5. Introduction to the packaging market

5.

Introduction to the packaging market

In 2020, the packaging market will reach a size of USD 997 billion, with a year-on-year (YoY) growth of around 3.5%. The printed part remains at roughly half the market, with a growth of 5% YoY. Rigid-board, both fiber based, plastic, metal, and glass, are 56.5%. Flexible packaging, plastic, fiber based plus other foils sums up the rest 43.5%.

Observing the market as a whole, the flexible segment has the best growth rate in all of the available reports. Flexible is very much driven by consumer change in demands, regulatory targets, and a gradual adaption to the circular economy principles. The shift toward a higher demand for new sustainability media like bioplastics, compostable instead of the fossil-based media, plays a new role. Sustainable media works impressively well together with consumers new demand. Old, heavy, and none flexible fossil packaging is on the way out. New, lighter, cheaper, smarter, and easier flexible packaging is on the way in. Baby food in pouches instead of glass jars is one of many examples of the ongoing trend. Now, let’s view the packaging market more from a converter’s point of view. We call them converters instead of printers in the packaging market because, here, print is only one of many stages going from an idea to the final product. We got design, print, varnish and lamination, foil, die cutting, and gluing to be ready for the filling and/or assembly line, etc. The packaging market comes from a very conservative view (even worse than the commercial print side) on both the relation to media suppliers and brand owners. It’s very much a symbiotic relationship where they often sit in the lap of the media supplier, especially when it comes to the board side of the business.

The time to market (T2M) for a package, or changing an existing package, is extremely long within the conventional and analog market. In some cases, it has a lead time of 12-16 weeks. Compare that with Commercial Print for “market communications”. If we look at General Commercial Print (GCP) as leaflets, brochures, manuals, etc. with some kind of finishing, stitching, gluing, and cutting, it has gone from a lead time of 8-10 weeks to within 24 hours. In some cases, delivering orders to the real estate market within 4 hours. Although packaging is much more and complex, the cost and supply chains focus more on the media. For the full experience of the whole product both in flexible and folding cartons, T2M will be a deal breaker. T2M will be the first important driver for this transformation toward a full flip of the whole market.

Regarding folding cartons, both pre-print production and post-print production must take many steps before the final product is ready, including varnishing, lamination, die cutting, and gluing. You’ll have to take further and different steps than in GCP (General Commercial Print) and the technologies will emerge making it a full implementation into the whole process. It is just around the corner, as I’m writing this. Every step must go through a full change, a total disruption. Cut all the links that are not adding any value anymore and replace them with new links, digital, and with high value. The market (consumers through brand owners) drives the competition toward faster turnarounds, T2M. Simultaneously it is becoming increasingly more crucial to stand out against competitors. This becomes substantial in packaging motivation and provides a great response for a brand owner. It even makes it the single most important and growing segment in the entire graphic area (except the next and upcoming 3D print market – but that one need to pass the emerging phase first and then go through their own low economy cycle).

As marketing people say, there are great possibilities within the transformation of packaging. It’s so big and strong that we see a possible flip of the market. The timing is now and the market demand for this is high, we got the technology available, we see many manual steps that can get disrupted, and it is also a growing market with a demand for more sustainability.

This will not only force existing players on the market to transform but also open the door for completely new players and new competition. Players outside of this business will make moves, and players from close neighborhoods as commercial printers, label printers, and logistic companies will get involved in this new supply chain. This is not a question of whether it will happen; it’s a matter of how they will make the adaptions within this change.

Brand owners are shifting their spending in marketing. Today and tomorrow, more money will be spent on social media and the packaging of the product. The total spending on marketing, outside of the cost for the product itself, is almost the same today percent wise as in the past. But traditional marketing will focus heavily on packaging in combination with new and social media where the packaging itself will gain increasingly more attention. In retail, packaging will thrive as an eye-catching marketing method. Retail is a highly competitive segment where the need to stand out on the store shelf is huge and will keep on growing. We’ll definitely see more SKUs (Stock Keeping Units), numbers of variations of a product as in size, volume, flavor, targets, regions, campaigns, etc. This development will increase enormously on a daily basis in an almost unaltered and pretty much identical retail space. At the same time, we’ll see a big demand for new and more sustainable media. Nothing can be changed or added without taking full responsibility for the sustainability in design, choice of media, CO 2 -emissions footprint, product protection, minimizing food waste, and enabling recycling.

Printing has historically been a secondary thing among packaging converters. The media/film, lamination, cure, die-cut, etc., have been much more important. If you buy a package with cheese in the shop, there are needs for many barriers like moisture, oil, oxygen, aroma, flavor, gas and light. This must be laminated together for a ready-to-go flexible package. In folding carton boxes, the first priority is the media itself, perhaps with a barrier and then print, varnish, die-cut, and gluing.

Often new technology is decidedly contributing in a disruption. New technology will skip as many steps as possible in a process. It’s a big difference compared to many manual and analog steps. For example, a disruption in the analog packaging industry means that you must print a whole jumbo roll before you can change from one job to the next. With digital, every small label job or packaging job can become completely unique – all from the same roll. That means you’ll add value and the consumers will receive more attractions/temptations while attempting to buy something. Going into the store, the final decision of a consumer will happen between product A or B in a fraction of a second, it all happens in 0.3 seconds. That’s the last chance to influence the consumer from a brand owner’s perspective. If the products are more or less the same on the inside, the packaging must stand out and make the difference. Let’s use perfume as an example. Why does the scent of Zlatan sell so well? Yes, maybe it’s a good product inside the box. But this segment is driven massively by the brand and the name itself: Zlatan. The worldknown footballers perfume also has packaging that stands out with some added smart features. If you put the packages in correct sequence on the shelf it will read Z-l-a-t-a-n wider, expanding the brand itself. We also see this with some wine producers who find a wider pattern with multiple bottles in a row on the shelf. And this is only the beginning.