Packaging giants in grip of price war ponder future

By LIBBY MIDDLEBROOK

Intense competition in the packaging industry continues to drive down prices, pushing at least one manufacturer into the red, with no early end to the price war in sight.

"The industry stinks in this country from a profit perspective - we're all in dire straits," said one industry player.

In recent results, Carter Holt Harvey said its packaging division had an operating loss of $3 million for the six months to September 30.

Other large companies such as Kiwi Packaging are also feeling the pinch, as prices for their products have slipped more than 20 per cent since 1997.

Kiwi and CHH comfortably shared a 50-50 split of the commercial packaging industry until Australian-based Visy Board set its sights on New Zealand in 1997.

Since then, Visy has established a $35 million corrugated packaging plant in Auckland and won several lucrative contracts off the two packaging giants including work for Lion Nathan, the Dairy Board, Fisher & Paykel and Heinz Wattie.

It is estimated that Visy now holds 20 per cent of the corrugated packaging market.

The increased competition has forced prices down for most packaging products, although the packaging chief executive for CHH, Ian Unwin, expects them to stabilise over the next two quarters.

"Prices in New Zealand used to be higher than the rest of the world but we're very competitive now," said Mr Unwin.

"New Zealand is benefiting from that at our expense."

The division, which also has an Australian operation, has closed more than 10 manufacturing facilities in the past three years, with about 500 redundancies.

Mr Unwin said CHH planned to continue to reduce its operating costs and did not rule out further factory closures. He said the division's Australian-based corrugated packaging facility, which had been operating at a loss, would also improve its performance during the next six months.

"New Zealand has been the biggest reason for the fall in performance, especially in the corrugated business."

Kiwi Packaging's general manager, Ian Sangster, said most packaging companies had been forced to reduce operating costs. He expected prices to stabilise over the next 18 months.

"There gets to a point where you can't take any more out of the business. I think the packaging companies are essentially saying they've had enough of the price slide and they've got to get business back to profitability."