Bologna might be best known abroad for its meat sauce and for being home to the oldest university in the western world, the University of Bologna. But this city, situated between Italy's Po River and the Apennine Mountains, has earned the nickname the "Packaging Valley."
Packaging machinery has become one of the dominant industries throughout Italy. Though the United States, China and Japan all produce automatic machinery, Germany and Italy produce two-thirds of all packaging machinery sold internationally, according to a study by the Confederation of Packaging Machinery Associations. Italy ranks second in production of packaging machinery, with 150 to 200 companies accounting for 17% of the market, behind Germany (23%), and ahead of the U.S. (11%) and Japan (10%).
Italy's packaging machinery base has emerged as a result of an extremely flexible production system, one that is increasingly geared to individual customer needs, consists of highly competitive small- to medium-sized companies, and manufactures with precision.
But the resiliency of Italy's packaging machinery industry has been severely tested by the financial recession that has encompassed the world markets. In 2008, growth was less than half of what it had been a year earlier, dropping from 7.2% in 2007 to 3.3%.
While companies have had to reconfigure their place in the market, some solidified their footing by concentrating on high-growth areas. The Marchesini Group, based in Bologna, for instance, has sought to capture new markets, such as China, India and Russia.
Much of the packaging machinery base has been tied to the packaged foods and beverages markets, which account for nearly 60% of the industry, according to research firm Freedonia. The Marchesini Group, however, has concentrated its machines heavily in pharmaceuticals, which accounts for 90% of its sales, with 8% going toward cosmetics.
But perhaps the strongest trend seen in Italy's packaging machinery industry is the push toward customization.
"You've seen more special and highly customized machines, dedicated to particular requirements of the customers and the specific products to be packaged," says Piero Tomasi, sales director for the Marchesini Group.
As many companies have sought to produce better machines at a cheaper price, machine production has often been shifted overseas to countries that offer cheaper labor rates. According to Tomasi, this is a self-defeating line of thinking. What differentiates Italy's machinery is the quality of its production. Less sophisticated workers from off-shore will produce a cheaper product, but it might come at a cost in quality.
"We do not believe that simply buying labor in low-cost countries is sufficient to reduce prices," says Tomasi. "The challenge is that of being competitive and offering an innovative product that is appreciated on the market, but that is also made in Italy."
Such a challenge is not limited to one countrys packaging machinery industry, but can be applied in every corner of manufacturing.