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The top 3 global packaging megatrends
The global smart packaging market is expected to grow during and post COVID-19. Besides the continued focus on eco-friendly and sustainable packaging, F&B and pharma companies are increasingly adopting smart packaging for traceability and to increase products’ shelf lives – in line with the requirements stemming from the pandemic for increased transparency and traceability of product supply chains.
What are the other top leading trends in the global packaging market and what are the drivers behind them? In our blog, we explore this and more, as well as the impact of COVID-19 on them.
1. Smart packaging to boost supply chain transparency
Many industries, including pharma and F&B, are focusing on smart packaging that leverages the use of technologies, including RFIDs, NFC, artificial intelligence (AI), big data and data analytics, to enhance supply chain transparency and improve customer experience. Some of the recent developments include Fresenius Kabi introducing RFID smart labels for a range of essential medications, including for vials, bags and prefilled syringes in August 2020. In June 2020, Karma Water released its cap technology to preserve active nutrients in its pre-mixed vitamin water; this cap technology releases nutrients and probiotics in the drinks, moments before consumption.
What does this mean for buyers and suppliers? With increasing consumer demand for smart packaging, suppliers are likely to increase their investments in this area, and focus on entering into partnerships and M&As to develop/expand their capabilities. Buyers will be able to digitise customer interactions to deliver better product experience, leading to increased sales and improved services, and will also allow them to optimise production and inventory through customer and retailer data. However high costs are a concern for these businesses, as devices used in smart packaging, such as sensors, have to date been manufactured in limited numbers.
Impact of COVID-19: Adoption of smart technologies is expected to rise – as companies aim to improve supply chain transparency through enhanced tracking and monitoring of shipments. In the F&B industry, higher adoption of smart technologies is being driven by growing demand for safe and healthy food.
2. Growing use of eco-friendly packaging
The packaging market is witnessing a rise in demand for bioplastic and lightweight materials driven by growing concerns around greenhouse gas (GHG) emissions and plastic waste. Although COVID-19 has delayed the adoption of eco-friendly packaging for many companies in 2020, their medium–long term implementation plans remain unchanged.
Some of the recent developments across large brands adopting eco-friendly packaging include: Tetra Pak signing a 5-year strategic partnership with Lund University (Sweden) to promote and develop sustainable products – the partnership will focus on developing bio-based packaging material, along with new package shapes and formats. DS Smith partnered with MULTIVAC to develop a sustainable modified atmosphere packaging (MAP) solution, ECO Bowl, which is made from 100% recycled materials and can be recycled again.
Lightweight packaging will help packaging companies achieve cost savings by reducing raw material requirements and freight/logistics cost. As demand increases, more suppliers will opt for it in the near term and will likely focus on investing in eco-friendly packaging materials to differentiate themselves from the competition. In January 2020, Stora Enso announced that it will invest $9.7 million in a pilot that aims to produce bioplastics. On the other hand, switching to eco-friendly packaging such as bioplastic, can result in increased costs for buyers, but can also yield intangible benefits. Buyers will also look to partner with bioplastic developers and use the opportunity to improve consumer perception.
Impact of COVID-19: Overall, adoption of sustainable packaging is expected to be slow in 2020, as countries defer their plans on banning single-use plastics. For example in May, the Italian government postponed the implementation of a proposed tax on non-recyclable plastic packaging to January 2021.
3. Increasing demand for rPET in packaging
The global market for recycled polyethylene terephthalate (rPET) was valued at $7.3 billion in 2019, and is expected to see a CAGR of 7.9% during 2020–2027. Driven by growing environmental concerns and government regulations regarding the adoption of environment-friendly practices, packaging companies are increasingly using rPET to manufacture their products. In 2019, the EU communicated a directive mandating the incorporation of 25% recycled content in all PET beverage bottles by 2025 and 30% by 2030. Coca-Cola, Danone and PepsiCo have all announced a 50% use of rPET in their bottles by 2030.
What does this mean for both buyers and suppliers? Packaging manufacturers will invest in R&D and acquisition/development/expansion of capabilities and infrastructure for manufacturing recycled packaging products. Those incorporating greater usage of rPET for packaging will not only see higher margins, but also lower carbon footprints. On the other hand, increased recycling volumes may reduce the per unit processing cost, resulting in lower prices for recycled products, which will benefit buyers. And with consumers increasingly demanding sustainable products, use of recyclable packaging will help buyers boost their brand image.
Impact of COVID-19: Many companies are not prioritising sustainable packaging initiatives in the short term, in the wake of cost-cutting measures due to the pandemic. Significant reduction in rPET collection rates globally, amid the COVID-19 lockdown restrictions during H1 2020, is expected to drive rPET prices upward, resulting in increased production costs and reducing its competitiveness against virgin PET.
For more megatrends and the full report on the global packaging industry, log on to Amplifi PRO.
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In her eleven years with The Smart Cube, Rashi has risen through the ranks from a research analyst to Senior Manager. Leading a team of 30 people, she is responsible for the end-to-end delivery of projects for clients in the CPG sector. An economics graduate, Rashi is an in-house expert in the F&B and FMCG space, especially on the procurement, supply chain and strategy side. When Rashi is not providing market intelligence to clients, she loves to spend her time doing kathak, a form of Indian classical dance.