Reports like that have the packaging industry sitting up: Arla and DMK have announced their intention to merge. Danone is closing its milk plant in Ochsenfurt, Lower Franconia, in 2026. Nestlé plans to give up two of its sites in Germany. The chocolate manufacturer Barry Callebaut is closing its factory in Norderstedt. Spreewaldhof is concentrating its cucumber production at the Schöneiche site. The Theo Müller group of companies is giving up its Landliebe locations in Heilbronn and Schefflenz by the summer of 2026. One medium-sized company in the meat industry has been particularly hard hit: Meisters Wurst- und Fleischwaren initiated preliminary insolvency proceedings two months ago. Is the packaging industry running out of customers?
“Yes, that's a concern for us. We are, of course, noticing these reports and look at the consequences for us as a packaging manufacturer for brands,” emphasises a leading employee of a premium manufacturer in the fibre-based packaging segment. The German packaging industry is under massive pressure, and not just because customers in the food industry are falling away. Consolidation in the food industry, plant closures and possible international relocations are setting off a chain reaction, the effects of which the industry is only beginning to realise. The fact that the automotive industry is faltering and fewer and fewer accessory parts need to be packaged is making the problem even more far-reaching.
The latest example: the planned merger of dairy giants Arla and DMK could create Europe's largest dairy company – and transform a huge customer base for the packaging industry. No specific site closures have been confirmed yet, but industry insiders assume that production processes will be bundled and packaging needs will be reassigned. In most cases, such a merger means fewer plants, larger volumes per order, and fewer suppliers. For smaller packaging manufacturers that previously supplied individual locations, this could mean the end of their business. “Large customers are looking for large suppliers because they can deliver more reliably,” says a former key account manager in the film industry. This has become clear during the pandemic at the latest. Large customers want to minimise their supply risk with packaging materials. Only large companies in the packaging industry can supply packaging materials and substances from several plants and thus avoid bottlenecks (‘contingency concepts’). According to the expert, only niches remain for small and medium-sized companies in the packaging industry to survive.
Depending on the degree of finishing, packaging is distributed around its place of production. For highly refined packaging, there may be 1200 kilometres between the place of origin and the place of packaging, but in fact the distances involved are between 300 and 600 kilometres at most.
The situation is even more dramatic when locations completely disappear from the market, as described at the beginning. All these decisions not only affect thousands of jobs, but also, under certain circumstances, their regional packaging partners. The reasons given for site closures and relocations are always the same: Germany is becoming an increasingly unattractive location due to high costs, bureaucracy and a shortage of skilled workers. German packaging manufacturers are also affected. Major mergers among food manufacturers often have a delayed effect on the packaging industry, which is already struggling with overcapacity.
The consequences are serious: fewer production sites mean a reduced demand for films, labels, bottles or cups. The consolidation of the food industry puts the packaging industry under pressure from two sides: on the one hand, many manufacturers lose orders, while on the other hand, a fierce competition for survival arises among the remaining suppliers.
Packaging experts confirm that the consolidation is continuing. “There is a certain tendency. When customers merge or plants are closed, the market for packaging suppliers also shrinks,” says the industry. The result: consolidation, site closures and takeovers can also be expected in the packaging market.
But one insider advises fighting: “Even if a production plant relocates abroad, this is no immediate reason for an experienced packaging supplier to give up. If the supplier has done a good job and the materials run well on the existing machines, they have advantages despite the greater distance – even with a new operator”. A statement that at least offers some hope. The plant manager at the brand manufacturer's plant plays an important role in this: “If he has been satisfied in the past, he can protect the supplier, even if a new tender has been issued,” emphasises the industry specialist.
In addition, the role of the packaging supplier has changed dramatically in the meantime: today, it is much more than just a material supplier. Brand customers expect advice on recycling, legislation and design. Companies like Tetra Pak have always not only supplied machines, but also helped develop product concepts that have opened up new markets for customers. Large packaging manufacturers such as Amcor now operate ‘Customer Excellence Centres’ where, for example, retail sales situations are simulated – including test customers.
Mergers such as that between Arla and DMK are changing the balance of power. From now on, packaging purchasing will be centralised, standards will be harmonised and purchasing volumes will be bundled. As a result, packaging is increasingly being viewed as a pure cost centre – with potentially negative consequences for design, differentiation and brand experience, according to the market.
At the same time, retail giants such as Lidl and Edeka are investing more and more in their own production and packaging capacities. Vertical integration is advancing. Those who control the packaging process themselves not only save costs, but also gain flexibility. This also means that there is less demand for traditional packaging suppliers.
In addition, there is increasing pressure from new regulatory requirements – above all, the planned EU Packaging Regulation (PPWR). The use of recycled materials, recyclability, standardisation: the requirements are becoming more stringent. Those who don't react quickly enough will be left behind. Small and medium-sized packaging companies in particular are left with their backs to the wall. “He who comes last goes away empty-handed,” warns an insider when asked. As a result, the big brands are securing the best delivery conditions for recycled materials, while smaller suppliers have to pay high prices or may even be left empty-handed.
The combination of consolidation, regulation and vertical integration is hitting the packaging industry hard. “Once production has been relocated, it will take years for it to possibly come back – if at all,” says one market participant. What remains is a shrinking domestic market with a declining customer base.
The impending recycling reality could be even more serious, but more on that in the next newsletter. That would go beyond the scope here. This, too, could trigger a further intensification of consolidation in the packaging market.
But there is still a shred of optimism, because, as the saying goes in the packaging industry, people will always eat and drink. What is more, food sales in Germany have been growing slightly overall for years. And particularly in the food sector, production usually remains close to the market and is therefore not out of reach of German packaging manufacturers. Many packaging companies already produce a considerable amount in neighbouring Eastern European countries.
However, one thing is certain: the packaging industry must reposition itself, consolidate partnerships, upgrade technologically and improve the recyclability of its products. Those who do not invest and network now could indeed soon lose customers.
Guest article by Matthias Mahr, Chief Reporter of Lebensmittel Praxis and a long-standing observer of the packaging industry
