 Good afternoon, everyone. I'm Paula Feldman, Director of Business Intelligence with PMMI, and I'd like to welcome you to today's webinar. Today, we're going to hear from David, Billy, and Andrew Jaresti, and I know I just said that wrong, Andrew. I apologize. Research consultants with DeNovo. David and Andrew will be covering the findings of PMMI's 2018 Snack Foods Packaging and Processing Market Assessment Report. David, Billy has more than 10 years of experience in the consulting industry. He joined DeNovo in 2014 and has been successfully managing consulting projects at DeNovo, such as marketing analysis and assessments, voice of customers, and lease generations for more than four years in various end markets. To include packaging, consumer industry plastics, compounders, polymers, pulp and paper coating, and heases, oil and gas, pharmaceutical, and I'm sure many, many more. Andrew joined the DeNovo team in 2017, and he has experience in manufacturing, consulting, and new business development. He's worked on several projects on global industry involving the analysis of the potential of different materials in a variety of end markets. His packaging experience started at Proctor & Gamble as a manufacturing engineer in their family care business unit. Today, David and Andrew will interpret the information included in the Snack Foods Packaging and Processing Market Assessment, providing insights and detailed information, including consumer trends, e-commerce trends, and industry forecasts by snack types. So just a few points before we start the webinar. If you have any questions at all during the webinar that you'd like to ask of David or Andrew, in the bottom left hand corner of your screen, you'll see a participant feedback box. Please type them in there, and we'll ask them at the end of the webinar. Their presentation has chalk full of information, so it'll last anywhere between 30 to 45 minutes, and they won't answer your questions at the end. So at this point, I'd like to welcome David and Andrew from DeNovo, and turn the webinar over to David. Thank you, Paula. Thank you very much. Good afternoon to you all. Thank you all for attending this webinar, so my name is David, and I'm Andrew. So as Paula introduced us already, we both work for the company DeNovo, which is specialized in B2B marketing consulting. Our office here in the U.S. is located in the Philadelphia suburbs. That's where we are right now, and we also have two offices in Germany and in China. So we recently finished that investigation for PMMI on the North American Snack Food Market, and the following is the presentation. The following presentation is the overview of our findings. The full findings can be found in the report that PMMI already published. So after a brief introduction describing the goals of the study, the market segmentation, we'll give you some numbers, market data, about the Snack Food Market nowadays. Then we'll look deeper into what are the main Snack Food Market trends. We talk about the trends and challenges that are faced by the CPGs in the industry, and then we'll have a look of their unmet needs before we reach the conclusion of this presentation. So the goal of this study was to actually refresh a 2012 study made on the Snack Food Market to provide PMMI members within the market trends, the CPG challenges, the unmet needs, and really the idea was to understand what are the implications in machinery investment in the next two to three years. So we target the Snack Food, both the sweet and savory segments, and we were focused on North America, especially on the USA, which dominates the North American Snack Food Market. So Snack Food can be defined as a small amount of food that is usually used for live meals or for eating between meals. It's more and more being seen as a meal replacement, actually. Snack Food is something that can be eaten in a hurry or in a casual manner, and that does not require any preparation. Snack Food does not need to be heated in the microwave or does not need to be filled, for example. So on this slide, what we show you here is the methodology that we use during the three months of our investigation. So we combine secondary research with mainly primary research. So we interviewed key players along the Snack Food value chain, which is described in the upper right-hand side corner. You see the main players we've interviewed, which are co-backers, brand owners, retailers. We did also talk to a few OEMs, which were contacted by PMMI and who were willing to share their insight with us here. The pie chart at the bottom shows you a breakdown of the type of player we talked to during our investigation. So to the surprise, you see co-backers, some retailers, and mostly brand owners. The reason why the slide is about brand owners, the brand owner category is so large is that it actually includes a number of co-backers for whom their own brands actually make most of their business. So we place them in the brand owner section here. The next two slides describe here the sweet and the savory snack segments and sub-signments that were part of this investigation. So on the sweet side, we have five main sub-signments that were confectionary items, bars, snack cakes and donuts, cookies and biscuits, and fruit snacks. Just as a note, I would add that for the purpose of this study, we actually put aside all dairy and frozen products. So as I said, frozen products were out of scope because they need some preparation. And dairy products, mostly yogurts, are not necessarily designed to be in as a snack in between meals but more as part of a large amount. So we omitted those in the sweet snack category. Next, on the savory snacks, we actually have a higher number of sub-signments. We have the traditional salted snacks, popcorn and rice snacks, crackers and biscuits, processed snacks. But we've also added four more recent categories of snacks which, as you'll see later, are growing fast. Those are the meat snacks, the nuts and seeds, the cheese snacks and the fresh snacks. Of all those four categories, you'll see the combination snacks which usually include a combination of all different types of food elements. Those kind of blur the lines here. So we haven't put a sub-segment dedicated to combination snacks because they actually encompass different types of food but they are counted either in meat snacks, if they are mostly made of meats or cheese, in the cheese combo category, if they were mostly made of cheese. So I will now let Andrew give you some details on the current state of the snack food markets. Okay, thank you David. So just very quickly, if anyone is not hearing us very well, please flag it to Paula and Paula can let us know. Okay, so I first want to start here with just a little bit about the snack food market both globally and in North America. And then after that we'll delve into certain snack food market trends and start talking about the impact on packaging. Okay, so on slide 8 right here, let's talk a little bit about kind of a global snack food market, see where North America fits in there and just some market specifics in general. So if you look at the charts at the top of the slide, you have a chart that kind of depicts market shared by region, some North America segment information, sweet and savory, and then we've got growth rates in the top right corner, regional growth rates. So I think the key learning here is that while Europe and North America are the two largest regional markets in terms of share and revenue, they're also the slowest growing markets which kind of make sense as well as they're developed regions in general. The developing markets of the Asia Pacific region, Latin America and Middle East and Africa are really experiencing the greatest growth. In North America, just a quick aside here, the sweet segment is worth about 60% of the market and then the savory segment controls about 40% of the market as it is today. Some regional specifics in North America and Middle East, you've got meat snacks that are growing relatively quickly. So meat snacks will also include some of those combination snacks that David is talking about right now, where you have your meat and maybe a healthy component, that kind of thing. In Asia Pacific, you've got refrigerated snacks like cheese snacks, you know, and cheese combination snacks that are growing relatively quickly. In Latin America, you've got sort of crackers and rice cakes that have experienced significant growth. In Europe, you've got dips and spreads, other types of combination snacks that have grown relatively quickly. Finally, globally, nuts and seeds exploiting the better for you trend are the fastest growing sub-segment. Also, they're very fast growing in North America and we'll get into that in just a little bit. Okay, so on this next slide right here, let's delve a little bit more into the savory side of things. So the global savory snack market was worth about $100 billion in 2016. Growing at a rate of about 9% over the next two years, or just under 10% growth rate, so it's a relatively decent growth. North America represents the largest market regionally, just under 40%. However, it is growing at a lower rate than the global growth rate. So it's just under half of the global growth rate is what North America is experiencing. So as we mentioned, meat snacks, combination snacks really are growing very fast in North America. Globally, you've got nuts and seeds that are the fastest growing sub-segment that are also really playing a big role in North America and Europe as well. So okay, so on this slide, let's talk a little bit about the sweet snack segment. So in the 2016-17 timeframe, it was worth about $55 to $60 billion annually. If you look at the table, we have some market specifics there that are associated with specific sub-segments in the sweet segment. So again, the key learning here is that you have snack cakes and confections that are your two largest sub-segments on the sweet side, but they're only growing at about an average growth rate. Whereas your snack bars and your food snacks, which are the lowest in terms of market share and size, are experiencing the greatest growth, really exploiting the better for you and single-serve trends. In terms of cookies, right now they've experienced a certain, they've stalled, cookie growth is kind of stalled right now, but we don't really believe this is the most long-term trend just because people are still going to keep buying Oreos and things like that, but just in this moment, we know cookie growth has slightly stalled. Okay, so now let's go, let's talk a little bit about some snack food market trends and really start relating that to packaging and their impact on packaging, equipment, and the space in general. Okay, so on this slide, you can see a list of the most frequently mentioned consumer trends during the primary research, during the interview phase. So you've got CPGs here that were the sort of primary group that were interviewed, but we also spoke to a number of OEMs, PMI members, and we're grateful for that, who gave us their views on the market and their customers as well. So the top four consumer trends in terms of, you know, that are playing a role in terms of packaging, equipment, impact, and are just being noticed in general are the better for you snack trend, the single-serve trend, so lower portions, lesser calories with a better for you trend, you might have production lines that are entirely dedicated to healthy snacks, and we'll get into that a little bit more later. With packaging and resealability, you want food that remains fresh because you want to take it and move it around. You've got an increasing number of flavors, so you've got flavor variety, you've got growth in combination snacks that can act as meal replacement, you've got growth in size variety, you've got an increasing awareness in terms of recyclability and desire for recyclability, see-through packaging, personalization, and especially young consumers want their sort of unique personal desires satisfied, food safety and guaranteeing food safety, and finally generic packaging, and by generic packaging we are talking about sort of having simpler packaging with sort of clear ingredient labels, the top three or four key ingredients, not really having like hydrogenated oils and that kind of thing. So those are key consumer trends that were mentioned during the interview process, and on the next slide we can see a list of the key retail trends that were mentioned as being important. So the top trend here is shelf-ready packaging. We're going to get to that a little bit later as well, but a quick synopsis, I mean probably you guys all know about this, but it's secondary packaging that is ready to be displayed on the shelf as is. So without unpacking the individual snacks one by one there are clear benefits and we'll talk about those. There's an increasing desire for stand-up pouches as well. From a retail perspective it helps with sales and marketing, you can print cool stuff on stand-up pouches essentially. There's an increasing desire for lower case counts. For smaller, for easier to open cases and smaller cases, those last three that I just mentioned really help with inventory management and streamlining, you know, unpacking costs and reducing them. Finally we talked about having smaller primary packages to really exploit the single-serve trend from a consumer perspective and then having more and more products available to entice more consumers to look at the shelves. Okay, so on this next slide let's go into a little bit more detail with respect to the better-for-you and single-serve trend. So the global healthy snacks market was worth about $20 billion in 2016. Growing at a rate of about 5%, so there's some good growth there. The goal today is to label ingredients simply and clearly on the package as I mentioned before, having maybe the top two or three ingredients mentioned. People like to know what's in their food more and more and want to be aware from a health perspective. So young consumers as I already mentioned really are driving some of these trends, the better-for-you and single-serve trends. They're more and more health-conscious, they're aware of what they're eating and also they want a lot of their unique desires satisfied as I already mentioned. And finally from a combination snack perspective, a lot of these combo snacks are really including a healthy component and are serving as meal replacement alternatives. So what does this mean from a packaging perspective? So growth in better-for-you snacks implies a potential investment in machinery for bars, so floor wrappers, for nuts and healthy chips. So pouch fillers including form fill seal machinery and also SRPs or shelf-ready packaging-based case packers. And then for combination snacks you're going to need a lot of tray fillers there. So we really expect growth in investment in those types of machines. And so with continued innovation OEMs can continue to meet the needs of the CPG space and the market in general. And what does the single-serve trend mean from a packaging perspective? You'll need faster primary packaging equipment to be able to keep the rate of production at least the same. Typically you reduce packages, but that typically reduces your overall production rate, so you want to increase the speed of these primary packaging machines to be able to keep things at least the same. Okay, so on this next slide, let's talk a little bit about kind of this explosion in number of product options, this explosion in skews that's been driven by a number of trends. So first of all, and I've kind of mentioned this a couple of times now, there's millennials today or sort of young consumers, quote-unquote, have a really wide variety of needs. Everyone wants kind of their own needs satisfied. And it's different to how families traditionally purchase their snacks. So that means that there needs to be more product options out there in terms of the actual food, more packaging options, that kind of thing. The growth in single-serve as well. So what does that mean? You've got traditional larger-sized options that have remained available on the market. And you also have now single-serve options, so smaller packages with lower portions that are available as well. You have also increased the number of flavors that are available. You know, again, tying into what we were talking about in terms of satisfying unique designers. And finally, the better view trend is playing a role here. You've got your traditional options that are still available, and you now have a lot of healthy options for the different sub segments that are also available. So what does this mean from a packaging perspective? You have a huge number of SKUs today and an increasing number of product options. You need to have a machinery that is flexible enough to be able to run the different types of packages. To be able to run the different types of sizes. To be able to execute changeovers very efficiently. And so that's the impact kind of on packaging, machinery, and flexibility from the growth in the number of SKUs. Okay, so on this next slide, let's talk a little bit about flexible packaging, which is obviously very interesting in many different spaces, including in the food and beverage and the snack food space. So overall, some market specifics here. So globally, the flexible packaging market was worth about $100 billion in 2016, experiencing some decent growth as well currently and over the next few years. On the US side, the US had about 25% of the global market in 2016. The key point here really is that while the global rigid packaging market remains larger, the global flexible packaging market is growing much faster. And what's that growth been driven by? You know, the appearance and demand for unique types of stand-up pouches. You've got quad-packs, you've got toy-packs, you've got a number of them that are playing a role and CPGs are paying attention to that. So you need machinery that is adapted to these different types of unique packages. The benefits of flexible packaging is probably self-explanatory to most of you guys. You know, they're better suited for printing, so that's a great marketing tool. They take up less space on average than similar rigid packages. And then of course, the multilayer films allow for food preservation and longer shelf life. So there's a lot of demand as well for resealable flexible packages. You know, that continues to help with food preservation. You eat a little bit now, you take your snack somewhere else, and you can still eat it while fresh as well. So that's going to continue to drive growth in zippered stand-up pouches and from a packaging equipment perspective, that's going to mean growth, more growth in form-filled steel machinery, which we're going to talk about a bit more later as well. Okay, so now let's get into e-commerce and kind of talk a little bit about its impact on packaging. So let's first define e-commerce. So e-commerce is essentially all snacks that are sold online. So your typical online retailer is the likes of Amazon. You also have your traditional retailers like Walmart and Kroger that have online options. And so the key here is that these snacks are sold online that are delivered to your home. You don't have to move and go anywhere. So if you look at the table, there are some market-specific that are associated with some specific sub-segments here. The point to show is that you still have some relatively low sales numbers and revenue generated by the e-commerce portion of sales in the different sub-segments. But the e-commerce segment is growing at really large rates, 10, 20, 30% in the different sub-segments. And so it's going to continue to play a huge role and it's going to grow in terms of its impact over the next few years. So what does that mean from a packaging perspective? First of all, its impact on packaging has been confirmed throughout the primary research phase by a number of CPGs. And so we know, for example, that certain CPGs are in negotiations with the retailers regarding producing lower case counts that are specifically geared for e-commerce. You want packaging that is called online ready, that is ready to be shipped as is and that minimizes the repacking effort. So having smaller cases, lower case counts, easier to open cases, ideally if you can produce cases or if you can produce packages that are just ready to be shipped as is without having any unpacking and repacking done, that's the ideal. But the approach there is going to be via the smaller cases and the lower case counts and that kind of thing. So that's the impact that e-commerce is having on the packaging equipment side right now. And OEMs are going to continue to have to pay attention to that. Okay, so on this next slide right here we already touched upon SRP a little bit and now let's talk about it in a little bit more detail. So the shelf ready packaging trend is one that is being driven by Walmart and Kloger and typically especially Walmart, a big leader in terms of influencing other retailers to catch on to certain trends. So what is shelf ready packaging? Again, secondary packaging that is ready to be displayed as is on the shelf. You're not unpacking individual snacks one by one. You're just removing essentially the top of the case. And now you've got a display and you've got your primary packs that are ready to be pulled from the shelf. So what are the benefits? It reduces unpacking costs so that's clear. There's certain marketing and brand promotion benefits as well. You can display cool graphics and just cool messages essentially on the cases themselves. From a packaging equipment perspective, what does that mean? There are many different types of shelf ready packaging. So that puts significant pressure on secondary packaging flexibility. Your case packers and your secondary packaging equipment must be flexible enough to run the different types of SRP based cases and it must be flexible enough to reduce downtime while running the different cases, that kind of thing. Other important retail trends that we mentioned lower case counts, easier to open cases, small cases, all that helps reduce inventory management costs as well. And finally, just to end this section on market trends, let's talk a little bit about kind of the theme of sustainability and we'll split that into two sort of segments. Material usage and then sustainable packaging so sort of recyclability. So on the material usage side, the growth of the single server and the lower case count trends means that unit material costs increase. So the material costs that are associated with producing one snack unit essentially increase as you reduce the size of these packages. So that means that a lot of CPGs are going to be focused on trying to reduce material costs there. The increase in the number of product options, the skew explosion, means you have more changeovers, more downtime. So reducing material usage is one way of reducing overall inefficiencies as well and helping mitigate the impact of having more changeovers. And finally, reducing material usage helps achieve sustainability goals. You can use that from a marketing perspective. So we talked to a number of CPGs and a few of them have told us really that one of their top priorities is to focus on finding ways to wrap primary and secondary packaging more tightly around concepts. That's something that's already being done in Europe and Asia and they want to see more of this in North America as well. So there's a belief that there's going to need to be innovation in primary and secondary packaging equipment to make this happen, and I know it's a general statement, but what's been mentioned was there may be a need to integrate primary and secondary packaging processes in order to allow for this optimal usage of material. And so we'll touch upon that later as well. So from a sustainable packaging side, so while consumers, what we found is while consumers are of course most more aware of sustainability issues and there's a greater desire for recyclability overall, lack of packaging sustainability is not currently an obstacle to purchase for consumers, and it's not likely to be over the next two to three years. This is a more long-term thing. And so all the better for OEM and CPGs right now because CPGs have tried running different packages that contain post-consumer materials or recycled material, and have had trouble doing so. So there needs to be an improvement in material to packaging equipment compatibility, so not just on the packaging equipment side, but on the material side as well, to be able to include recycled materials more efficiently in packaging processes. And so one last point here, sustainable materials and recyclability has been described as more of a customer-driven phenomenon than a consumer-driven phenomenon. It's retailers that are trying to get ahead and thinking about, well, when are consumers really going to start caring about this rather than consumers actually requiring this right now and demanding it as a requirement for purchase. So over the next two to three years, not a huge obstacle, but will be important in the long term and so it's important to pay attention to this but only in the long term. So I'm just going to pass it back to David right now to talk a little bit more about industry trends and challenges. Thank you, Andrew. So in this next section, we'll discuss the main trends and challenges that are witnessed and faced by the snack food industry. And I will start with a few words about the latest regulatory developments before talking about the importance of contract manufacturing and then highlighting the use of probiotics and other industry trends. So the main regulations that were discussed during our investigation were the Food Safety Modernization Act, which is the latest law addressing food safety and thus impacting the snack food manufacturers. But we also talked about the USDA standards. They have been mentioned by the CPGs who are known as meat and cheese mostly. We say that those standards are even stricter than the effecimate standards. That is why Combo Snacks, for example, are usually developed by meat and cheese companies like Oscar Mayer, Sargento, rather than traditional snack food companies which are not used to deliver with the stricter USDA standards. So the main drivers behind those stricter and more complex regulations are clearly food safety and product tracking. And it's not only the regulator that pushes for more complex regulations, but even food companies themselves they get aware of this and they want to avoid the costly product recalls that will be triggered by food contamination. So what it means in terms of CPGO variations, then first there is a need for more stringent documentation and reporting. There are some new labeling requirements, especially for tracking of goods and ingredients across the value chain down to the consumer. And mostly there are increased efforts to ensure cleanliness of the processing and packaging line. On the packaging side, this is obviously true for primary packaging equipment, but also to some extent to secondary packaging equipment. It's not only been the CPGs, but also the OEM leaders who have unanimously emphasized the importance of food safety. Even interviewees that were not necessarily aware of the impact of FSMA, they all reinforced the need for improved sanitary design for the processing and packaging equipment. So what does it mean in terms of impact for that equipment? First, there is a need, as I said, for improved sanitary design, mainly processing, but also primary packaging. The objective is really clear here. CPGs want equipment that they can clean more effectively in less time. They would like to go as far as wishing for an equipment that could be completely washed out. About a third of the technical interviewees would talk to mention the importance of sanitary design when they choose their equipment. There is also an increased need for metal and foreign object detection equipment, and that also includes x-ray machinery. CPGs have mentioned to us the need to install a greater number of detectors throughout the processing and packaging lines, as earlier detection can save a metal scratching cost in downtime. The sooner the detection occurs, the greater the saving. This is an important benefit for the CPGs who look to save as much as they can on their operation front in order to mitigate increased expenditures on raw materials and logistic costs. The main conclusion of this regulation outlook is that we see more investments coming in the next two to three years towards especially metal detectors, magnetic separators. X-ray machinery will fit also here in those investments as they can fly defective packages after they have been sealed, but this is a technology that is typically more expensive also. The next big trend we've noticed in the snack food industry is an increased reliance on contract manufacturing, not only from smaller companies, especially the newcomers to the snack food market, but also the large brand owners. We can confirm to us in our talks with OEMs who have acknowledged greater sales, sometimes two to three times more sales coming from co-parkers than brand owners. The co-parkers need more equipment to produce a wider variety of snacks. They also have a lower hand for marketing costs, so they can focus more on spending on equipment. That increased reliance on contract manufacturing has also been acknowledged by brand owners, even the large ones. The competition globally is increasing in the snack food industry. There are newcomers coming, especially to invest in the better-for-you market, so even the large brand owners nowadays they feel the heat of that competition coming from smaller companies. This is a reason why they outsource some of their production in order to be helped with their production. They also mentioned the rise of installing and operating new production lines as a reason for outsourcing their packaging operations, and that also allows brand owners to focus on the marketing aspects rather than the operation and the packaging aspects. The main conclusion here for us is that sanitary design of equipment is going to be key for contract manufacturers. Contract manufacturers want equipment that is easier and faster to be cleaned. They have cleaning costs that increase as they deal with a greater variety of products with smaller batches of snack foods also, and they face tooth odyssey, not only from the regulator, but also from their own customers, the brand owners. So that's more reasons for why sanitary design is key for contract manufacturers. So then, let's have a talk about the use of robotics in the snack food industry. All companies across the board, all CPGs, small, large, have acknowledged that the use of robots, the greater use of robots could help them satisfy their throughput goals, especially in primary and secondary packaging application. For example, on the primary side, robots could specifically improve pick-and-place-feeling capability for sticky items like bars, for example, but also for tray-based snacks like the combo, the combination snacks. On the secondary side, robots could help improve higher precision case loading, especially for shelf-ready packaging applications, as Andrew explained before, with shelf-ready packaging being more and more demanded by large retailers. That being said, CPGs with TOTU, even the largest one, they still see robotics technology as an expensive technology even today. They have told us, in some cases, they fall back on hand-packing operations when it's necessary. So we definitely see a need here from the OEMs to educate their CPG customers about the value and the affordability of robots. But for those reasons, we don't actually see many CPGs investing in robotics heavily in the next two to three years. It's more likely to happen when we cover down the road in five or ten years from now. So some of the challenges that have been mentioned during our investigations is the use of sustainable packaging, as Andrew described before. Some CPGs have tasted lightweight packaging or recycled materials, and have had issues achieving top speeds with their machines. So there is a need here for improvements, not necessarily only on the equipment side, but also on the material side. On a technology standpoint, CPGs have mentioned the difficulty of managing all the data they have access to now. With more and more equipment being connected to computers being automated, CPGs have access to a greater amount of data than they used to be, and they still see some difficulties to manage solar, all that data, and use it efficiently. They would like to see improvements being done here in the way they can extract and analyze all that data. Finally, on the supply chain aspect, there are concerns growing, especially with the rising cost of transportation. So that's another reason that we mentioned before that puts even more pressure on machine efficiencies in order to balance those increased costs. So I will now let Andrew talk about the main unmet needs of CPGs today, the snack food market and how that affects the packaging and the processing equipment. Yeah, okay, so thank you. Thank you, David, for that. So as David said, let's start talking a little bit about unmet needs and the impact on packaging there. How many on the part of CPGs? I should say. Okay, so on this slide, you can see a list of the most frequently mentioned unmet needs during the interview process when it comes to packaging equipment. So machine flexibility, we've kind of touched upon that and why it's important, really is the top priority. The need for faster packaging machines, which is especially relevant when we talk about smaller package sizes, and we'll talk about that, ease of cleaning and sort of sanitary design, food safety, having higher quality and more detection equipment per line, per lines as David touched upon. Overall equipment effectiveness, so ease of maintenance, ease of operation, having more flexible vertical form for seal machines, reducing lead times when purchasing machines and replacement parts and that kind of thing, and also reducing machine footprint. So those are key unmet needs that are mentioned during the process, and let's go into a little bit more detail on some of these right now. Okay, so on this slide, let's talk a little bit about kind of a really top two unmet needs, machine flexibility and machine speeds. So we've talked, you know, quite a bit throughout the presentation now about how there's been an increasing number in product options on the shelf and they're available on the market today. There's a greater number of package formats, a greater number of package sizes, and so machines must be able to run different types of primary packs, different types of secondary packages, and they must be able to do so efficiently. Chained-over must be efficient as well. On the secondary packaging set specifically, we've already mentioned this, but with SRP, shop-ready packaging, there's many different types of SRP-based cases, so that means that there's huge pressure on case packers and other types of secondary packaging equivalent to be flexible from the different types of cases. And so this, I mean, we've heard from a number of CPGs that it's a top investment criterion at their companies when it comes to the next wave of packaging machines that they're going to purchase. So OEMs would do well to heed this advice in their view, in our view, and going forward over the next few years. So in terms of machine speeds, having smaller primary packages as we mentioned means you need faster primary packages to maintain the rate of production. Similar with secondary packages as well, with the cases. People want smaller and smaller cases, e-commerce is fun to roll there as well, because that's easier to unpack and just easier to store as well from an inventory management perspective. And that means that your case packers are going to need to be able to run a greater number of packages per unit time to maintain the rate of production as well. It's not to improve it. So also having product diversification as well, having a greater number of product options available means you're looking for efficiency gains in any way you can find, and increasing machine speeds is one way to help reduce some of these inefficiencies there. And finally, increasing competitions. There's increasing competition in the marketplace in general. You have many more smaller players that are appearing on the marketplace. You've got co-packers. You have all kinds of companies that are producing snacks. And so if you can increase packaging speeds, it helps from a competitive perspective and reducing costs overall. Okay, so on this next slide right here, let's talk a little bit more about kind of sanitary design on the ease of cleaning and touch upon food safety. I know David already spoke about that. But if we speak about sanitary design, that's mainly relevant obviously for processing equipment and primary packaging equipment, like for for some machinery, other power fillers, other types of equipment there. The goal really is the ability for machines to be completely washed down. So without damaging electrical equipment, for example. And reducing areas where the food can build up, the food can pool. So the AWFVAC's Leadership Network, another point here, the AWFVAC Leadership Network has developed clean-in-place guidelines that I'm sure a lot of people have heard of. They are relevant in terms of really providing guidance on how to clean interior surfaces of machines without disassembly. So it will help CPGs wash down as well. Talking about food safety, David already mentioned this, but the more and more CPGs are going to be investing in more and more metal detectors and installing them throughout packaging lines and not just at the end of them. So packaging and processing lines. Because what that does is you can help, you can reduce the cost of recalls. You can catch contaminants earlier and also reduce some of your scrap material costs. So if you catch, for example, contaminant later in the process, you might have already sealed your snack, so you'll have to scrap more packaging material there. What it does is it will guarantee food safety, and this can be used from a marketing perspective as well to entice consumers. So there are two key trends that were also mentioned. David touched upon them, but very important for all of you. Keep paying attention to those. And from an investment perspective, metal detectors, magnetic separators, machinery that can be completely washed down, all that's going to be very important. Okay, so on this next slide. So mentioned ease of maintenance. You know, it's all about reducing maintenance costs. So referred to as well as overall equipment effectiveness. People want, you know, CPGs weren't machines that can run for many shifts. You know, more and more shifts without needing to be sort of maintained and dealt with. They want less moving parts for machine if possible. I know that all that's easier said than done obviously, but they consider to mention these things as being important. Can we reduce the amount of effort and time and money that we spend and we allocate to maintenance? Ease of operation. So these days you've got big turnover in operators and the workforce when it comes to manufacturing, especially for, you know, large-scale manufacturing. So you want equipment that is easier to operate so you spend less time training these operators if possible, maybe less HMIs per machine. Easier to use HMIs. And so just overall, can ease of operation continue to be achieved? I'm sure it is for a lot of equipment. I'm sure it can, it's, you know, not perfect for other equipment. Can it be improved? And finally, overall machine footprint. I mean, machines like certain partners and horizontal form-filled steel machines, which we're going to talk about on the next slide, take up a lot of space. So for example, on the FFS side, if you have vertical form-filled steel machines, that reduces the footprint. You can have redundant machines. It's a big selling point for the CPGs. But we're going to talk about the issues with regards to form-filled steel machinery and why it's important to continue innovating there right on the next slide, which leads me to, there we go. So on this slide, we have a selection of such a pros and cons that were mentioned by sort of CPG experts when it comes to the use of horizontal and vertical form-filled steel machine. So the big benefit with vertical FFS, as I just mentioned, is that there's a much lower space allocation. They take up less space than horizontal form-filled steel machines. That allows for redundant machinery. So they can also run pillow shaped pouches efficiently enough. But the big problem with vertical FFS is that they can't run zippered or unzippered standard pouches as well and as efficiently as horizontal form-filled steel machinery. At least the majority of them can today. There are certain wraparound issues that we've heard mentioned by CPGs in terms of materials, wrapping some of the zippers, wrapping and causing downtime. They also can't run premade pouches. They can't run that at all. They need roll stocks. Whereas horizontal form-filled steel machinery, while they take up a lot of space and generate a lot of waste, they can run fan-up pouches efficiently. They can run premade pouches. It's just a more flexible machine in general. Of course, cheaper, but really more flexible vertical form-filled steel machines that can really run fan-up pouches efficiently enough, including the zippered kind of standard pouches. Okay, so just to conclude the portion, the segment on Unmet Needs. A lot of CPGs talk about innovation. I know it's a general concept, but we've heard a few examples of how they believe there can be more innovation in packaging equipment. So there's a general belief that innovation has been too incremental over the last 10 years in packaging equipment. An example would be, if we heard an example about a certain type of partner, for example, there's different cartoning suppliers that might have, they might be the best at certain qualities. So for example, company A might have the best partner for quality A. Company B might have the best partner for quality B, and so on and so forth. And all these different companies had patents that were associated with these different qualities. And so the belief is that for a number of these machines, for example, a number of these qualities, a lot of the patents have expired today, but there hasn't been a much effort, at least that's the feeling from CPGs, the perception there, not enough effort to kind of combine the different innovations and make sort of, erratically improved machine for different types of packaging equipment. Now, of course, all kinds of, in general, in any industry, customers are going to say that we want cheaper machines, better machines, more innovation, but that's something that we heard a few times mentioned during the primary research. Another thing that we've already touched upon, the optimization of packaging usage, is the long-term goal, which is to tighten and to wrap primary and secondary packages around contents more tightly. So that will really help reduce material usage and material costs. And there's a belief that there might need to be an integration of primary and secondary packaging processes to make this happen. For the technical details there, I mean, it's really not clear, but again, the word integration was used a few times to kind of talk about how maybe primary and secondary processes can innovate to be able to achieve material reduction goals. And finally, in terms of robotics, David already mentioned that really there's a perception that a lot of robotic equipped technology is expensive. That's probably true for some types of machines, maybe not so true for others. There needs to be greater education, as David said, in terms of the market being aware of affordable options. But continued R&D investment from a robotics perspective is important over the next few years, because more and more down the line in the next five, ten years there's going to be much bigger investment in robotic equipped technology. In the next two or three years there might be some investment in some types of robotic equipped machines, but overall really it's more important in the long term. In the next five to ten years. Okay, so that was kind of a summary of the unmet needs portion of the presentation. I'll leave it to David to conclude and I'll touch upon with a couple of points in there as well. Okay, thank you Andrew. So let's wrap up this presentation by highlighting the key findings of our investigation. We'll start with the main trends in the snack food industry. If we look at market trends, better for you will continue to play a key role going forward. It's forecasted to keep every snack investing in that better for you trend is expected to keep growing fast. Same can be said for combination snacks which also likely to continue along a fast growth trajectory. On packaging trends, we see flexible packaging still growing. There is still room here for flexible packaging replacing rigid or traditional packaging types. There will be a focus on shelf free packaging. Retailer, especially the large ones wants to streamline their business so that helps them a lot here. As for packaging sustainability as we said probably not very important for the next two to three years, at least not a blocking point for the consumer. But it's a long-term goal of CPGs. On the retail side, the number of skews will continue to grow and that's going to be driven by the growth of e-commerce. The increase demand for more flavor variability as well as more, as well as a greater size variety across all types of snack foods. Just to summarize some of the main demands from CPGs, we've already mentioned all this stuff but just a quick summary. The top demand is really for greater flexibility and increased speed of packaging machinery, especially secondary packaging sign and that's driven by the SRP trend. A need for improved sanitary design driven by the Food Safety Modernization Act, general food safety goals. Finally, CPGs really wish to see more disruptive innovation rather than incremental improvements. As I mentioned, ease of maintenance, ease of operation, reducing lead times, machine footprint reduction, and also dealing with the perception that robotically equipped technology is too expensive. And finally, the key takeaways about where we see investment in machinery going in the next two to three years. So the top three areas where we see more investment are towards more flexible and faster secondary packaging equipment. We also see a greater demand for vertical form field field machinery, especially if those vertical FFS machinery catch up with the horizontal counterpart in the areas where they are still behind. And we do see also increased investment in metal detection equipment, especially to guarantee food safety. Other areas that could drive investments in equipment are more flexible and faster pouch filling machinery. All equipment that would be associated with fast growing segments. We do see CPGs also purchasing a dedicated line for better-for-you products, like for example gluten-free or allergen-free products. And finally, the increased reliance on co-parkers mean that OEMs will keep seeing more orders coming from co-parkers and more owners in the next few years. So we'd like to thank you all for listening to us during that webinar. If you have any questions, we do our best to answer them as much as we can in the next few minutes. Absolutely, and thanks for listening to us, guys. David and Andrew, thank you both. It's a great presentation. There's a lot of information here in this webinar, but there's also a lot more information in the report which you can download on PMMI.org slash research and search for snack foods. So I want to thank you on the great reflections you had about the issues in hand in the snack foods packaging and processing industry. Again, please put some questions that you might like to see answered in the participant feedback box on the left-hand corner. I do have a couple questions, so I'm going to read them off to you. So the first question is, is there a plan for co-packing linked with any specific type of packaging format, such as like our pouches of format requested more to co-packers than others? Right, so I would say that not necessarily. And I'll tell you why I'm not saying a yes or a no here. It's not necessarily because you'll find a lot of, you'll still find, so for example, if we look at nuts and seeds, you'll find a lot of contract manufactured snacks that are like in cups, the rigid cups. And so there's a lot of demand for those as well. Those will go, for example, in a lot of 7-Eleven convenience stores. You'll have a lot of those actually in retail stores as well. So it's not, and some of me we've heard specifically throughout the primary research phase, but we do know that there's significant growth in flexible packaging in snack foods, and there's greater growth on the flexible side than the rigid side. That's something that we know for sure. There's going to be definite impact on contract manufacturing operations. We do expect them to be dealing with more flexible packages. It's not something that we heard specifically that they're only doing the flexible because the rigid types of packages, like the ones I just mentioned for nuts and seeds, are going to continue to be important. Okay, so that kind of led right into the next question. Somebody was questioning about shelf-ready packaging. Do you see that trend mainly for flexible or is it, you said they're still rigid, so you think that's still going to be the thing where flexible is definitely increasing, but rigid hasn't lost its hold? Yeah, so that's part of it. That's definitely a part of it, but there's something specific as well with SRP. What I would say is that the start of this trend was really associated with nuts and seeds and certain types of snacks there, but nuts and seeds that were packaged with flexible packaging. Some of the benefits that we spoke about earlier, some of the benefits of flexible packaging, they take up less space, right, and they're also great for printing. So with the SRP, you can have great graphics as well on the sides of the case, but with flexible packaging, you can have tall packages that don't take up so much space and you can fit a lot more of them within certain SRP-type cases. So it's definitely going to be geared more towards flexible packaging. Started with nuts and seeds. There are certain brands that are very relevant, I think. I was walking by Kroger the other day, and David Seeds is a famous type of snack, I'm sure, and that's an example of a type of product that was really important, I think, at the start of the SRP trend as well, and they're flexible packages. You fit a lot of them in the SRP cases, and it's really going to be geared more towards flexible packaging. Great, thank you so much, Andrew and David. So another question we have, from your perspective and your experience in working and conducting this report, do you think these North America trends and consequences will also apply to other regional snack markets? Yes, so I would say for a lot of them, yes. So give an example. So you know how we mentioned the importance of reducing material usage? I mentioned Europe and Asia as already being two regional markets where the view from CPGs here is that a lot of the snacks there are this concept of wrapping primary packs and secondary packages more tightly around the content and optimizing packaging usage. That's something that CPGs view as already being widely done in Europe and Asia, and not so much here. So that's a difference in terms of something that's done that CPGs would like to see more in North America. In terms of flexible packaging, I would say that a lot of the trends with flexible packaging are worldwide, but what I would say is for shelf-ready packaging, for example, that's really a North America trend. Shelf-ready packaging is a big North America thing. Probably in the long term it's going to be important elsewhere as well, but when it comes to marketing and brand promotion and just the likes of Walmart really leading the way and innovating from a retail perspective in terms of enticing consumers, that's really an example of something that's really relevant for North America. In terms of other important trends that we mentioned, I mean sustainability for example, I think with recyclability that's an example of a trend that's more important in Europe than it is in North America right now. So there's, I think for example, camera work countries, but there are certain laws when it comes to packaging waste. You pay by the pound I think or by the kilogram in terms of mass of waste in certain countries in Europe. And so the idea is how can we reduce our waste? Well reduce the weight of your materials first of all, but also recycle more of your products too. That's more important in Europe. A lot of other trends I think are similar overall, but I hope that gives a good first perspective on some of the differences and similarities between Europe, Asia, and North America. Fantastic. Thanks so much for that explanation Andrew. Absolutely. So right at this point that is the conclusion of our webinar and I would like to, on behalf of PMMI, thank you for participating in today's webinar. As a final note, you will receive an email to complete an evaluation for today's webinar. Let us know how we did. Let us know how the topic went. And let us know if there's any topic that you'd like to see us do or report our webinar on in the future. As I mentioned in the participant feedback box, this webinar will be posted on PMMI.org slash research in probably 24 to 48 hours. And we also have a webinar coming up on July 12th. It will be our third quarter quarterly economic outlook report. So you should be getting an email on that or a notice for that shortly. So please sign up for that webinar. Our economists are some of the funniest ones I've ever seen. And if you think you can talk about the economy and be funny and you've never heard that, you have to tune into our webinar and listen to it. It's great. So once again, on behalf of PMMI, thank you so much for joining us today. Andrew and David, great presentation. Thank you.