The circular economy, climate neutrality and economic challenges have driven the packaging industry in 2023 and shaped its strategies. We look back for you – with an eye to the future – and identify key trends that indicate the future direction of the market. We also highlight key factors for your success in 2024.
2023 in the rear-view mirror: these developments have shaped the industry
Circular economy and climate neutrality
In the past year, leading players from the brand and retail sectors have become major influencers in the packaging industry with ambitious sustainability goals. Companies such as Unilever, Nestlé and Kraft Heinz have increasingly aligned their packaging strategies with the principles of the circular economy and climate protection and will continue to do so in 2024.
Pilot projects, market launches and innovative developments are crystallising packaging trends that clearly show where the market is heading in the future. These include
- the development and use of packaging that is 100% reusable, recyclable or compostable,
- the promotion of refill and reusable systems,
- substituting or reducing the use of plastic,
- reducing dependence on finite resources,
- reducing the CO2 footprint of packaging.
In addition, regulatory activities will continue to drive the industry and cause uncertainty. The new Packaging and Packaging Waste Regulation (PPWR) is a prominent and particularly formative example of this.
Declining sales and economic difficulties, influenced by a weakening overall economy, have presented the packaging industry with massive challenges in 2023.
As data from the Federal Statistical Office shows, price-adjusted, real retail sales in Germany in the food, beverages and tobacco sector fell by 5.3 per cent in the first half of 2023 compared to the same half of the previous year. This is a significant decline in sales.
This development had far-reaching effects on the entire packaging value chain. A slump in sales was observed across the various sectors of the packaging industry – from fibres and plastics to mechanical engineering.
In addition, increased and volatile raw material prices and ongoing market consolidation intensified competition and increased the standardisation (commoditisation) of packaging. This put pressure on the margins of many companies and led to a tense market situation.
Shaping the future: Strategic success factors for 2024
For the coming year, we therefore recommend that companies in the packaging industry focus on three strategic success factors with a view to long-term profitable growth:
Success factor #1: Rely on market intelligence
The past year has shown how strongly the market is influenced not only by the economy, but also by brand owner developments and regulatory changes, which can ultimately lead to a realignment of business models. It is therefore essential for companies to focus on market intelligence and continuously monitor what is happening in the market environment.
It is particularly important to prepare for and adapt to regulatory changes such as the Packaging and Packaging Waste Regulation (PPWR). Many branded companies are already intensively reviewing their packaging portfolio with a view to the upcoming changes and requirements. This could change entire business models over the next few years. This process opens up great opportunities: companies that proactively offer their customers solutions can gain an important competitive advantage.
Success factor #2: Position yourself strategically
While a classic 5-year strategy used to be sufficient, today’s dynamic market conditions require a solid, market-orientated and strategic positioning. It acts as a compass that not only determines the direction of a company, but also provides the necessary means for navigating through times of disruptive change.
In an era characterised by strong competition and increasing commoditisation of products, well thought-out positioning is becoming increasingly important. It enables companies to clearly differentiate themselves from the competition, stand out as leaders and effectively address potential customers.
Such positioning is based on a long-term perspective, utilises the company’s specific strengths, specifically meets the needs of customers and offers clear added value compared to the competition.
Success factor #3: Focus on growth markets
Long-term, profitable growth is a challenge for many companies in the packaging industry, especially when it comes to acquiring new customers. A well-thought-out market strategy is crucial to capitalising on these growth opportunities and successfully tapping into new sectors and regions.
Example – Looking Beyond China: New, Asian growth markets are moving into focus. Especially because growth in China is slowing down:
- China: European companies that are particularly dependent on exports, such as those in the mechanical engineering sector, are already feeling the effects of the downturn. According to a VDMA survey, only 10% of German mechanical engineering companies in China rate the business situation as good, and most expect stagnating or declining sales. The Chinese packaging market has grown more slowly than the Asian average over the last four years, with average annual growth of +2.1%.
- India, Indonesia, the Philippines and Thailand: other Asian markets are coming to the fore. India, for example, is recording a strong annual growth rate of +6.5 per cent CAGR. Over a four-year period, absolute volume growth of 111.3 billion packages is expected, which significantly exceeds China’s growth of 81 billion packages in the same period. By 2027, the rest of the Asian market is expected to overtake China in terms of volume. Other attractive markets include Indonesia (+4.1 per cent CAGR), the Philippines (+4.8 per cent) and Thailand (+3.2 per cent). Together with India, these countries will account for almost 60 per cent of total absolute volume growth in Asia over the next four years.
Fundamental: Adaptability and innovation
In a rapidly changing packaging industry, companies must go beyond the successful establishment of strategic factors and embed adaptability in their DNA as a fundamental characteristic for effective implementation. Successful strategy and innovation work will become an even stronger key factor for market success and growth in the future.