Packaging is Changing
Is it to our benefit or our fault?
Packaging trends have been shifting since before the COVID-19 pandemic and will continue after it becomes a footnote in history, although perhaps at an accelerated pace. The real drivers for change are the rise of urban living and mega-cities and increased environmental awareness. This all means that packaging-based supply chains will continue to adapt to the growing population centers and drive packaging growth and shifts.
Who is buying?
Any increase in consumer consumption will drive the continued growth of packaging. The purchasing power of the middle class is the primary driver for increased packaging needs. As seen in the following chart, population growth and the expansion of the middle class in the emerging economic growth areas will offset the stagnant growth in the well-established economies.
Global Population Snapshot
| Region | Population 2020 |
Yearly Change |
Net Change |
Fertility Rate |
Median Age |
World Share |
|---|---|---|---|---|---|---|
| Asia | 4,641,054,775 |
.86% | 39,683,577 |
2.15 | 32 | 59.50% |
| Africa | 1,340,598,147 | 2.49% | 32,533,952 |
4.44 | 20 | 17.20% |
| Europe | 747,636,026 |
0.06% | 453,275 |
1.61 | 43 | 9.60% |
| Latin America | 653,962,331 |
0.90% | 5,841,374 |
2.04 | 31 | 8.40% |
| North America | 368,869,647 | 0.62% | 2,268,683 |
1.75 | 39 | 4.70% |
| Oceania | 42,677,813 |
1.31% | 549,778 |
2.36 | 33 | 0.50% |
What We Buy
Buying habits have been changing for a while, and as a result increased product segmentation and personalization will continue to have a growing effect going forward. In 2020, many consumer products groups (CPGs) aren’t quite there, but they are starting to see that the integration of online shopping and omnichannel marketing can increase sales.
According to a poll conducted by customer data platform Evergage, only 26% of U.S. marketers have their channels connected. While CPGs tend to be very conservative and move toward change slowly, we can expect that companies will make great strides going forward. Consumers are most interested in personalized content related to products that interest them (50%), products based on their previous purchases or searches (43%), updates on availability or price (43%), and re-targeting related to the exact product they’re looking for (35%).
As products become more personalized it will increase the need for shorter packaging run lengths.
How We Buy
Global retail sales through all channels are estimated at ~$25 trillion at the end of 2019, a 4.5% increase from ~$24 trillion in 2018. Consumers worldwide spent nearly $3.76 trillion online in 2019, up from $3.63 trillion in 2018, according to Internet Retailer, a Digital Commerce 360 brand. Growth in digital sales also accounted for nearly 65.2% of all retail gains in Q4, up from 52.2% in 2018. Global digital sales are growing faster than the more saturated U.S. e-commerce market. In that same period from 2018–19 global digital sales grew by 14%, while only by about 4% in the U.S.
As consumers use the internet and increasingly mobile devices, especially after the “quick habits course” fostered by COVID-19, the move toward online shopping or “hybrid” shopping experiences like BOPIS (buy online and pickup in store) will only increase. Online shopping frequency is determined by age, with the younger generations providing the largest share. Furthermore, accelerated e-commerce adoption due to COVID-19 may be sticky as consumers avoid busy supermarkets, etc.
CPGs, as most other large enterprise companies, are learning that an “agile” culture enables them to operate more efficiently, reduce waste and, most importantly, change direction quickly as demand changes. This has moved the concept of JIT (just in time) as an operational philosophy for working with suppliers into the fabric of a company’s day-to-day decision making.
The inclusion of this new concept in CPG thinking is further evidenced by the 2019 McKinsey study No ordinary disruption; winning with new models in packaging 2030, which states that one of the top five priorities for the packaging industry is “handling SKU proliferation driven by consumer preferences; for example, more flexible and agile processes to manage shorter manufacturing runs, and faster new product development and time to market.”
The changing market demands go beyond the packaging process itself to packaging types, repackaging and how they need to change to support the new distribution demands. It goes on to state that “as e-retailers tackle the challenges of increased shipments of individual parcels and repackaging (as a result of online purchasing), we expect to see changes to the traditional packaging conversion value chain.
For one thing, business models requiring quicker turnaround and flexible conversion will encourage increasing use of automation. For another, it is likely that conversion will need to be more localized – that is, will be increasingly done close to or even in-house at brand owners – where converters need to be nimble to offer rapid prototyping, fast turnaround, and new technologies such as digital print.”
The use of flexible packaging can minimize package transport costs between the converter, packer/filler, retailer and end user. It not only takes up less space when empty than rigid packaging but can also be constructed on the spot from roll materials at the filling location, thereby minimizing transportation of ready-formed, but empty, packaging.
Replacing rigid packaging with even lighter-weight flexible pouches has started to occur but is not yet widespread due to current low speed on filling lines for pouches compared to bottles. This is beginning to change with the advent of more purpose-built digital production lines that include print, lamination, pouch construction and filling.
HP has been increasing its applications and resultant market share with this model. Additionally, the creative and unique packaging achieved with flexible packaging appeals to shoppers and boosts sales.
Environmental Awareness
Environmental awareness has moved from niche discussion to more mainstream action. Across the globe, governments and CPGs are not only discussing global warming, air and water pollution, recycling, plastic waste in the oceans and alternative solutions but starting to take action. The desire for sustainable manufacturing processes, including the use and reuse of materials, is beginning to see real traction in the market. Equipment manufacturers are developing press and finishing equipment with an eye on carbon neutral. Single-use plastics are being outlawed by local and national governments around the globe. Substrate manufacturers are starting to develop creative new materials based on recycled content and byproduct waste, with a goal of reuse and composting properties.
Millennials make up about 30% of the global population and are currently in the sweet spot of consumer spending. While environmental discussions have been going on for decades, they are the first generation to have grown up in a world where “climate change is part of the daily international dialogue, and have been forced to face the realities of extreme weather patterns, sea level rises, rapidly increasing GMO agriculture and species extinction,” according to the Sustainability Management School headquartered in Gland, Switzerland. They went on to reference a recent study that showed that “87% of millennials believe that companies should address urgent social and environmental issues. Early indications are that Gen Z is starting take up the mantle and continue these efforts.
CPGs are addressing these issues. Leading brands including Nestlé, Amcor, Colgate-Palmolive, Danone, Ecover, L’Oréal, Mars, M&S, PepsiCo, Coca-Cola, Unilever, Walmart and Werner & Mertz announced their commitment toward using “100% reusable, recyclable or compostable packaging by 2025 or earlier” at the 2018 World Economic Forum in Davos, according to the Ellen MacArthur Foundation. They went further to say that “more than 450 organizations have signed their Global Commitment to address plastic waste and pollution at its source."
Summary
The trends in packaging are a direct result of market changes and general awareness. Just as these have been driven in great part by the technologies that have connected us, the solutions are facilitated by many of those same technologies.
More to Come …
Drupa 2021 is coming, and I would like to address your interests and concerns in future articles as it relates to the manufacturing of Print, Packaging and Labels, and how, if at all, it drives future workflows including "Industry 4.0." If you have any interesting examples of hybrid and bespoke manufacturing, I am very anxious to hear about them as well. Please feel free to contact me at [email protected] with any questions, suggestions or examples of interesting applications.
