Summary
Executives in the paper goods and packaging market face a number of important strategic questions as they plan for growth given shifting market dynamics. To help navigate the road ahead, L.E.K. Consulting shares its perspectives on the state of the packaging market, the trends driving growth and the packaging sectors that are likely to outperform and underperform in 2015.
What is the Current State of the U.S. Paper Goods and Packaging Industry?
The U.S. consumer packaging industry has demonstrated less cyclicality than the broader economy while benefiting from a wide range of consumer and industrial trends. Going forward, we anticipate packaging demand to be driven by factors such as:
- Product fragmentation. CPGs are segmenting their customer bases in increasingly granular ways and developing new products that are ever more targeted at specific consumer groups, resulting in greater competition between brands and more demand for new packaging formats to increase differentiation
- Private label penetration. Private label penetration is still well below where penetration is, for example, in Europe. While we don’t expect similar levels of penetration in the U.S., private label brands are improving their packaging to compete more directly with branded products
- Promotional activity. Brands are increasing promotional activity, which shortens the life-cycle of packaging, particularly for elements such as labels
- Security requirements. Premium, and even non-premium brands, are seeing increasing activity from knock-off brands, driving demand for packaging that can provide different types of security measures such as holographs
- Shelf stability. The supply chain in a number of categories (e.g., food, beverage, personal care, pharmaceutical, etc.) is demanding better shelf stability, which is driving demand for packaging products such as hermetic seals and liners, aseptic packaging and newer hot-fill technologies
- E-commerce. Increasing on-line sales are driving demand for secondary packaging, protective packaging and industrial packaging options
While we saw some product de-stocking and slowing product introductions through the recent market cycle, many CPGs and private label brands used the cycle as an opportunity to gain shelf space. As a result, packaging demand showed some
resiliency through the cycle and we continue to see strong, underlying growth fundamentals for the years ahead.
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