The packaging and conversion industry in 2030: challenges and opportunities

The packaging and conversion industry in 2030: challenges and opportunities

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According to The Future of Packaging: Long-Term Strategic Forecast to 2028 report published by market research firm, Smithers, in the next decade, the global packaging market will grow by almost 3% annually, reaching more than $1.2 trillion by 2030.The consultancy says that over the past 5 years the global packaging market has increased by 6.8%. Growth has been especially in developing markets such as Latin America, where lifestyle changes have transformed consumer habits, boosting demand for packaged products and encouraging buying through digital channels.

Over the past decade, the global packaging industry has enjoyed steady growth, driven by factors such as changes in substrate choice and expansion into new markets and sectors. Now, trends such as e-commerce and the digitization of packaging, are emerging as the big transformers over the next 10 years; and while these trends are not new, the COVID-19 pandemic has accelerated its adoption.

BIG NUMBER: $1.2 trillion: worth of the packaging market by 2030

"Growth will continue over the next decade, but there is likely to be more pressure and disruptive changes," says Nick Santhanam, senior partner at McKinsey & Company. "While growth in China is slowing, like other markets in Asia, it will remain the industry's main driver of growth along with North America. Meanwhile, the use of plastic has soared, but the burden on the environment is causing increasing restrictions. And while e-commerce has been a boon for many converters, its spread has created new demands and highly compressed margins for converter customers, i.e. fast-moving consumer goods (FMCG) companies and retailers," he adds.

Surveys and reports conducted by various research firms such as Mintel, Euromonitor and McKinsey & Company suggest that the most important changes in the packaging and conversion industry in the wake of the COVID-19 crisis are changes in consumer channels, a major consumer concern regarding product hygiene and safety , volatility in commodity prices, elimination in the prohibition of single-use packaging and digitization of the value chain.

What does this mean for converters? According to David Feber, a partner at McKinsey & Company, generally, when brand owners have to rethink their packaging according to the new needs or demands of their customers, they tend to look for a new converter. "There is a real opportunity for packaging converters to step forward, understand how trends affect consumers and therefore their customers, and present consistent solutions."

KEY FACT: Converters must understand how trends affect consumers and therefore their customers, and develop packaging solutions according to these trends.

In "new normality," packaging companies face the challenge of improving their profitability in multiple ways: on the one hand, balancing their environmental sustainability goals with strict hygiene requirements and, on the other hand, strengthening their e-commerce strategy while competing with new players in the market and facing strong cost pressures. 


Consumers in 2030

"The next decade will usher in an era of conscious consumption. While competition to develop and market responsible packaging technologies will reach a high point, responsible approaches, collaboration and intellectual property exchange will prevail for the common good," says David Luttenberger, Global Packaging Director at Mintel.

Given that one of Unesco's Sustainable Development Goals for 2030 is the significant reduction of single-use plastics, consumers will reward companies implementing sustainable practices, including the use of environmentally friendly packaging. The key to achieving that loyalty, according to Luttenberger, is education. "Consumers want brands to help them understand what's really better, rather than what's "less bad." Brands, packaging manufacturers, and retailers that develop, market, and use environmentally responsible packaging will be more successful than those that do not."

KEY FACT: 44% of millennials prefer to buy from companies with environmentally friendly practices

2030: Opportunities for converters

Although the trends are the same for the entire industry, their implications over the next decade differ depending on the packaging material. For example, convergence of primary and secondary packaging requires a decrease in the use of packaging materials, which has a greater impact on the folding box and flexible packaging sectors compared to glass or metal packaging. By contrast, increased demand for health and wellness products represents greater opportunities for retailers engaged in bulk sales and, therefore, for the glass or metal packaging sectors.

According to the report No ordinary disruption: Winning with new models in packaging 2030 published by McKinsey & Company, despite increased sustainability pressure, "the combined power of the attractive attributes of plastics with respect to cost, automation and quality will likely boost rigid and flexible plastic substrates", provided converters can increase recyclability and percentage of recycled raw material used for their manufacture.

For their part, paper and cardboard will continue to benefit from the growth of e-commerce, becoming the ideal material for the implementation of solutions such as RFID tags, rapid response codes and other Internet of Things technologies.

The report also notes that glass and metal face significant challenges in terms of omnichannelity, but their strength, product protection and sustainability profile make them an interesting choice for brands that want to replace plastic packaging with other substrates.

"Looking ahead, there needs to be much closer partnerships with brand owners, retailers, upstream and even downstream recyclers to think about how packaging is going to work, what the value chain looks like, what problem it solves," says Daniel Nordig-rden, senior partner at McKinsey & Company. "The secret to innovation is to find the biggest problem the customer cannot solve. Then you think about how to solve it, and that's not a solo job, it requires an ecosystem."

Packaging companies are required to change their approach to prepare for the next decade. By developing a business model based on innovation, agility, reallocation of assets and resources (including mergers and acquisitions), collaboration and sustainability, converters can prepare from now on for the challenges and opportunities posed by the packaging of the future.

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