Packaging is about to join the one-trillion-dollar club. That many dollar bills, laid end to end, would wrap around the world almost fourfold. However, circular economics of a different kind will help shape the industry of the future.
With global sales of $975 billion forecast by 2018, industry numbers are up and rising. Smithers Pira research flags digital printing and bioplastics for growth, and tips brand protection to have more than doubled over a decade.
According to Nicholas Mockett, head of packaging M&A at Moorgate Capital, 2015 looks set to be a record year for mergers and acquisitions, surpassing even the 2007 sector high of $33 billion. While unprecedented, this level of investor interest is not surprising. He says: “When you compare the public company Packaging and Containers Index with the Dow, over the last ten years, packaging shows almost twice the return. Compared with the FTSE 100, performance is almost tenfold.”
Identifying growth
Mr Mockett identifies three market segments to watch – food, pharma, and health and beauty. “In food, the burgeoning middle classes globally will drive up the value of protein, so packaging which prolongs food life will become increasingly valuable,” he says. “In pharma, that same demographic, coupled with the ageing population in the Western world, will drive demand. Finally, ageing will also drive health and beauty products, such as hair dye or anti-wrinkle cream.”
This growth heralds opportunity for technological innovation, particularly involving electronics, as the rise of so-called smart packaging taps into connectivity emerging via the internet of things (IoT). It can boost productivity and protection, through tracing and tracking.
It also has client-facing benefits to offer product development, marketing and sales, says Andy Hobsbawm, founder and chief marketing officer of IoT smart products platform EVRYTHNG and advisory board member of the Active & Intelligent Packaging Industry Association. “Smart packaging can drive revenue growth and capture market share by engaging consumers at point of purchase, building brand loyalty, up and cross-selling products,” he says.
“Consumer insights will collect real-time data to better understand who, what, how, when and why consumers are buying. Data gathered through mobiles enables a raft of new personalised offers.”
Benefits to society become more purpose driven, though, when engagement moves beyond immediate commercial “fetch-and-pitch” models of leveraging data to sell more stuff. Entering the arena of behaviour change, smart can also be sustainable, says Mr Hobsbawm. “Smart packaging can turn a product into a direct digital media channel for the brand. They could deliver personalised reduce, reuse, and recycle content to consumers, to educate and inspire them to use products more sustainably,” he says.
Packaging companies have a critical role to play, listening to needs in terms of collection and reprocessing, ensuring design is simple for deconstruction, reuse and recycling
Waste and sustainability
Waste remains the default sustainability metric for packaging. Perception persists that the industry is both directly and indirectly responsible, so part of the problem. In the United States alone, for example, recyclable post-consumer packaging, worth an estimated $11.4 billion, gets wasted every year.
The industry can evidence efficiencies and eco innovation, but given the number and mix of actants in the whole product life cycle, can packaging companies truly influence the circular economy debate?
The answer is most definitely yes, they can and they should, says Adam Read, practice director – resource efficiency and waste management, Ricardo Energy & Environment. “Packaging companies have a critical role to play, listening to needs downstream in terms of collection and reprocessing, ensuring design is simple for deconstruction, reuse and recycling,” says Dr Read. “They perhaps have more influence than any downstream players, and must help drive the debate and instigate change – they must embrace this role.”
There are limits though to what can be achieved in recycling through clever design and engaging communication if appropriate collection and processing infrastructure simply does not exist. Here, the 2013 launch by the Alliance for Beverage Cartons and the Environment (ACE) UK of the country’s first dedicated beverage carton recycling facility illustrates how the packaging industry can act collectively to change the game.
ACE UK chief executive Richard Hands explains: “Having a defined domestic route for carton recycling to a UK processor, so creating a new market, has been important in changing perceptions. Since the facility opened, a further 10 per cent of UK local authorities have started collecting cartons kerbside, meaning the total has now increased to 62 per cent nationally.”
As industry mindsets shift, going circular also calls for a break with the language of linear-thinking, argues sales and marketing director at DS Smith Packaging UK, Tony Foster. “We shouldn’t be talking about supply chains any more – effective packaging is part of a ‘supply cycle’, where materials rotate around the economy in a circular loop,” he says.
This supply cycle envisions packaging services in a continuous, circular resource flow from responsible sourcing and design with the end in mind, through efficient manufacture and low-carbon transport, to retail connectivity and smart messaging, then via better post-consumer collection back to the beginning again. For global packaging, this is the trillion-dollar circle of life.
