for the ultimate manufacturing or seller of the box to invest in the small flute equipment," he says.

"The market is no longer in its infancy," Nebeling says. "The product will be around for a long time--it has a very solid niche. That niche can be expanded and grown for those who go out and find use for the product."