Roulston Research Paper and Containerboard Conference Call with RISI VP of Packaging and Former President of Temple-Inland’s Tru-Tech Division

October 22, 2012

Roulston Research recently held its Paper and Containerboard Conference Call on Oct 17th, 2012 with Sarilee Norton, current principal at Norton Associates and former president of Tru-Tech division at Temple-Inland, and Ken Waghorne, Vice President of Packaging at RISI. Sarilee has over 30 years of industrial experience in strategy, business development, market planning and corporate communications, as well as in sales and general management. Ken has specialized in the paper packaging markets for RISI since 1983. This conference call analyzed the dynamic changes that are driving the demand and supply of the containerboards market, as well as the balance of power among the major players in the industry. The U.S. Paper and Containerboard industry has undergone several consolidations of major players in the market over the years, including Rock-Tenn purchase of Smurfit-Stone Containers in 2011 and most recently the purchase of Orange County Container group by European-based Smurfit Kappa, which is expected to be completed sometime this quarter.  These mergers and acquisitions, along with changes in the capacity to produce containerboards will continue have major effects on the containerboard market and the major clients of these suppliers. As these consolidations begin to fully integrate, the core discussion questions to consider are: “Have consolidations in the containerboard industry reached its peak, how will the balance of power between the demand for boxes and the supply of paper effect prices, and what type of efficiencies in the industry are expected?”

The balance of power between the consumer package goods (CPG) companies / major retailers and the suppliers, who are hoping to see a bump in prices will only intensify given the tight conditions within the containerboard market, based on the consolidations mentioned earlier and the lack of movement in demand for containerboards. Consolidations among the suppliers have increased capacity to produce more containerboards leading to a call for higher prices. However, many consumer package goods companies such as Proctor and Gamble (P&G) and major retailers, such Wal-Mart will more than likely fight any price increases, due to low demand putting pressure on major players in the Containerboard industry, such as Rock-Tenn and Imperial Plastics to reconsider their relationships. The decision to increase prices and lose some clients will play a major factor for the coming years. Companies like Imperial Plastic and Rock-Tenn who are better than 50% of the market may be willing to sacrifice clients to meet their bottom-line given that demand does not increase. Capstone, who is another player in the containerboard market is described as aggressive and a risk taker in the discussion and has decided to focus on lighter weight boards.  Some of the latest stats have shown that United States is in a trend-shift mode with most of the paper and containerboard consumers demanding new light weight boards than the heavier ones, reducing cost for CPG’s and retailers. International markets are expected to remain flat, particularly in Europe. The biggest market for exports as explained in the discussion is the Latin America market. If you are interested in listening to the podcast of the event or engaging Ken or Sarilee please contact info@roulstonresearch.com.

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