Uncoated Paper and Multiwall Bags

SIC 2674

Companies in this industry

Industry report:

This classification includes establishments primarily engaged in manufacturing uncoated paper bags or multiwall bags and sacks, whether or not coated or containing plastics film or metal foil. Establishments primarily engaged in manufacturing bags from plastics, unsupported film, foil, coated paper, or laminated or coated combinations of these materials, are classified in SIC 2673: Plastics, Foil, and Coated Paper Bags. Those establishments manufacturing textile bags are classified in SIC 2393: Textile Bags.

Industry Snapshot

For decades, the uncoated paper and multiwall bag industry has faced intense competition from rival products made from plastic. Plastic bags are less expensive to manufacture and are often of lighter weight than paper products. Paper, however, is typically more durable, more favorable for colorful advertising, and more readily recycled. Despite the latter characteristic, paper bags began facing competition from a third opponent in the late 2000s--reusable bags.

Although environmental criticism against shopping bags has primarily targeted plastics, paper bags are also caught in the struggle. Lumped together as "disposable products," paper and plastic bags are denounced for their one-time use, after which they are discarded and replaced by a new bag the next time a consumer goes shopping. Led by San Francisco, some U.S. cities were restricting the types of checkout bags offered by retail outlets.

According to Dun & Bradstreet's 2009 Industry Reports, 195 establishments were engaged in the manufacture of uncoated paper and multiwall bags in the late 2000s. Of the $487.7 million in revenues garnered by the industry in 2008, Missouri accounted for $99.2 million, Tennessee for $80.5 million, and California for $40.6 million. States that had high numbers of workers in this category included Louisiana, Arkansas, and Missouri.

Organization and Structure

In all uncoated paper and multiwall (three-ply or more) bag applications, the package must contain and protect the product or contents. Paper is used because of its ability to contribute strength and stiffness or rigidity to the container. Plastics may also offer strength, but paper is more resilient than plastics over a wider temperature range. Paper is better for printing than other materials. However, in many applications paper bags must be coated with waxes or plastics (or laminated to plastic films or foil) to develop effective barriers to water, vapor, gases, or odors.

The uncoated paper and multiwall bag industry is split between two categories. Shipping sacks and multiwall bags accounted for the largest share of the industry, followed by grocers' bags, sacks, variety, and shopping bags. The gap between the two categories was expected to grow as the grocers' bag market continues to decline.

In the shipping sack and multiwall bag subcategory, the dominant product is multiwall shipping sacks and bags, with single- and double-wall sacks and bags a distant second. Of the total number of single- or double-wall bags produced, the largest customer category was agriculture and food, followed by building materials, chemicals, and minerals. In the uncoated paper grocers' bags, sacks, variety, and shopping bags subcategory, the leading product remained uncoated paper grocer's sacks.

In the industry's terminology, paper sacks refer to the large bags used to hold customers' supermarket purchases. The 1/6th barrel sack is the standard paper sack used in supermarkets. It is called that because in the early 1900s, when paper bags gained in popularity, they were used to hold 1/6th of a barrel of flour. Another popular size is the 1/8th barrel sack.

Paper sacks come in a variety of basis weights. Single-ply bags range in basis weight from 60 pound to 80 pound. Some stores prefer a double-ply bag, made of two 40-pound basis weight bags, since it can hold heavier items. Stores using this double-ply bag can avoid the "double bagging" common at checkouts of supermarkets using single-ply bags.

The bag industry refers to small, lightweight bags as "grocery bags." These bags are used in outlets such as convenience stores and fast food restaurants. They come in a variety of sizes, from 1/2-pound bags to 25-pound bags. These weights are also based on early 1900s terminology, when paper bags were graded by how much sugar they could hold. Retail trade establishments remain this manufacturing industry's primary customer.

The uncoated paper and multiwall bag market was a steadily growing and relatively stable industry into the 1970s. Paper accounted for the vast majority of bags produced for retail outlets, such as supermarkets. However, in the 1970s, plastics manufacturers began to perfect the single-ply polyethylene shopping bag, which could compete effectively with the traditional paper sack. While lacking some of the characteristics of the paper sack, such as stiffness, the plastic sack had the one big advantage of lower cost. Traditionally, individual plastic bags cost about one-third as much as the average paper sack. This price advantage increased when kraft paper prices skyrocketed along with other grades of paper in 1994 and 1995. For example, the price of 70-pound grocery sack paper rose from $320 per ton in 1993 to $530 in 1995, before falling back to about $410 per ton in 1996. In 1997 and 1998, the price rose slightly, to $450 per ton. With supermarket net profits averaging about one cent for every dollar of sales, these retailers were quick to convert to plastic bags. While most supermarket chains still stock paper bags for customers that ask for them, by the 2000s many had stopped asking the question "paper or plastic?" at the checkout, leading to increased use of plastic bags.

Prices prevalent in the late 1990s clearly demonstrated the cost differential. The average paper grocery sack cost $34 to $36 per 1,000, or 3.4 to 3.6 cents each, while the typical high density, 1/2 mil polyethylene sack cost $12 to $14 per 1,000, or 1.2 to 1.4 cents each. Although plastic bags do not hold as much compared to paper bags, supermarket chains still have substantial cost savings when using plastic bags. While a few supermarket chains use paper sacks extensively and others still stock paper bags, that has not stopped the steady erosion of paper's market share. In addition, other retail outlets, such as mass merchandisers, use plastic bags exclusively. Kmart Corporation converted from paper in the 1980s. This led Union Camp Corporation, which was purchased by International Paper Company in 1999 and was formerly a major supplier of paper sacks to Kmart, to invest in plastic bag manufacturing in order to continue supplying Kmart. In the early 1990s, Wal-Mart Stores Inc., the nation's largest retailer, converted to using plastic bags exclusively. In the mid-1990s, Union Camp scaled back its production of paper bags and sacks and closed its flagship Savannah, Georgia, bag-making unit.

Multiwall Market.
Multiwall paper bags, which use three or more plies of paper, are used heavily in industrial applications for the transport and sale of such products as seed and fertilizer. They have fared better than the grocery bag market, and have continued to expand their share of this market at the expense of single- and double-wall bags. Multiwall bags are used for many business-to-business transactions, such as the sale of fertilizer to farmers, as well as for consumer products such as pet food. As a result, they are sold in a variety of shapes, sizes, and constructions, from the plain brown bags used for cement mix to the high quality, four-color, plastic-lined packages used for pet food or lawn fertilizer.

Multiwall bag producers divide their market into two categories: paper multiwall packaging, designed for products weighing 20 pounds and more; and consumer packaging, designed for products weighing five to ten pounds, such as pet food and charcoal.

The number of packaging layers depends on the application. For example, multiwall bags for products being shipped overseas may have as many as five or six layers to withstand severe handling and extreme temperature conditions. Pet food bags, on the other hand, may have just three layers, with one being a grease-resistant paper. Cement bags usually include a polyethylene liner to keep the product's moisture away from the outer paper layers. However, some bag manufacturers, in order to make their bags more environmentally friendly and recyclable, were looking for ways to eliminate the plastic film inner layer by using specially treated paper instead.

Background and Development

Paper bags have been a major product for the paper industry for nearly 150 years. One of the earliest bag makers, Union Paper Bag Machine Co., which became part of International Paper Company, was founded in 1861 in Bethlehem, Pennsylvania, to make and sell machines for manufacturing paper bags. In the late 1800s and early 1900s, the use of paper bags continued to grow along with the economy. The bag market received a major boost from the invention and development of self-serve grocery stores in the early 1900s. As self-serve stores continued to expand in other retail environments, the use of paper bags boomed.

Plastic bags acquired an increasing share of the markets previously dominated by paper, thereby depressing sales in the uncoated paper and multiwall bag industry. This was illustrated by a long-term decline in production of the kraft paper from which bags and sacks are made. The decline in demand for unbleached kraft packaging papers, particularly for grocery bags and sacks, caused paper producers to reduce production capacity 40 percent between 1985 and 1995, from about 3.9 million tons in 1985 to 2.5 million tons in 1995. Production capacity continued to decline through the late 1990s, but stabilized in 1999 at about 2.2 million tons. Capacity for bleached kraft paper, used to make white paper bags, was about 440,000 tons in 1999.

The damage that plastics have done to the paper bag market varied greatly by category. In the paper sack market, plastics had assumed 80 to 85 percent of the market by the turn of the twenty-first century. That was a dramatic reversal from the early 1980s, when paper sacks accounted for the majority of the market. Paper was expected to bottom out and hold onto about 15 to 20 percent of the market, since many customers still prefer the paper sack in supermarkets. However, much of those sales depend on supermarkets' willingness to continue stocking two types of sacks. In the late 1990s, grocery bag manufacturers introduced a version of the paper sack with handles to better compete with plastic.

In the grocery bag market, plastics penetration was far less pervasive. In the late 1990s, paper still accounted for 65 to 70 percent of the market. Much of the strength in this market was based on the growth of the fast food market. Fast food chains such as McDonald's and Burger King use a very high volume of small bags to package customers' orders. Plastics have almost no penetration in this particular market segment. The main reason is that plastics have no rigidity, which becomes a problem when food, drinks, and other items are placed in one bag. In addition, these chains use the high-quality printing surfaces of the bags for promotions and advertising.

The product mix in the fast food bag segment changed radically in the 1990s as demand for recycled products grew. For example, the McDonald's chain converted from a bright white bleached bag made from virgin fiber to a 100 percent recycled, unbleached brown bag. Other chains, such as Burger King, soon followed with other types of bags made from recycled paper. Changes demanded by large customers such as McDonald's were highly significant. In 1985, for example, McDonald's used 285,000 tons of packaging materials, 86 percent of which was paper bags and 14 percent of which was plastic bags.

Some "high-quality" retailers use paper bags to promote store image, since plastic bags tend to be associated with discount outlets. For example, Starbucks Coffee used a highly printed, intricately patterned brown paper bag at its retail outlets.

The "notions and millinery" sector includes the flat bags (without folded bottoms) used to hold customer purchases in variety stores and department stores. Plastic made heavy inroads into paper's market share in this category, accounting for about 75 to 80 percent of the market in the late 1990s.

The multiwall bag market grew at an annual rate of less than 1.5 in the late 1990s. Some of this slow growth was attributed to inroads made by low-density plastic bags and wraps. One of the fastest growing bag applications was multilayer industrial plastic film bags, which were replacing multiwall paper bags for products such as herbicides, pesticides, and fertilizers. By the late 1990s, plastics claimed close to 30 percent of the market previously held exclusively by multiwall paper bags. Plastic bags were often used for high-moisture products, such as bark chips.

Manufacturers also produced combination bags, which included several outer layers of paper and inner liners made of plastic. This hybrid bag combines the barrier properties of plastic with the rigidity and strength of paper. Manufacturers also found that layers of different materials, such as paper and plastic, provide a better odor barrier in some instances than either material alone.

However, some multiwall bag applications have been converted to 100 percent plastic using three or more layers of different plastics to accommodate specialized packaging processes. For example, some products are packaged with a "hot fill" process, where the product is put into the package while still hot. The inner plastic layer can handle the hot product while the outer layers are designed to protect the product in transit.

Companies continued trying to make the traditional paper bag better, stronger, and easier to use. In 2005, Pedigree introduced a multiwall paper bag for its dog food that closes with what they called a "Slide-Right zipper" in an attempt to make the bags more convenient for customers and keep the food fresher. Other manufacturers launched products that would replace the traditional paper bag. In 2005 Domino Foods introduced a wide-mouth canister for its sugar products to replace the traditional multiwall bag.

Consumers' heightened awareness of the environment in the early and mid-2000s threatened to have an effect on the paper bag industry. In 2005, the San Francisco Commission on the Environment, in an attempt to reduce the tens of millions of plastic bags littering the city streets and clogging streams recommended that a 17-cent tax be imposed on paper and plastic shopping bags. Although taxes and limits had been placed on bags in other countries, this was the first such proposal in the United States. Supermarkets and plastics manufacturers vigorously opposed the idea, as did many consumers. The tax was not passed; instead, grocery industry officials and the Commission came to an agreement that the city would reduce its bag use by 10 million bags in the following year. The pact affected about 54 stores, mainly grocery stores.

San Francisco remained an epicenter of environmental concerns over paper and plastic grocery sacks. The 2005 pact between the San Francisco Commission on the Environment and area grocery stores did not end successfully. The Commission charged that the grocery alliance, which included such stores as Albertsons, Bell Markets, Cala Foods, and Safeway, failed to demonstrate a reduction of 10 million bags by the end of 2006. In response, San Francisco introduced the Plastic Bag Reduction Ordinance in January 2007. This law required grocery stores with $2 million or more in annual revenues to provide customers with only recyclable paper bags, compostable plastic bags that are petroleum-free, and reusable bags.

Current Conditions

As the first decade of the twenty-first century neared a close, more communities were following California's example and restricting the use of plastic grocery bags, which worked in favor of the paper bag industry. For example, Edmonds, Washington, became the first city in the state to outlaw plastic grocery bags in July 2009, and in March of that year Massachusetts set a goal is to cut the number of paper and plastic bags distributed in the state by a third by 2013.

Although plastic bags receive the brunt of environmental criticism, paper bags are hardly revered. Although they are readily recycled and derived from a renewable resource, paper bags require more energy and water to produce and create more air pollution during the manufacturing process. Caught between a rock and a hard place, more retailers and consumers were choosing a third option: reusable bags.

These reusable canvas shopping bags were even more of a threat to the paper bag industry than plastic. Many retailers, including supermarket chains such as Foodtown, Whole Foods, ShopRite, and Wegmans, sold canvas bags as an alternative to paper and plastic. PCC Natural Markets eliminated the use of plastic bags altogether in October 2007 and offered only paper bags and reusable canvas bags to shoppers at checkout. By the late 2000s they were being offered by major retailers such as Target and WalMart and were being touted as the solution to the "paper or plastic" dilemma. "We have studied the environmental impact of paper versus plastic, and believe that paper is the more sustainable choice, while bag reuse is the best choice of all," said Tracy Wolpert, PCC's chief executive officer, in Progressive Grocer.

Paper and plastic bag manufacturers tried to reclaim their former markets by improving their environmental impact. Plastic bags are not readily recycled, even in the most progressive of communities, so manufacturers focused on changing those conditions at both the pre- and post-consumer levels. Paper bag manufacturers, whose products are already recyclable, directed their efforts at promoting their image while continuing to enhance the desirability of paper bags. In 2007, Duro Bag Manufacturing Company introduced North America's first 100 percent recycled paper bag, made from 60 percent post-industrial and 40 percent post-consumer fibers.

Industry Leaders

Duro Bag Manufacturing Co. of Florence, Kentucky, was North America's largest maker of paper shopping bags in the late 2000s. Founded in 1953, Duro produces grocery bags, handled shopping bags, paper lawn and leaf bags, and such specialty bags as lunch sacks and pharmacy bags. The company had more than 2,500 employees working at 12 manufacturing plants across the United States in the mid-2000s.

Hood Packaging Corp. was formed by the 2001 merger of Southern Bag Corp. and Bonar Packaging, the largest multiwall bag producer in Canada. The new company became the world's third-largest supplier of multiwall paper packaging. Although the company is based in Ontario, Canada, its paper division is headquartered in Madison, Mississippi. Nine paper bag plants in North America produced several types of bags, including sewn, pinch bottom, pasted valve, consumer, and paper rollstock.

Ampac Packaging LLC produces plastic and paper bags for retailers, as well as security bags for banks and casinos. Located in Cincinnati, Ohio, Ampac operated 10 manufacturing centers in Asia, the United Kingdom, and the United States. In 2004, the company purchased the bag business of Longview Fibre Company, thereby expanding its product line and production facilities. In 2008 Ampac had almost 1,000 employees and sales of $119.2 million.

Exopack Holding Corp. manufactures a variety of flexible packaging products, including paper bags for consumer and industrial products. Based in Spartanburg, South Carolina, Exopack had revenues of $500 million and more than 2,700 employees in the mid-2000s. The company was formed in 2005 by the merger of Cello-Foil, the Packaging Group, and Exopack LLC.

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