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the areas of ﬁlling, handling, storage, and shipping.

There are presently standards for the 55-, 30-, and 16-

gal open-head and tight-head drums, as well as for the

20-L and 5-gal tight-head, nesting-lug cover, and

straight-sided lug cover pails. The ANSI standard also

includes a thorough glossary of terms related to

packaging. The ANSI Committee is presently in the

process of revising the current edition of the standard,

ANSI MH2-1991 (2), to incorporate the construction

requirements set forth under the Department of Trans-

portation’s Performance-Oriented Packaging Standards,

published in 1990 (see under ‘‘Regulations’’ below).

Figure 1. Steel drum designs: (a) open-head 55-gal (208-L) drum; (b) tight-head 55-gal (208-L) drum; (c) open-head 16-gal (606-L) drum.

In part a, lever-lock ring may be used; in part b, lip of cover is turned down to ﬁt over lip of drum; in part c, two or three rolling hoops may

be used, depending on size and material packaged. Hoops are equally spaced horizontally. Actual drum dimensions may vary.

378 DRUMS/PAILS, STEEL

REGULATIONS

All-steel pails and drums used in the United States for the

transport of hazardous materials must comply with the

Department of Transportation’s Hazardous Materials

Regulations (DOT) (4). For nonhazardous products, these

containers usually comply with the minimum require-

ments of the speciﬁcations set forth in the railroads’

Uniform Classiﬁcation Committee (UCC) (5) and the

highway carriers’ National Classiﬁcation Committee

(NCC) (6). Noncompliance with these latter two organiza-

tions’ speciﬁcations, known respectively as the Uniform

Freight Classiﬁcation (UFC) (5) and the National Motor

Freight Classiﬁcation (NMFC) (6), may lead to higher

insurance costs for the packager and/or shipper.

Signiﬁcant regulatory changes have taken place at the

DOT. Hazardous materials, governed by DOT, include

ﬂammable liquids, gases, and solids; oxidizing agents

and organic peroxides; poisons; explosives; radioactive

materials; corrosive materials; and certain marine pollu-

tants and hazardous wastes. Decades-old DOT design

speciﬁcations (such as the DOT-17E, -17 H, and -17C

containers) have been replaced by new Performance-

Oriented Packaging Standards (also known as HM-181

for its DOT docket number), based on the United Nations’

Recommendations on the Transport of Dangerous Goods.

The reasons for this shift were harmonization of packa-

ging requirements with international regulations and

development of package safety criteria based on the

performance of the container rather than on its design.

This has entailed a complete restructuring of the way

packagings are speciﬁed. The SSCI’s manual Understand-

ing HM-181 for Steel Drums (3) summarizes the DOT

regulations found in Title 49 of the Code of Federal

Regulations (4) as they pertain to steel drums and pails.

Packagers must now provide their drum and pail

suppliers with the following information: Packing Group,

product vapor pressure (if liquid), net mass (if solid), and

speciﬁc gravity (if liquid). The SSCI Buyer’s Guide (7)

provides a checklist for the packager. The steel drum and

pail manufacturer marks the container, after having

performed the following tests: drop, leakproofness, stack-

ing, hydrostatic pressure (if liquid), and vibration. These

tests are meant to minimize the risk of leakage that might

result from normal handling, shipping, storage, and

accidents.

A sample mark for an open-head steel drum of 1 mm

thickness manufactured in 1994 by manufacturer M1234

and authorized to carry a Packing Group II or III solid

with a gross mass of 300 kg (or less) is

UN 1A2=Y 300 =S=94=USA=M1234 1:0

where UN = United Nations, 1 = drum, A= steel, 2 = open

head, Y = Packing Group II or III, 300 = maximum gross

mass in kilograms (net mass of solid plus mass of drum),

S = solid, 94 = year of manufacture, USA = country of man-

ufacture, M1234 = manufacturer’s number of symbol, and

1.0 = thickness in millimeters.

A tighthead drum with a nominal 1.1-mm-thick head

and bottom and 0.8-mm body manufactured in 1994 and

authorized to carry a Packing Group II or III liquid with a

speciﬁc gravity of 1.8 or less and with a product vapor

pressure of 230 kPa (or less) at 551C is marked

UN 1A1=Y1:8=230=94=

USA=M1234

1:1=:8=1:1

where UN =

United Nations, 1 = drum, A = steel, 1 = tight-

head, Y = Packing Group II or III, 1.8 = speciﬁc gravity

(relative density of material to water), 230 = maximum

hydrostatic pressure tested in kilopascals, 94 = year of

manufacture, USA= country of manufacture, M1234 =

manufacturer’s number of symbol, and 1.1/.8/1.1 = thick-

ness of top, body, and bottom in millimeters.

Steel drums of 1.0-mm thickness or more (also 1.1/.8/

1.1) are permitted to be reconditioned and reused to

transport hazardous materials, thereby extending the

life of the container. Title 49 of the Code of Federal

Regulations (CRF), Parts 100–199, gives the full details

of DOT hazardous materials regulations. These regula-

tions govern shipment by land, sea, and air. It is the

responsibility of the shipper to ensure that they are using

containers tested and marked in accordance with the

minimum requirements for the material to be transported.

International

As stated above, the DOT’s new POP standards are based

on the Recommendations of the United Nations Committee

of Experts on the Transport of Dangerous Goods, acting

under the direction of the United Nations Economic and

Social Council (8). Chapter 9 contains ‘‘General Recom-

mendations on Packing,’’ which details packaging require-

ments, types of packagings, and marking and testing

requirements.

Members of the UN Committee are committed to adopt

these recommendations into their respective nation’s

transportation regulations as closely as possible to the

original, although differences are permitted. The UN

recommendations are not regulations per se, but guide-

lines for regulations. Yet they are usually part of the law

in the country of export or import, if not both. For

example, Canada has adopted the UN recommendations

into its Transportation of Dangerous Goods Act and

Regulations and Related Performance Packaging Stan-

dards, while Mexico has nearly completed the process of

writing the POP standards required under its hazardous

materials transportation law of 1993.

Two international codes do have the force of law for

member states: the International Maritime Organiza-

tions’ (IMO) International Maritime Dangerous Goods

Code (IMDG Code) governing hazardous materials trans-

portation by water and the International Civil Aviation

Organization’s (ICAO) Technical Instructions for the Safe

Transport of Dangerous Goods by Air. These two codes

have adopted the UN recommendations.

As of January 1, 1995, European road and rail regula-

tions (ADR and RID) conform to the most recent revisions

of the UN recommendations.

DRUMS/PAILS, STEEL 379

STEEL PAILS

About 73 million new steel pails are currently produced in

the United States each year; sizes range from 1 to 12 gal

(3.8 to 45.4 L).

About 80% is accounted for by the popular 5-gal (18.9-L)

pail. They are made in four basic conﬁgurations: full open-

head, straight side, lug cover; full open-head, nesting, lug

cover; tight-head, straight side; and tight-head dome top

(see Figure 2). They are constructed of 0.0115-in. (0.3-mm)

or thicker steel. Pail heights vary by volume, but dia-

meters are 6 and 8 in. (15.2 and 20.3 cm, respectively) for

1 to 2.5-gal (3.8 to 9.5-L) sizes, 11.4 in. (28.6 cm) for

3–7 gal (11.4–26.5 L), and 13

in. (35.4 cm) for larger

capacities. The two open-head designs account for about

75% of the total pail production.

Both types of open-head pails have a liquid-tight,

welded side seam on the pail body and a bottom afﬁxed

by double seaming (see Can seamers). Two side ‘‘ears’’ are

welded or riveted to the body, and a galvanized wire bail

handle is attached. Handles are furnished with or without

a grip, which can be wood or contoured plastic. The

straight-sided pail normally has one strengthening body

head (i.e., swedge), to add rigidity to the top of the

Figure 2. Designs for 5-gal (18.9-L) steel pails: (a) Open-head, straight side, lug cover; (b) open-head, nesting, lug cover; (c) tight-head,

straight side; (d) tight-head dome top. (Courtesy of SSCI.)

380 DRUMS/PAILS, STEEL

cylinder. The tapered type usually has a second bead that,

in nesting, rests on the top curl of the pail below and limits

nesting depth.

The tight-head pail, accounting for some 25% of sales, is

often used for the shipment of low viscosity or free-ﬂowing

liquids. It embodies a welded side seam, double-seamed top

and bottom ends, and a carry handle, usually a D-ring, of

galvanized wire spot-welded to the head. This container

can be ﬁtted with a variety of pouring and venting appa-

ratus. An offshoot of the tight-head pail is a domed-top or

utility pail, especially popular in 2

- and 5-gal (9.5- and

18.9-L, respectively) sizes for petroleum products.

Pails are used for liquids, viscous products, powders,

and solids. Pail markets include paint and printing inks;

chemicals; adhesives, cements, and rooﬁng materials;

petroleum products; janitorial supplies (e.g., cleaners,

and waxes); abrasives; cosmetics; fasteners and stamping;

foods; insecticides; marine supplies; pharmaceuticals;

powdered metals; and scores of other products and

materials.

Because of their ability to withstand high tempera-

tures, pails are the container of choice for the transporta-

tion and indoor storage of ﬂammable and combustible

liquids. The range of classes of ﬂammable and combustible

liquids allowed for warehousing and storage is greater

than the range for like-sized containers made of plastic.

See, for example, NFPA Code 30 on Flammable and

Combustible Liquids (9).

In addition to varying capacities, steel thicknesses, and

container construction, a host of options, ﬁttings, and

accessories are available to design a pail to a buyer’s exact

requirements.

Open-head pails can take two types of covers. The lug

cover, usually incorporating 16 wide lugs around its

circumference, can be applied at production-line speeds

by automatic crimping equipment, although hand-

operated and semiautomatic crimping tools are also avail-

able. The lug cover is opened with standard hand tools.

The second cover, a ring seal, is best for resealing pur-

poses. It consists of a formed disk that sits on the top curl

of the container and is clamped to it either by a separate

ring band or with rings that lock by lever action or bolt-

tightening.

Another option is a combination of steel thicknesses.

Cover and ends can be made of steel of different thickness

than the body for different requirements of strength and

economy. Lids and bottom ends can be strengthened by

using embossed circumferential beads to provide in-

creased rigidity.

On both tight-head and open-head pails, a wide range

of opening sizes, pouring spouts, and cap closures is

available. To cut costs, covers can have a simple, threaded

pouring nozzle topped by a screw cap. Even simpler are

pails furnished with just a dust cover over the pour

opening to keep the interior clean, with the user clinching

on or pressing in a pouring ﬁtting after ﬁlling. Various

metal and plastic pouring devices are offered, mostly of

the pull-up style; these are covered by a cap during

shipment. Some pour ﬁttings incorporate vent openings

that eliminate the need for a separate vent opening on the

cover. Tamperproof seals, consisting of a steel cap clinched

directly onto the pail ﬁtting, are often used.

BIBLIOGRAPHY

1. Steel Shipping Container Institute, Steel Shipping Containers:

The Choice for the Environment, Washington, DC, 1994.

2. ANSI MH2-1991, American National Standards Institute,

New York, 1993.

3. Steel Shipping Container Institute, Understanding HM-181

for Steel Drums, Washington, DC, 1993.

4. U.S. Department of Transportation, Code of Federal Regula-

tions, Title 49, Parts 100–199 (October 1993).

5. Uniform Classiﬁcation Committee, Uniform Freight Classiﬁca-

tion, National Railroad Freight Committee, Atlanta.

6. National Classiﬁcation Committee, National Motor Freight

Classiﬁcation, National Motor Freight Trafﬁc Association,

Alexandria, VA.

7. Steel Shipping Container Institute, A Buyer’s Guide to New

Steel Drums & Pails, Washington, DC, 1994.

8. United Nations Committee of Experts on the Transport of

Dangerous Goods, Recommendations on the Transport of Dan-

gerous Goods, 8th edition, United Nations, New York, 1993.

9. ANSI/NEPA 30, National Fire Protection Association, Quincy,

MA, 1993.

DRUMS/PAILS, STEEL 381

ECONOMICS OF PACKAGING

DIANA TWEDE

School of Packaging, Michigan

State University, East Lansing,

Michigan

PACKAGING MACROECONOMICS

U.S. industry shipments of packaging materials and con-

tainers in 2005 were nearly $103 billion, and sales of

packaging machines were estimated to be $5.76 billion.

Combined, these represent about 2.4% of all U.S. manu-

facturing shipments (see Table 1). But the economics of

packaging go far beyond the simple cost of producing the

materials and machines.

The total cost of the nation’s packaging operations is

easy to underestimate because it is embedded in the cost of

producing everything, and data on packaging operation

costs are not published. All products are packaged in some

way, and their components and ingredients are repacked

several times in the manufacturing operations of a supply

chain. The fact that all products are packaged means that

the packaging industry performance parallels the national

economy’s performance.

The packaging industries have almost every other kind

of business as a customer, and so packaging affects the

supply cost and demand of every product and factor of

production, from food to building materials to auto parts.

Retailing and distribution industry costs are also affected

by packaging. And after use, packaging affects the social

costs of disposal or recycling.

It is equally problematic to estimate the value of

packaging. The values of protection and containment

relate to the physical requirements of the product. Values

of communication and differentiation relate to the market-

ing requirements that facilitate sale. Therefore, the

amount of packaging materials used per product varies

enormously. For example, the can represents a much

larger proportion of the cost of a canned soft drink

compared to the relative cost of a multiwall shipping

sack for 50 lb of ﬂour. Furthermore, packaging is a key

way to differentiate products and add value to markets

willing to pay higher prices.

Consumer products use 80% of the packaging materials

in the United States. The largest segment is the food and

beverage industry, purchasing a little over half of all

consumer packaging (35% for food and 19% for beverages).

Other consumer products like health and beauty aids and

household cleaners account for 8%, and a combination of

tobacco, clothing, appliances, electronics, and furniture

make up the rest (18% of consumer goods packaging).

Packages for shipping (which includes shipping containers

for consumer products) comprise 33% of the value of

packaging (2).

Globally, the cost of packaging is variously estimated at

between $390 billion (4) and $450 billion USD (5).

Developed market economies consume the most packa-

ging. Pira International estimates that North America

consumes 29% of the world’s consumer packaging and

Europe consumes 33%, compared to 4% by Latin America

and 34% by the rest of the world (5). Datamonitor splits

the worldwide consumption in thirds: the Americas at

34.2%, Europe at 33.2%, and Asia/Paciﬁc at 32.5% (4). The

U.S. per capita consumption of packaging for 2004 was

estimated at slightly over $350 (5).

The expenditure on packaging is much lower in less

developed countries, and packaging solutions tend to have

lower cost. Materials and graphics are less sophisticated,

the process to make and ﬁll packages is more labor-

intensive, and machinery is slower and less efﬁcient

than in industrialized countries. Food is not shipped

long distances and is more likely to be purchased fresh

rather than processed and packaged. There is less variety

and much greater losses due to spoilage. But the packa-

ging that is developed is generally economical, material

recovery systems are efﬁcient, and there are many crea-

tive packaging applications using indigenous materials

and appropriate technology.

Packaging plays a signiﬁcant role in a nation’s eco-

nomic development. Improvements in packaging can fa-

cilitate economic growth by increasing the efﬁciency of

markets and by adding value to exports. Packaging can

reduce the cost of food and increase its supply by prevent-

ing losses, which can be as much as 50% for food in

developing countries.

The best way to add value to exports is to ship packaged

products rather than shipping in bulk. There is a growing

demand for more sophisticated packaging materials and

methods to be used for export packaging. There is increas-

ing realization by government authorities that investments

in packaging technology can yield economic beneﬁts, and

organizations like the International Trade Centre have

implemented programs to develop human resources in

packaging and make information more easily accessible (6).

Table 1. Gross Domestic Product 2000–2005 versus

Packaging Expenditures (in millions of current U.S.

dollars)

2000 2005

Estimated U.S. value of all

manufacturing shipments (1)

$4,209,000 $4,545,000

U.S. value of packaging

shipments (2)

$92,617 $102,756

Percentage: packaging of all

shipments

2.2% 2.26%

U.S. packaging machinery

shipments (3)

$3,820 $5,760

Percentage (packaging

material+machinery)

2.32% 2.39%

383

Table 2. Actual and Forecast shipments of the U.S. Packaging Industry, 1992–2010

1992 2000 2004 2005 2010 Increase %/yr

Paperboard/Molded Pulp

Corrugated containers-a $19,138 $24,610 $28,385 $29,500 $31,484 1.3%

Folding cartons 7,731 8,450 8,320 8,360 9,300 2.2

Sanitary food containers

Milk and beverage 678 705 775 805 875 1.7

Cartons and trays 175 416 335 330 300 1.1

Lipid tight 77 107 154 161 190 3.4

Fiber and composite packaging

Cans 600 600 590 590 600 0.3

Drums 374 430 310 340 350 0.7

Rigid boxes 516 620 563 570 500 2.5

Molded pulp products

354 550 481 492 550 2.1

29,643 36,488 39,913 41,148 44,149 1.4

Metal

Cans 11,665 10,954 11,374 11,700 11,000 1.1

Shipping containers 1,132 1,200 1,345 1,440 1,470 0.4

Flexible 1,406 1,850 2,090 2,150 2,508 3.0

Miscellaneous

Crown and closures 811 776 749 778 660 4.0

aerosols 775 991 500 525 580 2.0

Foil containers 177 180 105 115 110 0.5

Collapsible tubes 56 75 55 50 45 3.0

Strapping 420 353 370 375 430 2.8

Pallets

25 20 25 25 30 3.0

16,467 16,399 16,613 17,158 16,833 0.4

Plastics

Containers

Blow-molding bottles 4,577 7,510 7,920 8,790 10,900 4.4

Closures 1,586 1,865 2,210 2,323 2,700 3.1

Miscellaneous 2,153 2,667 2,825 2,970 3,760 4.8

Shipping containers 618 965 1,725 1,770 2,000 2.4

Squeeze tubes 220 350 410 440 510 3.0

Flexible packaging

Speciality bags 959 1,450 1,644 1,690 1,910 2.5

Converted wraps 2,455 3,650 4,300 4,410 5,000 2.6

Wrappers 515 1,350 1,580 1,618 1,824 2.4

Shipping sacks and lines 220 265 220 235 240 0.5

Cushioning 835 1,395 1,485 1,515 1,665 1.9

Strapping 250 320 340 355 400 2.4

Pallets

55 160 220 230 270 3.3

Total 14,353 21,947 24,819 26,346 31,179 3.4

Paper

Flexible packing

Converted wraps

All paper 866 1,155 1,050 1,058 1,100 0.7

Paper/foll 633 705 825 840 900 1.4

Wrappers 453 830 760 750 700 1.3

Specialty bags-c

486 800 740 733 700 0.9

2,438 3,490 3,375 3,381 3,400 0.1

Label and tags 1,490 3,005 3,300 3,370 3,730 2.0

Heavy-duty bags 1,455 1,639 1,250 1,260 1,100 2.7

Tapes 235 260 280 283 300 1.2

Wadding

30 110 122 120 50 0

5,648 8,504 8,327 8,414 8,580 0.4

Glass

Containers 4,915 4,105 4,304 4,500 4,800 1.3

Wood

Pallets and skids 2,143 3,155 3,215 3,295 3,750 2.5

Containers

Nailed boxes and crates 418 360 418 427 475 2.2

(Continued)

384 ECONOMICS OF PACKAGING

PACKAGING SUPPLY INDUSTRIES

Packing is produced by four manufacturing industries

using very different raw materials and manufacturing

processes. In the richly forested United States, the largest

segment (40% of sales in 2005) is paperboard-based. Metal

represents 16%, plastics is 26%, paper is 8%, and glass is

5%. Table 2 shows sales in the United States, by packaging

material type, for an eighteen-year span, from 1992 to

2010 (estimated). It and most of the industry data which

follows are drawn from The Marketing Guide to the U.S.

Packaging Industry, used with permission (2).

The paper, glass, and metal packaging industries in the

United States are mature. Their growth rate generally

parallels, but is slower than, all manufacturing. The

packaging industries’ proﬁtability varies, but is generally

below the average for other manufacturing industries.

Commodity markets for metals, paperboard, and plastic

resins used in packaging are characterized by low proﬁt

margins and high capital investments. Packaging conver-

sion is, likewise, a low-proﬁt sector. The degree of integra-

tion varies; paper and paperboard are the most vertically

integrated, plastics is becoming less integrated as resin

manufacturers have left the packaging business, and the

big aluminum and steel producers no longer make cans.

However, unlike other mature industries, the packa-

ging industry is not concentrated because packaging

producers of various materials compete with each other

due to the substitutability of container types. In 2005, only

26 companies had sales over $1 billion. The largest 50

packaging suppliers account for only 44% of total packa-

ging shipments, with many companies supplying only

one type of packaging material. Concentration is greater

within each material’s supply industry. Materials like

molded pulp, beverage cartons, glass containers, and

metal cans are made by industries in which the top four

companies account for 65% of shipments (2).

Paperboard Packaging

Paperboard-based packaging is the largest segment of the

packaging supply industry. It is also the most vertically

integrated; companies producing 50% or more of their own

paperboard account for 80% of the shipments of corru-

gated containers and folding boxboard cartons. Most of the

large companies making paper-based ﬂexible packaging

also make their own paper (see also Paperboard).

Corrugated ﬁberboard accounts for almost 63% of

the paperboard tonnage used in packaging. Since most

products (in the United States, at least) are shipped in

corrugated ﬁberboard boxes, the price is sensitive to the

overall economy’s performance. Periods of growth directly

increase the demand for boxes by every industry, causing

suppliers to reach full production capacity, which leads to

higher prices. Similarly, the increase in imported goods

from China has drawn demand away from the U.S.

corrugated industry, and so the U.S. industry has cut its

production in response, using the power of the integrated

producers to orchestrate industry dynamics.

Paperboard packaging prices are also affected by the

cost of wood (or recycled raw materials) and energy. Wood

has always been relatively plentiful in the United States,

and corrugated ﬁberboard boxes are one of the most highly

recycled packaging materials. Energy is a large compo-

nent of the production cost.

Metal Packaging

Tin-plated steel and aluminum cans make up most (70%)

metal packaging. Packaging is a small portion (only 3.8%)

of total steel production, but is 21% of total aluminum

production. The metal can industry is one of the most

concentrated of packaging industries in the United States,

with the top 7 can producers accounting for 90% of the

volume.

Table 2. Continued

1992 2000 2004 2005 2010 Increase %/yr

Wire-bound boxes and crates 139

545

647 650 625

–0.8

Veneer and plywood containers 112

Cooperage 112

Excelsior

30 20 15 20 15 0.8

2,954 4,060 4,295 4,392 4,865 1.8

Textile

Bags 728 914 610 610 550 2.0

Twine 100 150 130 128 100 4.0

Flock

35 50 60 60 60 0

863 1,114 800 798 710 2.4

Total/Average $74,863 $92,617 $99,131 $102,756 $111,116 1.6%

Notes: Shipments of many miscellaneous and unreported packaging items, Whose value may be as high as $1 billion, are not included. Some of the most

important items excluded are plastic food and garbage bags, fast-food packaging, reconditioned barrels and drums, gas cylinders, tubes and cores, and bulk

containers.

a. Includes solid ﬁber boxes.

b. Includes value of container, value, cap and propellant.

c. Includes paper/foil laminates.

d. Percent increase from 2004 to 2010.

Source: Estimat es by Impact Marketing Consultants, Inc., The Marketing Guide to the U.S. Packaging Industry, 2006. Used by permission.

ECONOMICS OF PACKAGING 385

For many uses, steel and aluminum cans are inter-

changeable, and usage depends on relative prices. Alumi-

num is more expensive per pound than steel. But

aluminum cans are lighter weight, and most innovations

have emphasized further weight reductions. To reduce the

cost of raw materials, the aluminum industry has facili-

tated recycling, and 50% of the aluminum cans used in

2003 (in the United States) were recycled. Since 1981,

aluminum cans have outnumbered steel cans; aluminum

is more popular for beverages, but steel still predominates

for food (see Cans, aluminum; Cans, steel).

The largest use for metal cans (71%) is for carbonated

beverages. The metal can is such a vital input to beer

production that big breweries sometimes have their own

captive can producing facilities. Food manufacturers use

26% of the cans produced.

The metal share of the packaging industry has been

falling due to the substitution of plastics. Cans are being

replaced by plastic bottles for beverages and by rigid

plastic or retort pouches for food. Steel drums and pails

have been replaced by lighter weight plastic drums and

pails. The aluminum foil barrier in ﬂexible packaging,

bottle caps, and collapsible tubes has likewise been re-

placed by new high-barrier plastics.

Plastics Packaging

Plastics are the fastest-growing segment in packaging.

Plastics have won market shares from all other packaging

materials, converting glass bottle users to plastic bottles,

paper bag users to plastic bags, ﬁberboard boxes to plastic

wraps, and steel drums to plastic drums. Plastic packages

generally use less material, are less costly to fabricate,

and weigh less, thus reducing transport costs.

The largest-volume plastic used for packaging is low-

density and linear low-density polyethylene used for ﬁlm

(LDPE and LLDPE = 30% of plastics packaging), followed

by high-density polyethylene (HDPE = 26%), polyethylene

terephthalate (PET = 18%), polypropylene (PP = 14%),

polystyrene (PS = 8%), and polyvinyl chloride (PVC = 2%).

The largest growth has been in PET for beverage bottles,

including substitution for glass bottles and metal cans as

well as the dramatic growth in the sale of bottled water.

The production of plastic resins is concentrated in oil-

producing ﬁrms like Dow Chemical, ARCO, and DuPont.

But the plastics converting industry is much more diverse,

with few barriers to entry. Economical production scale is

much smaller than that for converting paper, metal, or

glass. Market leadership for a container type is often

governed by proprietary technology that provides a special

value. Since plastic forming is relatively easier than

forming other packaging materials, there is more captive

production by ﬁlling companies, especially for plastic

bottles, thermoforms, and ﬂexible packages that are pro-

duced in a form/ﬁll/seal operation. (see Blow Molding and

the articles on the individual plastics).

As the plastics industry has matured, it has developed

more specialty applications. Lamination, coextrusion, and

barrier coatings have improved barrier and strength

properties, and thereby increased the market for plastic

packaging. Furthermore, most composite packages (and

even packages not normally thought of as composites, like

coated cans and cartons) rely on an essential layer of

plastic that adds strength, sealability, or barrier to other

materials in the structure.

The ﬂexible package converting industry is very dy-

namic. New materials and new combinations have been

developed to improve manufacturing options and to in-

crease the range of applications. Flexible packaging can

now be used to package almost any kind of product,

challenging every rigid packaging form with lower-cost

options.

The ﬂexible packaging industry is vital for developing

countries without the resources or infrastructure needed

for glass, metal, and paperboard industries. As a country

develops its economy in the 21st century, improvements in

low-cost ﬂexible packaging can stimulate every sector,

especially food industries.

Glass Packaging

Glass packaging is the smallest material segment in the

U.S. packaging industry. Glass has suffered from declining

sales as glass bottles and jars have been replaced by

plastic, metal, and composite packages for many products.

The 1980s was a period of consolidation and mergers, in

an effort to make the industry more competitive with

other materials. The top two producers now control 70%

of the market.

The raw materials for glass are relatively inexpensive,

but glass production requires a high amount of energy and

has high labor costs. Very few bottle producers own the

sources of raw materials, which account for 46% of the

cost. The increase in recycling glass has reduced energy

and material costs. Innovations in glassmaking have been

focused on weight reduction, including improving the

uniformity of glass distribution and plastic coatings, in

order to reduce material and shipping costs. In addition,

the efﬁciency of glassmaking has improved considerably

(see also Glass container manufacturing).

The largest use for glass bottles is for beer (57% in

2004), followed by food (19%), beverages (9%), and liquor

and wine (8%). However, in many cases, aluminum cans

have displaced glass bottles for beer, and PET bottles have

displaced glass for food, soft drinks, and liquor. Glass

applications are growing only for food and drinks where

its ‘‘prestige’’ image and high clarity are desired.

PACKAGING AFFECTS DEMAND FOR PRODUCTS

Packaging can increase the quantity demanded of a

product by reducing its cost. For example, as develop-

ments in packaging technology have reduced the cost of

protecting processed food, the market has grown to in-

clude more low-income consumers.

ackaging can also

increase the absolute demand for a

product by providing features that attract a new category

of consumers. For example, the market for paint was

increased by the introduction of ‘‘spray paint’’ to include

consumers who had never painted before.

386 ECONOMICS OF PACKAGING

Packaging is used as a tool to differentiate products

for market segmentation strategies. Buyers have unique

needs and can be segmented into broad classes. For

example, consumers with physical disabilities need easy-

to-open packages. Some of the primary packaging beneﬁts

that are used to differentiate products are:

. The amount in the package, to match various con-

sumption rates

. Low-cost minimal packaging for frugal shoppers

. Convenient package opening, reclosing, and dispen-

sing features for a variety of consumer use behaviors

. Longer shelf life for consumers who want to store the

product for future use, including packaging to reduce

oxidation of fats and decay of fresh fruits and

vegetables

. Special packaging for special occasions (gifts, holi-

days, etc.)

. Appeal to a consumer’s psychographic image

. Fit with a lifestyle

. Package recyclability for environmentally conscious

consumers

Of these beneﬁts, the most universal demand is for low-

cost improvements in package opening, reclosing, and

dispensing features.

Packaging affects all stages of the buyer decision

process—from problem recognition to postpurchase beha-

vior—especially for routine purchases of low-involvement

goods. Seeing a package can stimulate recognition of a

problem that could be solved by the product. Package

graphics can facilitate information search, evaluation of

alternatives, and the purchase decision, by showing the

attributes that differentiate the product inside. After the

product is purchased, packaging shows how to use the

product, and encourages a repeat purchase. Packaging

can also play a role in purchases that require more

extensive problem solving without the assistance of a

salesperson.

PACKAGING COSTS

The cost of packaging per product, expressed as a percen-

tage of selling price, varies widely, from 1% to 40%. For

some products, like bottled drinks, perfumes, and aerosols,

the package may cost more than the products’ ingredients.

These products depend on the package for their very

existence. For other products such as durable goods,

where the package is simply a means to facilitate distribu-

tion, the relative cost of the package is low.

Packaging costs depend on the materials and produc-

tion methods employed. The choice of materials generally

depends on the protection required and the marketing

requirements. Protection and preservation needs depend

on the nature of the product and its logistical system;

fragile products and packages that will be roughly

handled during distribution require more protection

than do rugged products; and for perishable products to

be stored, more preservation is required.

There is a growing recognition that package system

development should begin early in the product develop-

ment process. Packaging-related cost tradeoffs are much

easier to optimize before the product is fully developed.

For example, product modiﬁcation to reduce fragility may

be more economical than improving package protection.

Material Costs

Packaging materials include the primary package and its

closure, the shipping container, and unitization materials.

The cost of packaging materials depends on the cost of the

raw materials (plastic, paper, wood, glass, and/or metal)

plus the cost of conversion into packages to be ﬁlled. Most

of the raw materials are competitively priced commodities.

U.S. prices for raw materials can be found in publications

such as Plastics News and Ofﬁcial Board Markets.

The percentage of the sales price represented by the

raw material cost ﬂuctuates, depending on commodity

markets. In 2002, U.S. manufacturers of paperboard

packaging spent, on average, 54% of the sales price on

raw materials. It is highest for metal containers, 63%, and

lowest for glass, 37% (2).

The more complex conversion processes, such as mold-

ing, coating, or laminating, add a greater percentage to

the cost of converting the ﬁnished package. The conver-

sion setup cost can also vary by container type. Conversion

processes that require tooling, dies, or molds add ﬁxed

costs that are generally amortized over an initial produc-

tion period.

The prices of packaging supplies are also affected by

competition, vertical integration, and opportunities for

intermaterial substitution. Prices are affected by general

economic conditions such as recessions that result in

oversupply, growth cycles that strain production capacity,

and the cost of energy. The export demand for goods and

for packaging materials also affects prices.

Packages can be purchased directly from the converters

or from independent distributors. While a converter may

offer

a lower price

for high-volume orders, it is rare to be

able to purchase all packaging components from a single

supplier. Bottles may be purchased from the bottle man-

ufacturer, but caps, labels, shipping containers, pallets,

and stretch-wrap will be purchased from other sources

(although in the United States, glass bottles are often sold

in corrugated ﬁberboard ‘‘reshipper’’ boxes). Independent

distributors offer various components as well as entire

packaging systems.

Most packaging is purchased competitively, especially

when it is a standard commodity. For example, corrugated

ﬁberboard regular slotted containers have standardized

properties and are very similar when purchased from

different suppliers. In order to ensure low cost, a purcha-

ser may encourage competing ﬁrms to bid against one

another. Packaging innovations, like light-weighting or

material substitutions, are often introduced by one sup-

plier competing against another.

At the same time, there is a countervailing trend to

closer partnerships between packaging suppliers and

purchasers. In exchange for a single-source contract,

suppliers provide services such as design, quality

ECONOMICS OF PACKAGING 387