COVID-19’s impact is first and foremost a humanitarian crisis that has thrown us into uncharted territory. We at L.E.K. Consulting extend our heartfelt sympathies to all who are affected by this crisis.

The virus has differentially impacted companies across the globe based on their industry, geographic focus, end markets served and product use cases. Packaging is no different. Despite broad macroeconomic headwinds, certain packaging suppliers, including both global conglomerates and U.S.-focused players, are benefiting from pockets of economic velocity that are driving near-term revenue growth. In certain categories such as ecommerce, packaging providers are scaling production and benefiting from pull-through demand, while in other categories such as healthcare, converters are tactically adjusting their businesses to capitalize on opportunities. Understanding these dynamics can help manufacturers and converters begin to develop a strategy to offset losses in demand.

Healthcare consumables: While the U.S. healthcare market has typically been resistant to market cycles and grew through the Great Recession, restrictions on elective procedures are putting pressure on what has traditionally been a highly stable sector as states adhere to the latest Centers for Medicare & Medicaid Services guidelines. That said, packaging manufacturers are positioning themselves to benefit from demand related to COVID-19. An estimated 6.5 million additional test kits will be produced each week by April, driving demand for collection devices (vials, closures, etc.) as well as products (pipettes, cassettes, etc.) used in diagnostic testing.1 Additionally, manufacturers with relevant capabilities have been finding themselves filling supply chain shortages for mission critical products. For example, Berry Global is currently running its nonwoven production lines in the U.S., Europe and Asia at maximum production levels to attempt to meet demand for the critical input for N95 masks; COVID-19-related demand in the U.S., inclusive of N95 and other masks, is expected to be 3.5 billion masks

Ecommerce packaging: The surge in online purchases in the first two months of 2020 has led to a year-over-year increase in ecommerce spend of 52% relative to January and February 2019, creating tremendous demand for protective packaging and securement packaging (e.g., stretch film, pallets). For example, traditional corrugated cardboard boxes, flexible padded pouches from companies, and protective inner packaging are benefiting significantly from the increase in ecommerce spend. Even laggard ecommerce categories such as online meal kits (e.g., Blue Apron) are enjoying a resurgence and creating immediate packaging needs for cardboard boxes and higher-value insulated packaging products. From March 12 to 14, the online grocery category, largely composed of delivery services such as Amazon Fresh but also inclusive of meal kits, saw its sales grow by 400% relative to the same period during 2019.

Food and beverage: With the consumer dollar rapidly shifting away from many foodservice establishments, grocery retailers, including those in historically low-growth center aisle categories as well as higher-growth fresh categories, are expected to see heightened demand. For example, consumers estimate that they have spent 15%-20% more on grocery dry goods since the COVID-19 outbreak, while decreasing their dining out spend by 40%-50%. Additionally, consumer demand for protein grew by 77% for the week ending March 15 relative to the same week during 2019,  which is expected to drive revenue to manufacturers of trays, vacuum packaging, protective films (both traditional PVC film and shelf life-extending modified atmospheric packaging, or MAP) and other related packaging. Total U.S. beer consumption has fallen 0%-1% per year in recent years; however, the first two weeks of March saw grocery, convenience, liquor and other chain store beer sales grow by 8% relative to 2019, driving demand to can, bottle, carton and label suppliers as beer drinkers shift from on- to off-premises consumption.

Personal care and household goods: Relative to February 2019, demand for hand sanitizer grew by 67% during February 2020. Global beauty manufacturers such as LVMH as well as global distillers such as Pernod Ricard have initiated production of hand sanitizer to meet end customer needs and are generating tremendous demand for bottles, caps and pumps, among other products. Products such as hand wipes and household cleaners also saw double-digit increases, all of which contributes to demand for molders that manufacture bottles, caps and closures. Comar, a New Jersey-based injection molder and manufacturer of antibacterial wipe lids and canisters, reports “working around the clock to keep up with the increased demand of mission critical items” to meet the needs of its customers and, indirectly, of the end consumers.

While challenging times are certainly ahead for the packaging industry, pockets of near-term velocity are present in the market and addressable to proactive manufacturers.


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