Las Vegas — Consumers are increasingly vocal about wanting to see more sustainability in product packaging, but there is an ongoing question about who is going to pay for change.
These changes in how packaging is produced and perceived is presenting both challenges and opportunities for packaging companies.
"For most people in the industry, they are going to create headwinds or tailwinds. The key is going to be how to manage those going forward," said David Feber, a partner at management consulting firm McKinsey & Co.
"Consumers are saying there is a big [environmental] cost of packaging and the world needs to do something about it," Feber said at The Packaging Conference recently held in Las Vegas.
"Brands are making serious commitments to make a difference. The consumer perception in this area is growing almost exponentially in terms of how frequently it's mentioned. As a result, the regulations have continued to grow fairly rapidly across the world in almost every country that has a massive presence in this area," he said.
Consumer awareness about plastic waste in the environment in the past 15 years has exploded.
"This is one indicator of what's really driving a lot of sustainability sensitivity in the area across the industry and across the world," Feber told the crowd.
Packaging companies certainly have seen the issue of sustainability ebb and flow over time.
"I think that probably doesn't change. The brands aren't willing to have a higher price tag to add sustainability. But the one thing that seems to be changing is that consumers have a much, much higher sensitivity to sustainability. This is really going to create change," Feber said.
And that, he said, is "a real issue for packaging."
"Take a step back and remember this, today's winners are often tomorrow's losers," Feber said. "The key here is change is inevitable and it's coming to the packaging industry. That's really the message I want to send."
Other important megatrends impacting growth and profitability in packaging include the emergence of electronic commerce, profit compression for both consumer packaged goods companies and retailers, changing consumer preferences and digitization of packaging.
E-commerce continues to grow at a rapid pace and that trend will continue as more and more people look to shop that way.
"We see really a pretty massive growth trend continuing to occur in e-commerce," Feber said.
And e-commerce is increasingly seeking packaging solutions specifically for transit that are different from those found on store shelves.
A trend toward changing consumer preferences involves the individualization of products, Feber explained. Customers were once used to having only so many choices at traditional retailers limited by the number of products that can be displayed.
But the internet is allowing retailers such as Amazon to expand that offering to literally thousands in some categories.
"There has been an increase in consumer customization and personalization of products," Feber said. "It's really leading this consumer desire for variety and customization."
Another trend is margin compression for both retailers and the CPG companies that supply products.
"That is likely to continue and likely to have consequences on the full value chain," he said.
Digitization of packaging is increasingly allowing companies to differentiate their products and consumers to seek out more unique purchases compared with the past.
Packaging, as a whole, today is "pretty static," Feber said. "There are emerging technologies, but it's still in its infancy. As the cost curves catch up on some of the more sophistication technologies, the digitization of packaging will continue," he told the conference audience.