Horváth & Partners, an internationally active management consultancy firm with well over 1,000 employees, focuses on the packaging industry in German-speaking countries and especially in Austria. Its clients include large corporations as well as medium-sized businesses. Christoph Kopp is responsible for the Paper & Packaging division as an associate partner. At FACHPACK, he presented the results of an industry study on the European packaging industry, which his company published at the beginning of 2022. The study sheds light on developments in the industry, based on interviews with top managers from various packaging companies and quantitative data analysis by the company's research team. Unsurprisingly, sustainability was identified as a dominant theme. Against this background, according to Kopp, material competence in particular plays an important role in securing the competitiveness of packaging companies.
As the expert points out, the European packaging industry will continue to grow moderately – with annual growth of one to three percent, depending on the region and sector. Factors such as demographic change and e-commerce are contributing to growth, while material and packaging efficiency and packaging avoidance are driving sales down. "The industry has achieved good margins in recent years, but the room for manoeuvre is limited," says Kopp. However, digital transformation can lead to more efficient value creation processes and larger companies are able to achieve economies of scale, according to Kopp.
From Packaging Manufacturer to Material Manager
The managers interviewed perceived a strong market pressure on the topic of sustainability, especially coming from larger companies and corporations. Therefore, according to Kopp, manufacturers who are leaders in sustainability will probably also be the most successful in competition in the future. The consultancy sees differences between large corporations, which are already far advanced, medium-sized businesses, which are still grappling with the issue, and smaller companies, which are still determining their position.
According to Kopp, packaging companies should see themselves as suppliers in the value chain and how they ensure recourse to raw materials. "Given the circular economy, this means that packaging manufacturers need access to recycled material. This poses a challenge and advantages will exist for those who have access to waste and material resources," the consultant is convinced. Currently, many packaging companies are therefore tending to integrate more into the recycling processes and invest in recycling units." Since this decentralised business is very different from the traditional packaging business, it is not an easy task. The potential, however, is tempting and attracts packaging manufacturers as well as companies in the waste management and chemical industries.
With sustainability in mind, there are other effective levers for the packaging industry, says Kopp, including prevention and material efficiency. "When it comes to recycling, we think of two components: using recycled material for packaging and making the packaging itself recyclable. For certain applications, reusable is also an option," Kopp elaborates. This places completely new demands on packaging design. Because the products have to be designed in such a way that they can be returned to the cycle. While this is possible to a large extent with paper, there is still room for improvement with plastic. So relatively little of it actually comes back into the cycle and what does come back is often downgraded. The challenge, according to Kopp, is to get the appropriate recyclates at competitive prices and at the same time ensure sufficient quantities.
CO2 reduction is another key issue that emerged in the study. But the technologies currently available show limits to the effort, especially in energy-intensive processes such as paper manufacturing. "It is essential to look at the carbon footprint and protection through packaging together, as packaged products often have a higher carbon footprint than the packaging itself," says Kopp.
Mastering the Challenges of the Future
For the future, the packaging expert from Austria predicted a stronger substitution of plastic by paper. Even now, he said, there is a higher growth in paper packaging compared to plastic packaging. Nevertheless, plastic packaging has a larger share overall, especially in flexible solutions. Moreover, not all plastic packaging can be replaced one-to-one by paper, e.g. due to barrier properties. "Demand for recycled paper is increasing, and growth and profitability are likely to converge over the next few years," says Kopp.
Another key driver of future growth is packaging functionality, which starts with design and extends to aspects such as return shipping options and convenience. However, growth in the packaging industry is being held back by the issue of material efficiency.
Finally, Kopp pointed to the challenges posed by the volatility and price increases of raw materials and energy. These cost increases affect materials such as steel, paper and plastics, with metal experiencing the greatest price fluctuations. "Due to current geopolitical unrest and economic developments, including the threat of recession and a period of high interest rates, we should expect these fluctuations in the coming months and years," the consultant noted. Companies should therefore not look at material price management in isolation, but treat it as an end-to-end issue. It is important to learn how to deal with changes and to involve all relevant players, such as purchasing, market intelligence, sales and production, in this process in order to develop a successful strategy, he said.
