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Is the rise in corrugated demand a swansong?

May 8, 2019 | Corrugated Packaging, Market Research, Packaging, Packaging Research and Analysis

Demand for corrugated has been experiencing something of a resurgence in recent years but the question is, will it continue?

According to a new report – the Strategic European Corrugated Report, compiled by the team here at NOA – the demand bubble has been fuelled by two factors.

On the one hand, the traditional market of bricks and mortar (B&M) stores has been extremely buoyant for corrugated (if not for retailers). Larger supermarkets, such as Asda and Sainsbury’s, have been fighting back against the tide of the limited list discounters, like Aldi and Lidl. For both ends of this B&M market, corrugated provides an ideal way to display and promote products.

At the same time, it will come as no surprise that ecommerce has had an effect, since some 20% of shopping is now done online. So there is high demand for ‘white’ corrugated from B&M stores, while ecommerce favours ‘brown’ for delivery packaging. A win-win situation for corrugated demand, which has been buoyant for the last two to three years.

However, our research suggests this is not set to continue – are we seeing corrugated’s swansong?

Our Strategic European Corrugated Report is based on extensive research and interviews with key brand owners and retailers, analysing each retail channel and looking at 40 sub markets, among them a high proportion of FMCGs, such as chilled ready meals, confectionary and drinks.

Our prediction is that while corrugated production will continue growing well for the next five years at more than 2.6% per annum, it is likely to start reducing to around 1.3% for the following five years to 2028 (with as much as 1% of this growth down to modest single use plastic substitution).

This reduction in demand, we predict, will be due to market share being lost by the big B&M stores to ecommerce. At the same time, and in response to consumer pressure, right-sizing of packaging, pack rationalisation and packaging waste reduction will impact on demand for corrugated.

In other words, our research shows that corrugated growth will flatten off and corrugated converters, with their 24-7 operations and fast turnaround times, may need to scale back production unless they take steps to move into new markets. Not a swansong then, but a likely dip that will need addressing.

Corrugated as an alternative to single-use plastic (SUP) has seen some success, for example corrugated discs for chilled pizzas. However, opportunities for corrugated to substitute SUP will only happen if corrugated can overcome the significant technical hurdles to truly challenge plastics.

The technology isn’t there yet for the widespread substitution of SUP for corrugated. For example, in the case of ready meals current SUP is flexible, hygienic and light and there is no obvious corrugated alternative to the plastic tray that doesn’t require some form of plastic liner. Even when a viable corrugated alternative can be found, corrugated converters can’t switch overnight. Investment is required, and the investment cycle is at least two to three years.

But there are opportunities out there, and brand owners should know that corrugated converters are eager to collaborate and find solutions. We’ve analysed the FMCG market past and present, we have confident future predictions, and we’ve looked at the specific opportunities in the SUP market too. The pizza bases was one – there are more to be had and we know what they are. The savvy corrugated converters, who concentrate their resources, will find them – or they can always ask NOA!