The complete package
The packaging industry has evolved dramatically in the last twenty years, as greater focus on ease of use, design and practicality have driven innovation and greater variety of available substrates.
Branding and style once provided the main focus for packaging providers. Now, it is clear that efficiency and environmental factors will have a greater role in strategy. Intermediaries (fast moving consumer goods companies and food beverage producers) are noting the ability to save on logistics and losses whilst packaging end-users become more conscientious about the environmental footprints of the products they consume. That isn’t to say that branding won’t matter. On the contrary; packaging “styles” will have to balance the demands of efficiency, cost and constantly evolving consumer tastes.
For packaging producers, this means increased innovation will be needed, and a shift away from commoditised “one size fits all” solutions. On the other side, it also leads to potential for more specialty products for which purchasers are willing to pay more.
Waste – big losses that packaging can help turn to profits
It is estimated that one third of food produced is never eaten1. Spoiling can occur due to inadequate transport or it may be down to harvesting practises. In e-commerce, it is estimated that 10% of all shipments arrive damaged and another 10% are not in the correct packaging2.
Focusing on just these two examples, a more holistic approach to packaging can help save waste and bolster profits. Using packaging more effectively (and using less) coupled with better types of packaging (for example vacuum packaging to extend shelf life of foodstuffs) can both reduce costs and reduce losses, thereby benefitting the bottom line.
Stars aligned – with regulatory drivers too
Regulatory drivers remain supportive and a number of countries are enacting, or have enacted, protocols that will both directly and indirectly impact packaging choices – from recycling targets to reducing carbon footprints.
With these points in mind, all the incentives are aligned for increased adoption of more advancements in packaging substrates to improve product life, reduce losses and enhance the consumer experience. Put simply, less waste is less cost to producers and the environment.
Round and round – the struggles of lifecycle analysis
Lifecycle analysis of packaging is a dynamic problem, as packaging’s varying forms create difficulties in assessing the environmental impacts. Take a simple example of the aluminium can versus a glass bottle for a soft drink. Aluminium is undoubtedly more energy consumptive in initial production, but recycling is very efficient. Glass meanwhile is less energy intensive in first production, but recycling requires the container to be melted down. However, if the glass bottle is merely washed and reused then it is much more energy efficient than even the recycling of the can. This is before aggregate recycling rates are taken into account.
Overall, we remain positive on the packaging sector, with a focus on the more innovative packaging providers.
1. UN World food programme, UN FAO and University of Arizona https://sealedair.com/insights/reimagining-food-waste-misplaced-resources-and-lost-opportunities?campname=insights?loc=rtp&iesrc=rcmd&astid=67807554-d4e3-4fb1-ab64-b3870c85247f&at=17&rcmd_source=WIDGET&req_id=65609ab6-2e16-47b8-b57e-5afdf6875376 ↩
The views and opinions contained herein are those of Schroders’ investment teams and/or Economics Group, and do not necessarily represent Schroder Investment Management North America Inc.’s house views. These views are subject to change. This information is intended to be for information purposes only and it is not intended as promotional material in any respect.