 Good afternoon. I'm Rebecca Marquez, Business Intelligence Coordinator with PMMI, and I'd like to thank you for joining today's webinar on PMMI's Dairy Market Trends in Packaging and Processing Operations Report. Over the next hour, Nina Hallquist with Proactive Worldwide Inc. will provide insight into the trends in dairy operations and the growing demand for new, flexible, versatile packaging and processing equipment. Nina Hallquist is a strategic marketing professional with more than 15 years of experience conducting research and leading teams in global market studies, competitive analysis, strategy development, business planning and implementation. She leads research projects for proactive worldwide, a strategy consulting and decision support firm that serves multinational corporations across several industries, including consumer goods and industrial manufacturing. Today's discussion will focus on the global dairy market growth, dairy product and packaging trends, original equipment manufacturer or OEM packaging and project involvement, packaging equipment investment timeframe, equipment demand and specifications, equipment automation drivers, and potential equipment provider solutions. At the end of the presentation, which will last approximately 45 to 50 minutes, Nina will answer any questions you may have. At this point, I would like to hand the webinar over to Nina Hallquist with proactive worldwide. So much, Rebecca. Thank you very much. Good afternoon everybody. Thanks very much for your attendance today. And so I'm here to talk about trends in dairy packaging and processing operations. And this is actually a recap of a 2013 market study that PMMI did. And so throughout this study, we really focused on looking at global market size and structure and trends for the dairy industry and also the drivers affecting it as well, marketing distribution, consumer trends and emerging trends as well. And then looked at how that affected the processing and packaging supply chain for the industry as well for both primary and secondary packaging. And then we also interviewed a number of different industry segments including CPG and food suppliers to get really an unbiased and kind of objective understanding of the decision makers within the dairy industry at those companies and the implications for investments. We looked at regulatory issues affecting dairy industry and packaging. And we also evaluated if there will be an increase or decrease in the amount of packaging and processing machinery purchased in the industry. So those were kind of the main topics that we covered here. So I'll talk a little bit about the study methodology that we used to conduct the study. And then I'll get into the topics that Rebecca just went over here. So in terms of methodology, we had 75 respondents to our study. Majority of them were in North America, primarily from the US, although we did have one from Canada and one from Mexico in North America. And then the remaining 23% were really spread across the EMEA region, Australia, New Zealand, and also Latin America as well. As far as industry segments, food suppliers and producers made up the largest portion of respondents. And so there we have, you know, the real decision makers in terms of packaging. Also, we got the point of view of the machine equipment providers, CPG firms, and package materials suppliers as well. So those were the segments that we covered. And then as far as the specific role of the respondents, it ranged from project engineering to design to sales and marketing as well. A lot of folks focusing on operations. That was the largest segment followed by packaging engineering. So when we look at the global dairy market, what are we seeing growth-wise? Well, in terms of milk production, and we looked at that as kind of one of the main metrics for growth, we're seeing slow growth there among the major exporters. And you can see there the graph from the USDA for global milk production on that one. But there definitely are opportunities in particular segments that are definitely growing. And cheese and yogurt in particular were a couple of areas that we were hearing as we did our study that were growing, certainly for cheese, the number of varieties of cheese that people are demanding as pallets change and become more sophisticated. And also, yogurt just continues its strong growth that has taken place over the last several years. That is continuing. So there are definitely areas of growth within the dairy market. There are also opportunities that we identified, particularly in emerging markets, if processors are willing to take this on and export, really growth markets in China and India that we're seeing. And also, key consumer trends, processors can definitely tailor their business practices to meet shopper needs. And there when we were looking at millennials gaining buying power, their consumer preferences continuing to shift and really wanting things like on-the-go portions and choice and being able to personalize things. Also choosing organic and natural options. We're seeing those trends there. So being able to meet those needs. And then thirdly, opportunities around operational efficiency. So throughout the whole supply chain, managing costs, network optimization, et cetera, and really maximizing supply chain and logistics. And one area in particular that we're going to focus on a little later here is how you can improve operational efficiency through automation and automation of packaging. And so that was one topic that respondents did give us some color commentary on. So we'll be talking about that. In terms of dairy product trends, as I mentioned, we're really seeing the demand for natural products, organic products, artisanal products with fewer additives. All of these things are really definitely trends that we're seeing. Consumers want more transparency about the product's provenance, where it originated. And this is leading to some changes in dairy product recipes, fewer additives, and also processing and packaging. One example of that is growing popularity of processes such as filtration to increase shelf life. So if you use more natural products and fewer additives, then you have to find other ways to increase shelf life filtration is one of them as well. And so specific trends that we're seeing is milk seen as a health food. So fortified milk, flavored milk, drinkable yogurts and things, really marketed as things that are healthy for you and packing nutrients. Also, as I mentioned, those kind of on the go portion controlled dairy snacks, and even targeted at different times of day. So a mid morning snack, yogurt, for example. So that was a trend that we were seeing continuing popularity of yogurt. And this is back to the 2013 study yogurt was mentioned as a fast growing dairy product. It still is today and continues to grow. And more flavor variety and cheese, we talked about that and more flavors and different types of cheese. One responded talked about, you know, five different types of anti-go cheese that that they're seeing in stores now. So definitely more variety there. And also the reemergence of butter and fat rich dairy. And this is this is more recent. Attitudes are changing a little bit. As folks learn a little bit more about the types of fats and properties of dairy fats that that are held actually viewed as healthy now and not associated with chronic disease. And so we're seeing some of those products regaining market share. And that's a little bit of a difference from the flashback to the 2013 study that you can see there. But folks were still talking about low fat or fat free products. But a little bit of a change there. But otherwise pretty consistent with yogurt being a still a popular product organics being definitely popular and fortified products as well. One other thing I wanted to mention here is that some of what's driving this is the requirements for GMO labeling in the US. And there so that's even reinforcing this demand for more kind of organic products also more transparency on food labeling as well in general. So that's that's another kind of driver here also. And then how does this flow through to dairy packaging trends while they are reflecting the demand for more natural and organic organic dairy products. And so when one consequence of this is that basically CPG firms and food suppliers are looking for more shelf stable packaging. Because again, this is a way to preserve products that have more natural ingredients and then fewer additives and keep them as you know, as fresh as possible while being as natural as possible. And one one thing that we were seeing among respondents with the demand for aseptic packaging is particularly strong. And they also specifically mentioned things like modified atmosphere packaging as a shelf stable packaging alternative Tetra pack was mentioned. That's more popular in EMEA and developing markets, but it was certainly mentioned as an option. Also biodegradable and transparent packaging. So this is kind of to complement the organic dairy food trend and comply with environmental regulations, particularly in EMEA, they are more stringent on biodegradable packaging there. So that was a driver for them. And consumers themselves are also asking for more transparent, clear see through packaging against going going back to the whole transparency trend there and knowing what what goes into your food. One thing that was mentioned also was recyclable improvements in packaging as an innovation disruptor. So equipment improvements were recyclable, high density polyethylene bottles was was one example that was given by respondents as kind of an innovation disruptor there. And then thirdly, a key packaging trend is flexible and retail ready packaging. And this is really being driven by the big box retailers. They want flexible packaging. They want retail ready. And that meaning ready to display. And so a couple of examples of that are display ready corrugated cases and secondary patching packaging that is easy to remove. But things that can be immediately put on the shelf so they don't have to be hung or have kind of secondary steps taken that they're immediately ready for retail display. And then a flashback to the 2013 study, some kind of enduring packaging trends, we did see some overlap. So shelf stable, again, single servant on the goat packs, we were hearing about those individual servings also and sustainability labeling concerns. So that was that was a concern then as well. And it continues to be now, especially with the legislation that has gone through and is now long. And flexible packaging, growing use of standup patches that all of those things continue to be trends that we're seeing. Okay, so in terms of regional packaging, dairy packaging trends, we were looking at, you know, what type of packaging is more popular region by region. And so what we were seeing is that rigid plastic is the most popular dairy packaging product pretty much in everywhere, except for Asia Pacific where liquid cartons are most popular. And so they definitely account for the highest share of overall packaging in Western Europe and North America also. And they account for a significant units, number of units in Asia Pacific as well obviously with a large population there, even though it's the second most popular packaging product behind liquid cartons, still large number of units demanded there. Flexible packaging is also another packaging type that's popular in Asia Pacific and Eastern Europe and Latin America. But liquid cartons are kind of the most second most popular in Western Europe and also Latin America. In terms of original equipment, manufacturer project involvement. So here we were asking about respondents, particularly from, you know, the CPG firms, the food suppliers, you know, when do you want packaging OEMs to be involved in your projects? When do you feel that they provide value? And they said, particularly for as our needs become more complex as we want and demand more flexible and versatile types of packaging, we want machines that can accommodate that, that can be reconfigured to produce multiple types of packaging. As a result, we want to, for those types of projects that are more complex, we want to bring OEMs in earlier, and we do, to advise on what's possible with packaging design. So they're, they're part of the, you know, design and analysis process. And they want them to be a collaborative, collaborative advisor on those machines. And the machine equipment providers we talk to themselves also want to be seen as a collaborative advisor certainly than rather than just competing on price. Because they really want to be able to make suggestions on things like production techniques. And, you know, things that they see will be able to result in a lower total cost of ownership and higher ROI for, for their customers. So they definitely want to be involved there. One thing that they said was, if we are reduced to compete on price, then it becomes, it becomes very difficult to differentiate yourself. So really, we want to be, you know, we, we aim to be involved earlier so that we can set ourselves apart and really provide value to our customers. In terms of equipment investment drivers there, you know, clearly ROI is one of them. But some others that have mentioned were, again, improvements in machine flexibility, speed, versatility, being able to reduce different types of packaging using one machine, that was a consistent theme. Also, greater automation to increase efficiency. So, and there are different types of automation that people talked about and ways to automate. We'll talk about that in a couple slides here. And then thirdly, solutions to specific pain points. And here folks talked about the Food Safety Monetization Act and all the documentation requirements that go along with that as something that they were looking for, you know, as they invest in equipment and they have to do documentation, they're looking for monitoring capabilities, tracking trace capabilities that will really help them comply with all the documentation that they have to produce for this so that it will support those efforts. In terms of equipment investment timeframe, the CPG firms and food suppliers, we spoke to invest in the food packaging equipment annually, but that's a little bit misleading because they're typically investing just to replace worn out equipment, not all of their equipment, of course. And so that means that, you know, it could be different annual cycles for different types of equipment. So, and they said that, you know, new packaging equipment projects don't occur every year. So, you know, the equipment timeframes can vary considerably. And they say they said that their packaging equipment typically has a 10 year life cycle. So there's not a very regular cycle with investment, although you know, they do invest annually, but it could be for different types of equipment each year. And then obviously, with the equipment life cycle, investment timeframes can vary. They also talked about retrofits. And they said that retrofits were often easier to justify as an investment. So retrofitting an existing piece of equipment, rather than purchasing a new machine. So that was something that, you know, when they were making arguments to their management about what kind of equipment their equipment needs and new equipment they needed, retrofits were a little bit of an easier case to make than new packaging equipment. So that was as identified as a challenge. But one thing they said that they thought would be a differentiator. And this is again, the CPG firms and suppliers that we talked to when thinking about packaging equipment providers. A differentiator would be an OEM designing a versatile machine to convert for multiple package types. So this was definitely identified as something that would be, you know, unique in ad value that they're not seeing as much. So that's an opportunity for packaging equipment providers. In terms of equipment demand and specifications. So here again, we're seeing that that self shelf stable packaging, specific types mentioned, were aseptic tetra pack again, although again, that was that was more focused for the EMEA respondents, and modified atmosphere packaging and being in greater demand, again, because of natural product trends. They also mentioned vacuum packaging also. And also, flexible packaging, being able to make flexible pouches, guess it, things like that. Equipment to make secondary packaging that is shelf ready. One example that they gave was perforated secondary packaging. For example, so basically packaging that is flexible and retail ready. And then conversion equipment to enable packaging machines to produce multiple types of packaging, as we mentioned previously. And then in terms of so we see packaging trends driving packaging equipment demand, we're also seeing regulatory requirements, driving equipment design and specs. So one big trend here was hygienic design and really driven by regulatory requirements that have increased the demand for hygienically designed packaging equipment, equipment that's easy to clean with stands being wet from the cleaning process. Particularly, one specific thing they mentioned was switches that must be they called the IP6778 was one spec they mentioned and also being able to withstand high pressure water from the cleaning process. That was a requirement. Also, stainless steel was something that was mentioned consistently. And specifically, stainless steel 316 for equipment, screws, bolts, all of those things that come into contact with dairy, but also several respondents said that they would prefer stainless steel, even per machine parts that do not contact dairy products, just so that they ensure they're compliant and prevent any high profile contamination. So regulatory requirements, certainly you're driving that. And so they said that even if the that equipment wasn't touching dairy products, they still want it to be stainless steel to ensure hygienic equipment capabilities that were in highest demand, there were flexibility. So again, producing multiple packages and size and types of capability to do that to produce packaging quickly with shorter production runs, and being able to change over easily. That was another theme that was definitely highlighted. Being easy to clean and being hygienically designed, enabling clean in place, for example, to comply with regulatory requirements was in high demand. And then automation and specifically they talked about robotics to execute repetitive tasks. So that would be a way to increase operational efficiency there. Specific equipment that respondent respondents mentioned most often as being in highest demand, where the case packers and case form packaging, fillers, flow wrappers and high speed horizontal film seal. They also talked about using total productive maintenance procedures and single minute exchange of dyes as capabilities there. So really the themes here are kind of regulatory requirements and packaging trends driving that demand. And we mentioned automation a few times here. So when we asked specifically about you know, what's really driving automation capabilities for dairy packaging equipment, really it was all about achieving greater production and cost efficiency. And this was in particular in developed markets where labor costs are higher. So that was mentioned most often in North American Western Europe. Also, with the growing use of big data and intelligent machines, that is enabling track and trace capabilities, and also enabling accurate documentation. So when responded in particular talked about business rules and how he has to document every single step of its production process, and how you know, difficult that will be. And so if he can have any way that automated machines can help him do that, that would absolutely be a differentiator for him. In terms of challenge automation challenges, and this is where, you know, the difficulties with using automated machines will require greater support from package equipment providers. So you know, automated equipment definitely increases efficiency, but it does tend to break down and take longer to diagnose and fix, because it's more complex. So they need greater support in doing that. And it requires greater technical ability to operate. So getting more training on that to be able to operate it and maintain it effectively is another area of support that they're looking for from OEMs. As far as specific things that they are, they have been looking to automate a couple of examples where things like automated bag handling, filling and palitizing as well. Those were examples of kind of automated procedures. So in terms of kind of the ask for OEMs here again, we're training on the automated equipment, providing good aftermarket support. So if there is a problem, they can get in touch with the manufacturer to understand how to resolve it. And also, thirdly, they talked about incorporating analytic capabilities into automated dairy packaging machines. And specific areas they talked about there were monitoring equipment and performance, production metrics, and specific production metrics they talked about were things like runtime and downtime, line feeds, batch sizes, overall asset utilization, and improving change over time. So that those were several kind of specific metrics that they were talking about when they talked about analytics for production there. They also talked about using analytics to help troubleshoot and diagnose the cause of production problems. And then track and trace capabilities as well to help them comply with regulatory requirements again. And then a few other analytics metrics that they talked about were those for production, so things like the number of cartons and liters per hour, and also troubleshooting as well. And interestingly, a couple of respondents, we talked to an export manager specifically for an equipment provider said that, you know, not all dairies are asking for this yet, but as regulatory requirements become more stringent, more and more of them are starting to. So he saw this definitely as a trend that he was seeing in terms of what's demanded for equipment. So given what we've talked about in terms of what's being demanded as far as dairy products and then what that means for packaging and what equipment providers can do. Here are some kind of challenges and then some potential solutions that we saw as we were doing this study. So food companies expenses are increasing, and that's due to some vertical integration into the industry. And one example of this is that that we were hearing about a few times from a few respondents is that companies like TPG firms like Walmart are getting into dairy processing. And so they're they're they're even facing competition from former customers. So that's causing greater competition, more price pressure. And then they're also on the flip side, they're seeing increasing expenses due to the fact that more organic and natural dairy products are being required. So they're having to change the way they're packaging. That increases expenses. So given these two kind of two pressures that they're feeling, what can equipment providers do to provide some solutions. And so a few things that we thought of were collaborating with dairy customers to kind of learn more about their business, work with them to develop business processes that integrate better with the processing and packaging, packaging equipment, so that the equipment itself works well with the dairy customers business processes that are already established. So that just makes everything more efficient, less labor intensive, and more cost effective. Another option we thought of is basically listing price options on a price menu, so that the customers can tailor the packaging to their needs with cost in mind. So you know, as they're facing facing increased expenses and the rest of their business, they can really tailor the packaging equipment to to what they need and their budget. We also thought of perhaps developing an auditing program. And so there the machine William could come in and review the machine performance and provide a lifetime cycle runtime estimate there to see if the machine is really, you know, running the way it should be still has the same product lifecycle that it originally was supposed to have, or should it be replaced sooner. This is basically a way to kind of track your installed base to see where opportunities may come up. But it's also a way to kind of reestablish and reinforce your relationship with your customers as well. Another challenge we're seeing for food companies is that demand for shelf stable and hygienic packaging for dairy. And so, you know, packaging that improves the shelf life of natural dairy products. And so a couple of solutions we thought of there were designing packaging machines for obviously shelf stable packaging that's hygienic, extending dairy product shelf life. So that's definitely a trend that we heard over and over. You could also partner with a firm that specializes in cleaning solutions to provide cleaning solutions and consulting on dairy packaging equipment machines. So they're just fulfilling that demand for hygiene and clean and place as well. Some other challenges we did we identified through the study. So we've talked about increasing regulatory restrictions. And so, you know, rules are becoming more complex, certainly in the US with FSMA. And those types of rules have already existed in the MEA for some time. And so, and continue to become more stringent. So in order to respond to this, some solutions you could provide are manufacturing dairy equipment packaging machines, again, with stainless steel and electrical switches. And those were two things that respondents mentioned most often that they were that they would look to require in dairy packaging equipment. Producing machines with automated production monitoring, as we talked about. And then another thing that was mentioned was producing machines that can add QR codes to packaging. This is just another way to provide those track and trace capabilities as well. Another challenge that food companies talked about was flexibility in equipment, equipment that can be easily modified to different material types of sizes that enable changeovers quickly. That was another trend. And so, a solution could be designing machines that can accommodate multiple packaged materials, thicknesses, types, and conversion equipment. So enabling those changeovers. Another solution could be designing more machines with more integrated lines to keep products under control and basically using enabling these more packaging materials shorter runs, shorter runs were definitely mentioned, and then more customization. And finally, they had difficulties operating automated machines, like we talked about. So providing that training, ongoing technical support to operators, and providing that training upfront to make sure that they're well versed in their automated equipment, adding analytic features to help operators diagnose machine issues as well as tracking production metrics, so those two things. And then one thing that we heard from respondents as well was it was kind of a unique solution, adding augmented reality visual tool to help operators troubleshoot problems. And one example that was given for this was that diversity care has an augmented reality iPad app that overlays the control panel of the dishwasher so that restaurants can troubleshoot what's wrong with their machines and attempt fixes. And so this is, you know, obviously not a direct comparison, but it's just an example of what could be possible to help operators troubleshoot on their own rather than having to call the equipment manufacturer and get support from them. So just another way to enable them to kind of fix it on their own if they can. So that takes us through the executive summary findings of our report and obviously we have the full report available to you. But any questions at this time? Nina, thank you for your insight on the dairy market trends in packaging and processing operations report and how it's going to affect the packaging and processing industry. I would also like to open up the session up to questions. Please enter any questions that you would like to have answered in the message or chat box and we can have those addressed. Okay, Nina, I do have one question. In terms of monitoring and analytics. In any of your interviews, did you find any mentions of remote access capabilities that would be requested or communicated to OEMs? You know, we didn't hear about remote access capabilities is more around the specifics around, you know, some production metrics and also the helping with documentation monitoring. But I will tell you that in our work with other machine providers, certainly remote access is something that they are working on and enabling in their machines as people, you know, more and more are out of the office or, you know, at another site or just geographically dispersed in terms of operations. It's certainly something that we're seeing overall. They didn't mention it specifically here very much, but it's certainly an overall trend. Okay, great. And if anyone does have any questions, you can feel free to answer them in the question chat box and I'll make sure that that gets addressed. I do have one other question so far. Is there anything that you uncovered in your interviews that might be perceived as an obstacle to innovation on equipment design? I think one thing that was difficult for equipment providers was just the lack of consistency and investment time frames. And so, you know, they cited that as a challenge because, of course, the business flow then is not consistent. So that makes it a little bit more difficult to invest in machine equipment innovation and trying new things. So that was one thing that was difficult, but they know the key trends that they need to go after. They do know that, you know, automation and analytics is something that people are looking for and versatility is something people are looking for. So they're certainly looking to invest in that, but just having that kind of consistent revenue flow and cash flow was a challenge. Okay, great. One thing I should mention that I forgot to actually at the beginning here in terms of dairy market trends, in terms of the structure of the industry, we had been seeing some consolidation with large CPG firms, you know, kind of snapping up smaller ones. And I think one example that we heard was like Lactalis buying Parmalat and Galbani was one example, but there were several others. But they said that, I'll respond and say that really their perception was that this kind of consolidation trend is slowing down a little bit now. And so the implications being that, you know, industry stabilizing a little bit, but then they also identified a disruptor is that vertical integration that I was talking about with Walmart and others like Kroger is getting into dairy processing as well. So they're starting to see some of their big customers starting to compete with them too. So just a couple of trends there. Okay. And if there's any other questions, please feel free to add them into the question chat box. I do see a couple. What is from Jorge? Do you see any specific opportunities on dairy segments and yogurt cheeses that he put in there? So yogurt is definitely still growing and companies are even collaborating with like packaged designers like artists to try and differentiate their yogurt products. You'll play in particular and we have an example in the report is doing that just to try because there's so, you know, it obviously grows trend. So there are a lot, there's a lot of competition. And so they're trying to figure out different ways to compete. One of them is working with artists. Another is trying to figure out different packaged designs like having the spoon in the lid, for example. And so they're trying different ways to compete in that market. It's growing, but it's competitive. Cheese as well is another growing segment. And there they were talking about individual servings of cheese and different kinds of more sophisticated cheeses, particular opportunities there. So Manchego, really things like that. But so those were the specific things they mentioned there. Okay, great. And I do see another question here. Are these dairies interested in standardizing across their divisions? Do they have engineering located at one location and then have a different and then have different regional needs? There, we didn't get a specific feedback on that. We did see some differentiation in packaging needs across different regions. So like for in North America, for example, people really emphasizing that they were very concerned about having to comply with FSMA and also the new GMO labeling regulations coming in. And so they were concerned about how to deal with that. They were also, I mean, they were also concerned with more environmental packaging as well. So that was mentioned more often as a need. We need to have biodegradable packaging because it's a regulatory requirement here. So that was a little bit of a difference there. They didn't mention standardization across divisions. We talked to a lot of different types of firms. So we talked to large CPG firms. We talked to smaller dairy farms and then food suppliers in between those two extremes. They didn't talk about standardizing across their divisions so much. But that certainly could be a possibility. Okay, great. Well, Nina, I think that's it for the questions right now. So I think we can conclude here. On behalf of PMMI, thank you so much for participating in today's webinar. As a final note, for everyone who attended, you'll be receiving an email with an evaluation for today's webinar. Please take a moment to complete the evaluation and let us know how we can improve this presentation like this. And thank you very much. And thank you so much, Nina, for helping us out today. Absolutely, it was my pleasure. Thank you. Have a good afternoon. All right. Thank you.