Interesting things about the packaging industry, retailing dynamics, consumer trends and NOA’s insight.

What the future holds for the paper packaging industry

Jun 9, 2018 | Carton Packaging, Corrugated Packaging, Market Research, Packaging, Packaging Research and Analysis, Plastic Packaging

Planning for future demand is vital for any industry and paper packaging is no exception. So the team here at NOA – using our expertise in packaging market research – have been doing some crystal ball gazing and here is what we have found.

Current state of our industry

The industry is busy, and has been growing by as much as 4 percent year-on-year. Paper is in demand (indeed, as we have written about before, it is in short supply) and demand continues to hold up well in 2018. In short, paper mills and paper packaging converters are doing brisk business.

But what does the future hold? Can this trend continue or are we experiencing an ‘Indian Summer’?

Predictions for paper packaging

Based on our packaging industry analysis, our strongest advice is against complacency. Certainly, growth is trending upwards – indeed, we predicted growth up to 2020 would be between +1.5 to +2 percent but in reality it is now trending more towards +3.5 percent.

However, drilling down a little further into the data we can pinpoint some interesting changes.

SRP (standard format shelf-ready packaging) is slowly declining, as consumers fall out of love with out-of-town retailing, while the much smaller SFSRP (single facing shelf ready packaging) is growing with the rise of smaller, metro-style supermarkets.

This in turn is likely to lead to white paper volumes levelling off. This is due as much to the march of ecommerce as to increasing activity in convenience retail. The impact of this, we believe, will be felt around 2020/21.

Ecommerce packaging has been growing hugely and has contributed significantly towards high demand levels for brown corrugated papers, which is up by 3.6 percent.

With the focus on light weighting, ‘right sizing’, sustainability and an overall drive for a reduction in packaging, the pressure for reducing paper packaging will lead to an overall slowing in the growth of paper volumes (both by area as well as tonnage).

We can see this happening already with the likes of Amazon. As we’ve written before, the retail giant showed its hand in the run-up to Christmas when it started sending products with no outer box, which reduced its outlay on packaging and transport in one go.

In the long-term, we believe both white and (more significantly) brown or unbleached papers are likely to slow in growth from the heady days of 2017/2018, altering by around 2020/21.

Graph showing container construction trends

Let’s mention the ‘P’ word – plastic!

Ah, we hear you cry, plastic is now the sworn enemy, so surely that will result in a big switch to paper?

Well, yes and no. Packaging market trends do indeed indicate a move way from plastic towards paper. But – and it is a significant ‘but’ – the switch is complicated and is a very long-term and extended proposition.

We believe it will take around ten years for corrugated to penetrate plastic volumes, mainly because expensive machinery that automatically packs product using plastic packaging solutions will only gradually be replaced by brand owners.

So, in summary, the slowing in demand for bleached and unbleached papers in four to five years’ time, coupled with the delayed upturn presented by switching from plastic to fibre-based solutions in ten plus years, is likely to lead to a low in the next half decade in the growth for corrugated.

Where this volume drop will be most harshly felt, and which market sectors will be worse affected, is the subject of further packaging industry research now being carried out by the NOA team.

If you would like to find out more, or if you have an enquiry for a very in-depth and ‘granular’ assessment of end use markets, or wish to commission a very specific corrugated packaging industry report on your sector – so you know what the impact of the predicted downturn will mean for you – please email our team.