Key Trends Influencing the Packaging Sector in 2024

Sustainability and circular economy in packaging

Sustainability and the circular economy are increasingly prioritized in the packaging sector, with companies like Graphic Packaging and International Paper leading the charge. Their commitments include innovative recycling solutions, reducing greenhouse gas emissions, and replacing problematic plastics, reflecting a strong customer demand for circular packaging solutions.

"Our customers' interest in and commitment to packaging that's more circular, more functional, and more convenient continues to rise, and the investments we have made to be the global innovation leader in sustainable consumer packaging are paying off." --- (GPK, earning call, 2024/Q2)

"Through its purpose of 'Redefining Packaging for a Changing World' and its Now and Next sustainability strategy, DS Smith is committed to leading the transition to the circular economy, while delivering more circular solutions for its customers and wider society – replacing problem plastics, taking carbon out of supply chains, and providing innovative recycling solutions." --- (IP, press release, 2024/04/16)

"With this certification, Sonoco can provide customers with verifiable materials that contribute to the circular economy, help them meet sustainability commitments, and more broadly support expansion of the recycling infrastructure." --- (SON, press release, 2024/05/13)

"And we're one of the unique packaging companies given our commitment to circular economy, greenhouse gas reductions." --- (GPK, conference, 2024/06/11)

"DS Mid is also a sustainability leader focused on driving the transition to the circular economy with ambitious targets in plastic replacement and reducing greenhouse gas emissions.Moving on to Slide 7." --- (IP, event transcript, 2024/04/16)

Technological advancements shaping packaging solutions

Technological advancements in packaging solutions are driven by innovation in sustainability and efficiency. Companies like Coca-Cola and Molson Coors emphasize the importance of smarter packaging and increased capacity, while Amazon leverages data to enhance sustainable packaging choices, showcasing a clear trend towards integrating technology in packaging strategies.

"From creating new products and brand extensions to the development of more sustainable packaging to more efficient equipment and the use of technology to improve our business, we believe innovation is a key enabler in creating value." --- (KO, event transcript, 2024/05/01)

"When it is fully operational in a few weeks' time, we will have a more efficient brewery that produces less waste. We also commenced a new multiyear project in the U.K. to increase our brewing and packaging capacity, which is necessary in part due to the continued growth of Madri and it is these investments, along with our extensive hedging program, that have helped us to offset inflation, particularly during the significant inflationary period we have experienced in recent years. And while inflation has moderated, as expected, it remains a" --- (TAP, earning call, 2024/02/06)

"All that info helps the model predict the more sustainable packaging to use while still protecting the items." --- (AMZN, Twitter, 2024/04/22)

"So I want to drill in a bit on innovation, but not just on product innovation, because you've also looked to drive bigger and smarter innovation across packaging, across marketing sorry, across equipment we find in the market." --- (KO, conference, 2024/06/06)

"core power brands in 2023, but we believe we can build from here, and we have focused plans around our key above premium brands and innovations to do just that. This starts with the Blue Moon family performance, and we feel good about our new campaign in packaging, our repositioning of Blue Moon Light as well as our line extensions into non-alcoholic [ph] It's early, but we believe we are moving in the right direction. We are committed to continuing to innovate and scale in Beyond Beer, which for us is all about above premium." --- (TAP, earning call, 2024/Q2)

Shifts in consumer preferences for packaging

Shifts in consumer preferences for packaging are increasingly driven by a focus on food items, sustainability, and simplicity. Companies like Procter & Gamble and PepsiCo are adapting their strategies to meet these evolving demands, emphasizing lighter, environmentally friendly packaging and targeted innovations to enhance consumer satisfaction.

"Well, as a percentage of the basket consumers are buying, we've certainly seen a shift from general merchandise to food." --- (WMT, conference, 2024/06/25)

"This new form emerges as a direct response to the call for a laundry solution that is lighter, faster and simpler – embodying the shift towards more consumer-first product innovation." --- (PG, press release, 2024/04/02)

"Getting back to a real focus and understanding the consumer journey across all of the markets in which we compete has been fundamental to making sure that we have strategies to capture and deploy our investments in areas where we think we’re going to get the best return for that." --- (CL, earning call, 2024/Q1)

"That is not for all the consumers, it is some consumers, that is not for not all portfolio, it is some parts of the portfolio, and we have been working different tactics to give the consumer what they want, and we see that is working, and that's why we feel comfortable about -- given the oxygen that we have in the P&L that we'll be able to deploy in a very targeted way, thinking long-term about the category, making sure that has -- it has good ROI, that we'll be able to turn around the -- especially, what you were referring, the food business to positive volume, and with that, a higher level of net revenue." --- (PEP, earning call, 2024/Q2)

"These are 1) leveraging environmental sustainability as an additional driver of superior performing products and packaging innovations, 2) increasing digital acumen to drive consumer and customer preference, reduce cost and enable rapid and efficient decision making, 3) developing next-level supply chain capabilities to enable flexibility, agility, resilience and a new level of productivity and 4) delivering a superior employee value equation for all employees inclusive of all genders, races, ethnicities, sexual orientations, ages and abilities - for all roles - to ensure we continue to attract, retain and develop the best talent to better serve our diverse consumer base." --- (PG, sec filing, 2024/Q4)

Regulatory changes affecting packaging standards

Regulatory changes are driving the packaging sector towards sustainability, with companies like Dow investing in recyclable materials and technologies. The emphasis on reducing plastic demand and enhancing recyclability reflects a broader consensus on addressing plastic pollution, influencing packaging standards significantly.

"Among the factors that could cause plans, actions and results to differ materially from PCA's current expectations include the following: the impact of general economic conditions; conditions in the paper and packaging industries, including competition, product demand and product pricing; fluctuations in wood fiber and recycled fiber costs; fluctuations in purchased energy costs; the possibility of unplanned outages or interruptions at our principal facilities; and legislative or regulatory requirements, particularly concerning environmental matters, as well as those identified under Item 1A." --- (PKG, press release, 2024/07/23)

"To provide them with a better understanding of the potential business risks associated with reduced demand and what steps Dow is taking to ensure that investments in technologies to use recycled post consumer plastic as feedstocks for new products are economically viable rather than economic risk. We urge your support of Proposal 5. Thank you." --- (DOW, event transcript, 2024/04/11)

"But Innate has changed that by enabling a full plastic solution that retains the packaging performance and also enables it to be fully recyclable. And we have an example of that over in the Gallery Walk." --- (DOW, event transcript, 2024/05/16)

"While Dow and many of its peers insist that improved recycling will fix the problem, a growing consensus of international experts disagree, stating that reduced plastics demand and production are essential elements in getting plastic pollution under control." --- (DOW, event transcript, 2024/04/11)

"Barrier Coatings allow Paper Packaging to resist oil, grease and other liquids for to go, shelf stable and frozen foods, all while enabling recyclability and repulpability, meaning that greater than 80% of the original Wood Fibers are able to be recovered during the recycling process so that new paper can be made with the same performance qualities. Demand for new barrier coatings is going to continue to grow at a rapid rate due to the global recyclability and circularity trends." --- (DOW, event transcript, 2024/05/16)

Economic factors influencing packaging costs

Economic factors influencing packaging costs in 2024 include higher pricing strategies and productivity savings offsetting inflation impacts (LIN), decreased raw material and energy costs (DOW), and labor constraints affecting production pace (VMC). Additionally, foreign currency fluctuations can also impact costs for companies relying on imports (NEM).

"The increase in the quarter was primarily due to higher pricing, savings from productivity initiatives and lower other charges, which more than offset the adverse impacts of cost inflation and lower volumes in the first quarter of 2024." --- (LIN, sec filing, 2024/Q1)

"COS for the three and six months ended June 30, 2024 decreased primarily due to lower raw material costs, lower global energy and feedstock costs and the impact of structural cost improvements, partially offset by increased planned maintenance turnaround spending." --- (DOW, sec filing, 2024/Q2)

"Foreign currency exchange rates can increase or decrease profits to the extent costs are paid in foreign currencies, including the Australian dollar, the Canadian dollar, the Mexican peso, the Argentine peso, the Peruvian sol, the Surinamese dollar, the Ghanaian cedi, and the Papua New Guinean kina." --- (NEM, sec filing, 2024/Q1)

"If labor constraints continue and demand remains positive, our operations may proceed at a slower pace, which may effectively extend the recovery while allowing us the opportunity to compound price, control costs and grow earnings." --- (VMC, sec filing, 2024/Q1)

"Cost of sales, exclusive of depreciation and amortization Cost of sales, exclusive of depreciation and amortization decreased $215 million, or 5%, for the first quarter of 2024 primarily due to lower cost pass-through, lower volumes and productivity gains which more than offset cost inflation." --- (LIN, sec filing, 2024/Q1)

E-commerce trends driving packaging innovation

E-commerce trends are significantly driving packaging innovation, as highlighted by industry leaders. FedEx notes a shift in package yield due to increased e-commerce volume, while UPS anticipates revenue growth from rising e-commerce demand. Walmart and Target emphasize adapting packaging for same-day services, reflecting the evolving needs of consumers.

"In addition, international export composite package yield decreased 5% in 2024 driven by reduced demand surcharges, a larger mix of e-commerce volume, and an increase in lower-yielding deferred volume related to the full reopening of the international economy service." --- (FDX, sec filing, 2024/Q4)

"We expect revenue growth to continue in the second half of 2024, with anticipated increases in e-commerce demand driving higher volumes and rates." --- (UPS, sec filing, 2024/Q2)

"Our business model is delivering strong momentum. E-commerce is sustaining its strong growth and pulling new value streams and profit pulls along with it." --- (WMT, earning call, 2025/Q2)

"This growth was driven by our same-day services, Drive Up, in-store pickup and same-day delivery, which has been rapidly embraced by our guests in recent years." --- (TGT, earning call, 2025/Q1)

"A vast majority of growth in the parcel market is now driven by e commerce." --- (FDX, conference, 2024/05/29)

Impact of globalization on packaging strategies

Globalization significantly influences packaging strategies by enabling companies to achieve economies of scale while maintaining local relevance. Firms like PepsiCo and Coca-Cola leverage international markets for profitability, but also face challenges from market risks and regulatory uncertainties that can impact their packaging decisions.

"We look at that very carefully. Now why are our margins expanding internationally because as we gain scale and obviously, that our fixed cost leverage is much better, and that's how we're getting to more profitable businesses in international markets, especially the large markets, whilst we keep affordability at the center of our strategy because that's long-term, including other things that we do, obviously, with availability and with innovation." --- (PEP, earning call, 2024/Q1)

"We've benefited from global scale while maintaining local relevance by tying our brands to regional meals occasions." --- (KO, earning call, 2024/Q1)

"We are exposed to market risks from operating in challenging environments due to economic, political and social instabilities, natural disasters, debt and credit issues, currency controls, foreign exchange and interest rate changes." --- (PG, sec filing, 2024/Q4)

"Because of this, we cannot predict the scope or form potential taxes, regulations or other limitations on our products or their packaging may take, and therefore cannot predict the impact of such taxes, regulations or limitations on our financial results." --- (PEP, sec filing, 2024/Q2)

"Overall, our industry remains attractive and is expanding. We believe we're well positioned to capture the vast opportunities available to us. Across the world, we're continuing to navigate many varying market dynamics locally to deliver our global objectives." --- (KO, earning call, 2024/Q2)

Innovations in biodegradable packaging materials

Innovations in biodegradable packaging materials are gaining momentum, with companies investing in sustainable solutions like recycled and bio-circular materials. These advancements aim to reduce CO2 emissions and enhance performance, reflecting a strong commitment to environmental sustainability in the packaging sector.

"They are investing in sustainable solutions by using recycled packaging or with the aid of biodegradable packs." --- (PKG, press release, 2024/07/17)

"Bio-circular solutions are transforming biomass and by-products from other industries into feedstocks with a lower CO2e emissions impact—enabling high-quality cosmetic packaging, footwear and more." --- (DOW, Twitter, 2024/04/21)

"We also continue to invest strategic capital and innovation to support organic growth and sustainability initiatives. At the recent environmental packaging live event, we" --- (SON, earning call, 2024/Q2)

"And there's a couple of things that our suppliers can help us with there. So one, better resin and better virgin resin so that we can have better performance for the materials even though we're taking out some other materials that we're giving the performance that the pouch had before." --- (DOW, event transcript, 2024/05/16)

"And so, there are premiums in the market today for those materials. And the Mura process, in our view, is one of the more highly profitable ones because it uses the supercritical steam to change the product back into a monomer state. So, we feel good about the startup of that project." --- (DOW, earning call, 2024/01/17)