As the packaging industry recovers from the COVID-19 catastrophe, it must refocus and lift its game—all while negotiating ongoing industry developments.
While people adjusted their lives in reaction to the coronavirus epidemic, the crisis wreaked havoc on the financial markets. The worldwide packaging business, which generates $900 billion per year, will be affected in both the short and long term due to these disturbances. Significant shifts in consumer channels, new or increased consumer-safety concerns, raw-materials prices, lifted single-use packaging bans, and the disruption of several end markets are the most significant changes. Furthermore, we anticipate that the current crisis will modify previous packaging megatrends.
When the world recovers from the COVID-19 pandemic, packaging companies will have to improve their performance in various ways. This may include balancing sustainability goals with stringent hygiene requirements, stepping up their e-commerce games, and competing in a new customer landscape while facing severe cost pressures. Packaging converters and other packaging companies must rethink how to shift to their next normal to navigate these rough waters and stay ahead of the competition.
Packaging’s advancing megatrends
Packaging firms will have to reconsider their market strategy and emphasis. We expect the pandemic’s impact to change major megatrends that were already transforming the packaging business before the crisis while also raising the bar for performance.
Before the COVID-19 crisis, the packaging value chain was focused on sustainability, particularly in light of regulatory and public concerns over single-use packaging waste. Many nations’ regulators were moving quickly to address the problem, and fast-moving consumer goods (FMCG) corporations and retailers made significant commitments to enhance package sustainability and rethink their packaging systems.
Maintaining a Healthy Balance Between Sustainability and Hygiene
However, with the outbreak of the COVID-19 virus, sustainability has taken a back seat to worries about cleanliness and food safety, which have taken precedence. With this in mind, how will the COVID-19 situation impact the sustainability plan, which has become a critical consideration for the packaging industry? Sustainability, we believe, will continue to be a fundamental industry-shaping trend, providing significant competitive advantages for a resourceful packaging converter. However, along with hygiene and consumer safety considerations, sustainability should be redefined. Indeed, the increased emphasis on hygiene and food safety is set to become the new normal and a top priority for consumers and packaging customers (FMCG businesses and retailers) across the whole value chain.
Some stores, for example, are implementing novel measures to safety and cleanliness, many of which are likely to endure until the outbreak has passed. Consumers are increasingly demanding things that are both hygiene-assured and single-use packed. Packaging design, substrate selection, or specialized functionality to ensure viral survivability at a minimum could impact packaging material preferences.
Packaging firms will have to handle sustainability and hygiene problems and cost, performance, and convenience needs from this standpoint. Furthermore, market disruptions could be exacerbated by variable raw-materials costs and pauses in recycling services. Companies might respond by experimenting with innovative ways to promote sustainability, such as producing truly biodegradable (compostable at home) packaging materials to prevent packaging leakage into the environment.
Demands of e-commerce
Consumer behavior is changing dynamically as a result of the coronavirus outbreak. Consumer spending on retail and groceries—particularly food—has risen considerably during the crisis. Buyers are increasingly purchasing their goods online, supporting a surge in e-commerce shipments and other home-delivery services.
Role of Packaging Companies
According to The Legacy Printing’s CEO, we expect the e-commerce shopping trend to stay strong, which is why the demand for custom rigid boxes will also rise. According to some industry projections, US online retail sales will reach or exceed 10% this year, compared to 2 to 3% before the crisis. If, in the long run, most products in all categories are sold online, e-commerce will give a massive push to the manufacturing of packaging boxes. The US-based packaging company has been creating and designing packaging solutions that are fully optimized for the e-commerce channel. The packaging solution provider’s packaging solutions significantly minimize and mitigate product damage. Their packaging options are designed explicitly for e-channels and are tech-enabled to increase filling speed and productivity. This e-commerce packaging is three to four times more durable than standard off-the-shelf packaging. As a result, many manufacturers have turned to them since their packaging makes e-commerce shipping as simple as possible. E-retailers are increasingly using AI and automation to fill orders and stock warehouse inventory. This US-based packaging solutions provider has offered new packaging and redesigns approaches to utilize these technologies to increase speed and efficiency fully.
Consumer Preferences are Changing!
Consumers cut back on non-essential purchases, traded down, and changed channels during the Great Recession. After the recession, the latter two consumer behaviors were maintained. We saw significant alterations in customer behavior during the COVID-19 crisis, both by category and by channel:
Category – Consumers place a greater emphasis on necessities, both up and down trades, and a
substantial pullback in discretionary expenditure. Consumers appear to be reverting to larger, more well-known brands.
Channel – Consumers have embraced and tried new channels quickly, with an emphasis on internet purchasing. Furthermore, lockdown measures have resulted in so-called nesting behavior worldwide, with excursions to coffee shops, spas, restaurants, and other activities being replaced by staying at home. Many customers may conclude that meeting their social needs at home is a more convenient and cost-effective option in the future.
We predict customers to remain price-sensitive, gravitating toward price and value brands; to retain, if not accelerate, their online shopping activity; and place an even greater emphasis on health and hygiene. Adjustments in consumer tastes will lead to changes in product mix at FMCG and retail customers.
If these patterns continue after COVID-19, the repercussions for packaging firms will be far-reaching, including shifting profit pools. If organizations are to produce products quickly enough to suit new and existing consumer demands, including a demand for convenience, operational procedures must become more flexible and agile.
Consumers are gloomy or unsure about the pandemic’s long-term effects: in the United States, over half of the consumers are incredibly frugal with their money. Furthermore, as consumers’ packaging budgets shrink, cost pressures in the packaging business are projected to intensify across regions. According to a recent global B2B study, over 27% of respondents projected to cut their packaging costs by 4 to 10% in the future. As a result, packaging converters must continue examining and taking advantage of cost-cutting options to keep their plants cost-competitive.
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During the COVID-19 issue, packaging clients are also evaluating and adjusting their supply chains. Customers who rely on global supply, in particular, are now exploring making their footprints more regional, either by adding regional suppliers or replacing cross-regional ones. Packaging converters with global sales and, more importantly, raw-materials suppliers must consider building a regional supply chain (perhaps through co-location with clients) and increasing vertical integration. Their goal will be to boost the flexibility and resilience of packaging products and provide transparency to clients about stock levels and supply backup plans, among other things. These shifts may also allow collaboration with customers, such as joint packaging research and development and production planning.
Digitization of the value chain at a faster pace
Another effect of the pandemic is that all value chain segments are expected to become more computerized to reduce supply-chain and manufacturing risk. We also expect more automation, artificial intelligence, and remote help to boost productivity and resilience.
Thanks to real-time information and analytics, customers will seek to track supply chains significantly more closely than previously, possibly changing from annual or quarterly to weekly monitoring. Increased transparency isn’t only about saving money; it’s also about helping to develop a more robust supply chain and ensuring product health and safety. This approach could allow packaging converters to help consumers by increasing the incorporation of technology into the packaging itself, for as through radio-frequency identification.