Understanding trends and challenges affecting packaging operations across the world
By Jorge Izquierdo, Vice President, Market Development, PMMI, The Association for Packaging and Processing Technologies
Before the coronavirus (COVID-19) became a global pandemic, demand for packaging machinery around the world was on the rise. A 2019 report by Grand View Research projected the value of the packaging machinery market to reach $65.18 billion by 2025. However, the onset of COVID-19 produced significant disruptions in early 2020. According to PMMI’s 2020 Economic Impact of COVID Report, the shutdowns of early spring prompted some consumer packaged goods (CPG) companies and other product manufacturers to postpone or outright cancel orders for packaging equipment, while others scrambled to rush orders and purchase replacement parts as they coped with spikes in activity. It may be months or even years before industries “normalize” following wide accessibility of a vaccine. However, the pandemic is already leaving its mark on the packaging operations of manufacturers—both in how these businesses cope with changing or continued consumer demands and how they evolve to survive and thrive in a no- or low-touch world. As seen over the last six months, the industry must continue to innovate to keep pace and develop solutions that will see them to the other side of this pandemic and beyond.
Consumers still dictate macro trends
eCommerce, customization and sustainability are three macrotrends that continue to influence the packaging decisions of brands. Before the onset of the pandemic, online sales in the United States were growing at 15 percent a year and 62 percent of consumers purchased products online for instore pick-up in 2019, according to PMMI’s report Omnichannel Retail: Operating Harmoniously in an Integrated, Digitally Enabled Supply Chain. As brick-and-mortar retail outlets shut down in March, eCommerce effectively exploded. A Forbes article reported that in the first few months of stay at home orders, online revenue growth was up 68 percent from last year.
Expectations remain strong for eCommerce, even as brick-and-mortar retail has re-opened. McKinsey’s survey of more than 20,000 consumers in Europe—also hard hit by COVID-19 in the spring, observed that digital adoption in Europe rose from 81 percent to 95 percent as a result of the crisis, with the grocery sector seeing the largest growth. Over 70 percent of respondents said they “expected to continue using digital services with the same frequency as they do now or even more often.” For CPGs and other essential goods manufacturers, a larger focus on eCommerce can potentially require changes to packaging strategies such adopting omnichannel packaging that fits supply chain needs for both online and brick-and-mortar distribution.
In online retail, customization is increasingly important to equip brands with a competitive advantage in such a vast marketplace. As a result, packaging suppliers are quickly adapting their offerings to this demand-driven market. This requires CPGs and other product manufacturers to implement more automated solutions that are efficient and flexible to meet rapidly changing needs.Sustainability also continues to influence the conversation around packaging as consumers remain attentive to the impact their purchases have on the environment. Though it feels as though COVID-19 sidelined discussions on sustainability in packaging, Gen Z and Millennials still represent $350 billion in spending power in the US alone. In 2019, McKinsey reported Gen Z would represent 40 percent of global consumers by 2020. As these demographics rise, so too must brand commitments to social and environmental awareness that align with their beliefs. For many companies, this means incorporating and extending sustainability measures to packaging with light-weighting, right-sizing, use of recycled, recyclable or biodegradable materials and minimizing utilities and energy usage. Specifically, in Europe, the concept of a circular economy continues to dominate conversations around sustainability. Around the globe, our industry is driving innovation; and we see this in the ongoing push to improve sustainability across all packaging types throughout the supply chain.
Meet demands and overcome challenges
When the pandemic hit, CPGs and other manufacturers had to dramatically shift formats in order to address the supply shortage of goods deemed essential. Amid the closures of cafeterias and restaurants, meat brands switched from institutional offerings to supermarket formats. Cleaning supply brands accelerated production of larger format offerings amid rapidly escalating demand. Additionally, all manufacturers were met with challenges to operate with social distancing measures and appropriate personal protective equipment (PPE) in place to prevent virus outbreaks.
To meet these challenges, some manufacturers increasingly adopted reconfigurable, modular machinery to allow more flexibility in production, packaging and the supply chain to re-organize product flow. Increased customization of products in both e-tail and retail environments also accelerated investment in more automated machinery. Some manufacturing sites focused on digitizing their facilities to create agility and flexibility in product packaging and shipping while embracing automation to achieve higher efficiency and productivity.
Robotics feature prominently in discussions of automating eCommerce ready factories. Some companies implemented collaborative robots -cobots- designed to interact and perform with humans on a line, and others utilize more traditional robots to eliminate monotonous job functions. Autonomous mobile robots transport pallets and other heavy loads because they can navigate dynamic environments without physical or electro-mechanical guidance devices.
With manufacturing, challenges are often opportunities. Increased demand for various packaging formats and SKUs translates to an increased demand for filling and dosing machinery. Likewise, machinery designed for case handling solutions is also in demand to accommodate the expansion of e-commerce. Additionally, demand for more customizable and aesthetically pleasing packaging drives growth in labeling, decorating and coding. Brands that can include a claim about sanitation or health benefits will opt to customize labeling to communicate that to the consumer.
With the forecasted recession, the industry can expect to see growth in private labels and a reduction in premium and specialty foods, resulting in a decrease in premium packaging and an increase in budget-friendly formats. New technologies, solutions and education addressing the changing landscape of packaging amid COVID-19 were abundant at the inaugural PACK EXPO
PMMI, The Association for Packaging and Processing Technologies, represents more than 900 North American manufacturers and suppliers of equipment, components and materials as well as providers of related equipment and services to the packaging and processing industry. Learn more at pmmi.org.