Over the last decade, the global packaging industry has seen tremendous growth and change. Costs of raw materials, labour, and energy have increased, there has been significant consolidation among global players, the developing world has emerged as a viable and highly desirable market, new technologies have offered greater product diversity and a more interactive shopping experience, and tougher regulations are pressuring packaging supply-chain members to provide greater protection for consumers and the planet. In a rapidly changing world, two recent studies predict continued growth for the global packaging industry.
Markets shifting East
A market forecast released last year by Smithers Pira – a global testing, consulting, and information services business that specialises in packaging-, paper- and print-industry supply chains – predicts that the global packaging industry will grow approximately 3% annually and reach US $820 billion by 2016 from a base of US $670 billion in 2010 – a roughly 22% increase. The study credits this growth on broad trends that include increased urbanisation and investment in housing/construction, an expanding healthcare sector, plus rapid development in the BRIC (Brazil, Russia, India, China) nations, as well as some Eastern European countries. Greater time pressures on consumers combined with increased personal disposable income in these regions will drive consumption of a broad range of products (ranging from food and beverage to white goods to household and personal-care supplies) and with them packaging.
Smithers Pira also notes that the US was the largest consumer of packaging in 2010 at US $137 billion (with China close behind at US $80 billion), but by 2017 positions should reverse with China passing the US. During the same period, the study predicts that India will become a Top 10 packaging country, with demand doubling between 2012 and 2017 to US $24 billion. Research also indicates that food/beverage and healthcare will remain the two largest sectors of the global packaging industry, growing to US $43 billion and US $34 billion respectively by 2016. Cosmetics will reach US $24 billion globally during the same period. Fibre products (board) will remain the largest type of packaging material through 2016, totalling US $250 billion. Rigid plastics will stay the second largest type, growing to more than US $200 billion by 2016, while flexible packaging will increase during the same period to US $163 billion. Interestingly, the study predicted erosion of market share for metal and glass packaging.
New and improved technologies will also contribute to shifts in materials usage, with biopolymers gaining in both rigid and flexible packaging segments (displacing petroleum-derived polymers) and better functional and barrier coatings improving packaging performance. Enhanced graphics and the trend for lightweighting across all material segments (a function of resource reduction and cost control) are also expected to continue to influence growth and shifts in material usage.
Staying relevant in a rapidly changing world
Aseptic packaging giant Tetra Pak also commissioned an in-depth report in 2011 that more deeply explored the trends most likely to impact the packaging industry's largest sector: food and beverage. The study reported results in terms of impacts on consumers, retailers and packaging manufacturers, showing how all three groups are likely to respond to the similar pressures.
Consumers: more interconnected and vocal
Given how interconnected consumers in many parts of the world are now thanks to the internet, and with the growing importance of social media platforms, consumer opinion matters more than ever. That means purchasing decisions are increasingly complex and influenced by social, technological, cultural, geographic and environmental factors. The study, which queried consumers in 25 countries, emphasises that although cost remains important, shoppers everywhere are looking for value, which is not always the lowest price. To define what value is consumers are doing more online research, using more coupons, buying in bulk, visiting more discount stores, and switching from name brands to store brands.
With consumers leading busier and more time-pressured lives, they are looking for ways to reduce stress and complexity and looking to retailers and manufacturers to provide convenience (portable products are valued by those who eat on the go), help them stay safe (food safety is a big area of concern in developed as well as developing nations) and healthy (nutrition and quality of food are important), and make it easier for them to be "green" (by reducing pollution and predefining green choices). Interestingly, the study found that stressed consumers prefer fewer choices, which they feel simplifies purchasing decisions.
Because more consumers are buying more goods and services on the internet, which they can access 24h/day, they are applying the same expectations of service and availability to physical retail stores. Last, the study notes that consumers want to feel special and they want their cultural context to be understood, which will have particular relevance as the market shifts eastward.
Retailers: more responsive and flexible
As the central link between manufacturers and consumers, retailers are better positioned to see consumer trends first and hence exert their own influence on manufacturers. Retailers feel the pressure to visit busy shoppers, leading to a more diversified, dispersed, and fragmented retail model. Technology already is bringing retailers and consumers closer via online shopping, mobile applications like QR codes, and social-media platforms offering product evaluations, ratings, and reviews. Such interactions not only are powerful promotional opportunities and provide valuable quality-control feedback, but they also strengthen the consumer/retailer relationship by providing greater value and enhancing shopping experiences. Within the next few years, the study predicts that new formats, delivery channels, and technologies will further change relationships between retailers and customers.
Retailers are also naturally positioned to lead the sustainability agenda, which will be driven by tighter legislation, greater consumer demand, and the need for higher operational efficiency. Like manufacturers, retailers that "go green" will save money by reducing energy consumption and minimising waste, and that will produce greater consumer trust and loyalty.
In order to ensure success in this rapidly changing environment, the study notes that logistical efficiency will be critical so retailers can manage complexity, flexibility, and profitability. That, in turn, will necessitate closer relationships between retailers and manufacturers to develop packaging solutions that maximise shelf space while making identification, replenishment and disposal more efficient. As economic growth in developed markets slows, another important retailer trend will be exploration of developing markets. While these markets often are highly fragmented, eCommerce offers a way to enter with less risk, and an online "presence" can help predict future viability of brick-and-mortar stores.
Food & beverage manufacturers: greater consolidation and higher efficiency
Food and beverage manufacturers and retailers have experienced considerable change over the last decade, finding greater synergies, participating in more co-packing agreements, sharing market intelligence, and working jointly to develop industry standards for consumer safety and environmental protection. Despite all this change, the study predicts more ahead.
Owing to economic stagnation in the West, plus higher costs of raw material, labour, and utilities, the study notes that it will be critical for manufacturers to make their plants as efficient as possible for long-term survival. This is best achieved by focusing on efficiencies of scale, particularly producing fewer products in larger quantities in newer, bigger plants that are more efficient. In fact, any efforts to minimise wasted energy, water and food will not only help lower capital expenses, but also will help manufacturers meet consumer and stakeholder expectations. As manufacturing efficiency and social responsibility become increasingly intertwined, sustainability will become a core business practice. Hence, new technologies that help improve efficiency and/or reduce waste will be highly valued. Scarcity of resources is expected to drive greater interest in renewable packaging materials as well.
Developing countries will be vital for growth owing to their combination of rapidly increasing populations and an expanding middle class. Major players are already leveraging local marketing tools (for example social media platforms, sponsorship of local events and teams), partnering with or acquiring local producers, and adapting existing products to meet local market needs. This will drive further consolidation throughout the supply chain. It also improves a packaging manufacturer's negotiation power, broadens its portfolio, increases production volumes and access to more distribution channels, and offers greater opportunities for diversification and control over raw materials. This, in turn, will help change the entire packaging value chain.
With manufacturers in search of increased profits and forced to explore greater differentiation of their products, interest in securing access to premium, exclusive, or exotic ingredients may require closer control of the supply chain. In turn, this is leading to bilateral supply agreements to minimise risks for growers as well as manufacturers, plus application of new technologies and communications tools to better manage inventory, shipping, and other aspects of the supply chain. Closer ties to local retailers also helps manufacturers react more quickly to changing consumer demands.
In the meantime, food safety is a growing concern in both developed and developing countries around the world, and there will be more pressure to protect scarce food resources. With greater consolidation among global manufacturers predicted, this should help drive up safety standards the world over.
Sometimes it is easy to overlook the role that modern packaging design and materials have had on preserving food and ensuring a sufficiently long shelf life to allow food to be transported and used where it is needed. As the Save-Food initiative – a joint campaign of the Food and Agriculture Organisation of the United Nations (FAO) and Messe Düsseldorf – warns, global food losses are one of the most urgent problems facing the international community. The group works to support regular dialogue between all stakeholders involved in the food supply chain (50 companies and associations are currently members) and helps to develop effective measures to reduce food loss. They are taking their show on the road this year and can be seen at the Process Expo in the US.