Abstract
Increased Manufacturing Costs Make Pricing a Key Differentiator for Suppliers in the U.S. Caps
and Closures Market
Price competition in some of the commodity type packaging markets such as continuous thread and
tamper evident has intensified over the past few years. Increasingly, suppliers have to compete on
price in order to build a long-term strategic partnership with their customers. Closure products
such as metal crowns have minimal product differentiation and this gives the customer better
bargaining powers while determining the supply price. Nonetheless, this has not resulted in a
significant dip in prices, since rising raw material and energy prices are adding to the
manufacturing costs. Most suppliers have contracts with their customers and the increased raw
material costs are being passed on to them. However, energy costs will have to be borne by
suppliers, and this eventually impacts their profit margins.
This Frost & Sullivan research service covers the U.S. caps and closures market. The study
examines the segmentation by material types and discusses market trends. It also incorporates the
top challenges facing the industry and provides strategic recommendations to address each of them.
Changing Consumer Trends Call for Value-added Packaging Products
Higher level of consumer spending and changing consumer tastes have translated into an increase
in line extensions and new product introductions. Amidst this, the need for product differentiation
has made packaging a critical component of branding, merchandising, and promotional activities.
Packaging companies are constantly trying to improve package design by investing in research and
development. Among the many trends is the rising popularity of over caps and the shift from metal,
glass, and paperboard containers to plastics. "The changing consumer demands for dispensing of
products will increase the need for more complex and high-end closures in the future," notes
the analyst of this research.
Increasingly, buyers are locally sourcing materials in order to minimize the lead-time for
bringing out products to the market. Further, they are consolidating their vendor base to ensure
supply of products with consistent quality. This involves reducing prices to cater to the few larger
customers that expect suppliers to support them on a global basis. Such a supply chain constriction
is all about strategic sourcing by bundling larger percentages of global requirements.
However, while acquiring capabilities to supply on a global scale, small and medium-sized vendors
will be challenged to consistently meet customer requirements with their limited resources and this
makes them strong targets for takeover by bigger participants.
Collaborating with Customers in New Product Development Can Help Counter Pricing Pressure
Operational excellence coupled with constant product development to meet customer needs is likely
to help the cap and closure suppliers to counter the bargaining power of the buyers. For instance,
suppliers can collaborate with customers to develop new products and focus on custom development of
products for specific needs of the client. "Changing consumer needs is one of the most
important factors that would impact the caps and closures market in the United States," says
the analyst. "The market is in the growth phase and proactive steps to understand the varying
needs of consumers will help companies gain competitive advantage in the future." | 
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