Annual Packaging Study 2023: The Great Stocking/Destocking Saga and Its Aftermath

Brand owners, who since 2019 have been increasing their inventory levels in a bid to decrease risk, largely expect their inventory levels to return to pre-COVID-19 levels in 2024 as demand growth recalibrates and supply chain issues subside. And by 2027, after steadily increasing the share of packaging sourced from the U.S. over the past few years, they expect that share to hit 85%, driven by a desire for suppliers that can serve short-run needs at compelling lead times.  

That’s according to L.E.K. Consulting’s sixth annual proprietary packaging study that we conducted in the fourth quarter of 2023, which makes clear how players in the packaging value chain can differentiate their offerings in order to best meet the needs of brand owners and, by extension, their investors.

Brand owner packaging sourcing strategies

After low inventory levels in 2020-21 and mixed stocking/destocking trends in 2022, brand owners largely expect inventory levels to normalize across end markets — namely food, beverage, beauty and personal care, and health and household — by the end of 2024 (see Figure 1). 

As to those brand owners that keep elevated inventory levels, they cite a desire to improve supply chain resilience as their top reason (59% of responses), followed by a desire to minimize the risk of product shortages and improve customer lead times (see Figure 2). 

Conversely, brand owners that are keeping lower-than-normal inventory levels are primarily doing so in order to minimize risk (51% of responses), cut costs and rationalize stock-keeping unit (SKU) counts. They also cite falling end-market demand, a decreased need for total safety stocks, investment priorities other than inventory and a move to reduce the number of suppliers they use (see Figure 3). 

Meanwhile, brand owners have increased their domestic sourcing of packaging in the past few years, and they expect this trend to continue, rising from 84% in 2023 to a predicted 86% in 2027 due primarily to suppliers’ increased level of responsiveness and their ability to serve short-run needs, as well as the improved lead times that come with domestic sourcing.

So while for the most part inventory levels have normalized, continued restocking to pre-COVID-19 levels continues to be a demand tailwind for converters heading into 2024. Indeed, domestic converters with the ability to produce short runs are well positioned to gain share as brand owners onshore their packaging production.  

An evolving packaging picture

Packaging is considered critical to the success of a brand. And as our survey results over the past six years have demonstrated, brand owners prioritize packaging that is specific to ecommerce, and are increasingly looking for packaging that is both U.S.-sourced and made with sustainable materials.  

What’s changed in the past year, however, is that brand owners are more than willing to change packaging materials to keep their costs down — and notably, Tier 1 brands are spending less on packaging relative to their smaller branded peers, more in line with that of private-label brands. Brand owners are also rationalizing SKUs and introducing new SKUs primarily due to product innovation and, by extension, new packaging formats; however, converters can offset the impact of SKU rationalization by differentiating themselves with innovative packaging designs.  

Finally, in a bid to improve supply chain resilience and minimize the risk of product shortages, most brand owners expect their inventory to reach pre-COVID-19 levels in 2024 as supply chain issues subside.  

To learn more, please see our summaries of the survey findings detailing the latest packaging trends and associated spend, the impact that various megatrends are having on packaging, and the impact of brand performance and SKU dynamics. 

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