Is the future of fiber packaging good?
Why is fiber packaging expected to achieve long-term growth in the global shift to a circular economy business model? In a world of steady population growth and urbanization, the demand for packaging is growing. At the same time, packaging requirements are becoming more and more, and environmental sustainability is becoming a common denominator.
In order to succeed in the packaging industry, almost every idea a company invests in must consider how to reduce the environmental impact of its products. Sustainability is no longer seen as "just a trend" as it was when the concept was first popularized. Consumers need it globally, and our planet depends on its full implementation so that it can function naturally.
To minimize the industry's impact on the planet, understanding the appropriate path forward for fibre packaging must start at the macro level before taking specific actions that can be considered but with the appropriate urgency. As with almost all industries, the paperboard packaging market is influenced by global and local trends. Globalization, and the ease and speed with which consumers can digest information, are forcing companies to consider more than issues directly related to paperboard.
According to Mintel's PESTEL analysis in the Global Packaging Trends 2023 report, we can monitor several categories of global trends, including political/legal, economic, social, and technological. The most high-profile recent political event affecting the industry has been the Russian-Ukrainian War. The war has worsened international relations, negatively impacted trade, and European neighbors and countries around the globe have imposed sanctions on Russia and its allies.
Before the war, Russia, Ukraine and Belarus supplied almost 25% of Europe's demand for timber and forest products, which has since fallen to essentially zero. Not only has this created a general shortage of fibres, but it has also forced suppliers to change their fibre structure without access to certain tree species. Russia is also a major energy supplier to the European Union and the rest of the world, and without their contribution, energy costs would have skyrocketed, leading to increased production costs that are passed on to consumers along the value chain.
Political polarization has been high since the height of the COVID-19 pandemic, creating divisions among consumers and an unstable buying environment. Today, every company seems to be facing a public relations nightmare away from a full-blown boycott of its products.
The upcoming US election should exacerbate divisions, as campaign promises and subsequent conversations reverberate in living rooms across the country. With lawmakers confident they can make changes by enacting new laws, we should expect to see a rigorous and dynamic regulatory environment move forward.https://www.risedongsheng.com/
A major concern for the packaging industry is focused on dealing with plastic waste, so we can expect investment in recycling infrastructure, deposit return schemes, broader extended producer responsibility legislation, and a closer look at PFAS "permanent" chemicals.
From an economic perspective, the report discusses the following trends that directly affect the packaging industry: economic uncertainty, rising commodity costs, supply chain challenges, labor shortages, the threat of a global recession, and inflation. As a result, value-based options are subject to a premium. Industry members need to consider how their packaging can help consumers save on their budgets without compromising quality, safety, sustainability, convenience, or freshness.
In an era when information travels rapidly around the world through different media channels, it is important to consider social factors. Today's consumers trust companies, governments and institutions more than ever, so they feel obligated to act responsibly. Now that consumers can access company and product information with just a few clicks of the mouse, transparency is key.
This can be achieved through clear, third-party verified packaging labels that communicate the company's purpose. This also requires an honest understanding of the challenges the company faces and how to address them. Consumers will also buy brands that share similar values, so they will pay attention to how the brand responds to controversial topics.
With consumers spending more time online than ever before, there is a big push to enhance digital experiences. Influencers have influence, so companies must be prepared to respond when emerging trends reach a wide and impressionable audience.
For all the pain the COVID-19 pandemic has caused, it has certainly accelerated many technological advances. One is the adaptation of so-called "smart labels", which can use QR codes to communicate product details outside packaging.
Narrowing our focus to corrugated packaging, we see some noteworthy trends. The market continues to grow, but the proportion of fiber packaging is actually declining. This is due to the higher growth rates in the production and use of other fiber products, coupled with the lightweighting of the final product itself.https://www.risedongsheng.com/
In 2023, factors such as inflation, destocking, near-recession conditions, and poor agricultural conditions are causing current demand to shrink, but are expected to rebound in 2024. In the long run, corrugated packaging will remain a valuable product in high demand, mainly because consumer purchases have shifted to online ordering and home delivery.
From a sustainability perspective, corrugated cardboard is becoming lighter as producers are using different product combinations to reduce cardboard's specific carbon footprint and material use. Additionally, corrugated cardboard is widely recycled while often made from 100% renewable raw materials.
Consumer attitudes towards sustainable packaging are changing. McKinsey & Company, the world's leading management consulting firm, has released research findings in two new reports, Sustainability of Packaging: Insights from the US Survey and Sustainability of Packaging in 2023: Inside the Heart of Consumers Worldwide, which help us understand these attitudes.
The study found that the top criteria for buying packaging were price, quality and convenience. More than two-thirds of consumers cited inflation as their top concern, as the importance of price criteria has increased by 11% since the COVID-19 pandemic broke out. The study also showed that environmental factors are largely determined by demographics, with Millennials, Generation Z and people living in urban areas tend to be more concerned about environmental factors than older generations or those in rural areas.
In terms of packaging characteristics, the study found hygiene and food safety to be the most highly rated attributes, but their importance to consumers has also become less important since the height of the COVID-19 pandemic. Nearly 40% of respondents said environmental impact is very or extremely important, a figure that has fallen by 4% since 2020. This may be due to rising prices causing consumers to prioritize other characteristics, but as the global economy normalises, we should expect to see environmental impact regain significance for consumers.
Research shows that identifying a sustainable packaging type is difficult for most consumers, but compostable and plant-based packaging types tend to show consumers that the packaging is sustainable. Conversely, aluminum foil and multi-material packaging are seen as the least sustainable options.https://www.risedongsheng.com/
These studies also show that consumers are willing to pay more for sustainable packaging. The survey results show that 4% -7% of consumers are willing to pay a premium of more than 10% for sustainable packaging, while only 5% -8% of consumers say they will not pay any premium. But about 50% of consumers say they are willing to pay a premium of 1% -3% for sustainable packaging.
So what will the future look like? We will continue to see that product protection is of paramount importance, as the least sustainable packaging is actually packaging that does not protect the product from damage or deterioration. Environmental impact will be determined at the design stage, where material efficiency, a design that is easy to recycle, and minimizing the environmental impact of the entire packaging should be major considerations. We will also continue to see strong demand for fibre packaging as it is recyclable, lightweight and made from renewable raw materials.
Although plastics have become the substrate of the past in many applications, they are still difficult to completely replace due to their many properties, including high barrier properties, transparency, and economy. That said, the right information can help fiber packaging close the gap.
The future of fiber packaging is bright, and as we continue to innovate, the industry has the opportunity to make a significant contribution to mitigating climate change and achieving a true circular economy. Understanding the industry's past, present, and future can be used to build a more sustainable future.