The trends reshaping packaging
Five major trends will change the game in the packaging industry and raise the bar for performance in the next five to ten years.
Much higher levels of innovation and agility will be required to deal with the pressure and potential disruptions emanating from these trends:
- E-commerce everywhere. The rise in e-commerce could place an intense focus on increased packaging requirements, including for new products, along with last-mile-delivery innovations.
- Changing consumer preferences. Demands for much more personalization, convenience, health, and affordability are driving SKU proliferation to new heights.
- FMCG and retail-margin compression. Further margin compression for FMCG companies and retailers, with pressure passed back up the line to converters, may intensify the threat of insolvency.
- Sustainability. Requirements for sustainability are rising at every step of the value chain—with rising activist scrutiny.
- Digitalization and Internet of Things (IoT). Digital efforts are being used both to drive down costs and, increasingly, to gain a competitive edge with consumers—for example, by generating greater customer value and service by integrating technology in packaging.
Implications for the packaging industry
Preparing for these changes requires new ways of thinking—“intuition resets”—about a packaging company’s focus and market approach. While growth in China is cooling, the country, together with other markets in Asia, will remain the industry’s top growth engine alongside North America, which China has displaced as the global leader in packaging. Notably, while the use of plastic has soared, the ecological burden is provoking heavier restrictions as demand rises for more sustainable solutions across the board.
The overriding implications of these packaging trends differ according to substrate and will demand substrate- and channel-specific strategies. Despite the surge of sustainability pressure, the combined power of plastics’ attractive attributes with regard to cost, automation, and quality will likely buoy up rigid and flexible plastic substrates, if converters can increase recyclability and recycled content. Paper and board will continue to benefit from e-commerce growth and are ideal for integrating digital and IoT solutions (using quick-response codes, radio-frequency-ID tags, near-field-communication protocols, and so on). Paperboard will likely see more of the convergence of primary and secondary packaging, a shift in focus or buzz around the last mile (as will plastics), as well as more local or even captive converting operations to increase FMCG companies’ agility. Glass and metal have an uphill battle in this more omnichannel world, but their traditional strengths and sustainability profiles (recyclability and using recycled content) still offer ways to fend off substitution by other substrates.
Even with deep substrate expertise, most converters need to think through an array of moves and revamp their approaches accordingly, giving attention to five priorities:
Preparing for these changes requires new ways of thinking—“intuition resets”—about a packaging company’s focus and market approach. While growth in China is cooling, the country, together with other markets in Asia, will remain the industry’s top growth engine alongside North America, which China has displaced as the global leader in packaging. Notably, while the use of plastic has soared, the ecological burden is provoking heavier restrictions as demand rises for more sustainable solutions across the board.
The overriding implications of these packaging trends differ according to substrate and will demand substrate- and channel-specific strategies. Despite the surge of sustainability pressure, the combined power of plastics’ attractive attributes with regard to cost, automation, and quality will likely buoy up rigid and flexible plastic substrates, if converters can increase recyclability and recycled content. Paper and board will continue to benefit from e-commerce growth and are ideal for integrating digital and IoT solutions (using quick-response codes, radio-frequency-ID tags, near-field-communication protocols, and so on). Paperboard will likely see more of the convergence of primary and secondary packaging, a shift in focus or buzz around the last mile (as will plastics), as well as more local or even captive converting operations to increase FMCG companies’ agility. Glass and metal have an uphill battle in this more omnichannel world, but their traditional strengths and sustainability profiles (recyclability and using recycled content) still offer ways to fend off substitution by other substrates.
Even with deep substrate expertise, most converters need to think through an array of moves and revamp their approaches accordingly, giving attention to five priorities:
- investing in R&D and innovation to secure a portfolio of competitive options
- handling SKU proliferation driven by consumer preferences—for example, through more flexible and agile processes to manage shorter manufacturing runs and through faster new-product-development times to market
- reallocating resources and assets and pursuing M&A—for instance, to achieve a global–local footprint
- strengthening collaboration with FMCG companies and input suppliers, including technology suppliers
- shifting the product mix (and processes) toward greater sustainability
Reference:mckinsey.com
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