Digitalization is playing an increasingly important role for the packaging industry. Drivers are changing customer preferences, growing competition and the need for greater operational efficiency. In light of this, companies are turning to digital transformation to develop new business models and solutions for their customers. In our article, we discuss the top 5 digital transformation trends in our industry in 2023, provide background, show examples, and identify opportunities. Spoiler Alert: Companies must embrace digital transformation to remain competitive and meet customer needs.
Trend #1: Digitization of sales and marketing
Background:
Packaging companies face a major challenge: acquiring new customers. Current, analog methods are increasingly proving ineffective and producing too few results. Without the acquisition of new customers, however, there is hardly any growth apart from the development of existing business – and thus hardly any future opportunities.
Opportunity:
One solution is digital new customer acquisition, which relies on content-based approaches. With this method, companies can expand their customer base and tap into new growth opportunities.
Example:
In this explainer video, two companies in the packaging industry share their experiences with digitizing their sales and marketing.
Trend #2: Digital business models
Background:
In an increasingly standardized and consolidated market, it is difficult to differentiate and win new customers. A 2020 survey by B+P Consultants confirmed this challenge. High competitive and cost pressures were cited as the biggest constraints to growth.
Opportunity:
- To reduce cost pressure and differentiate, digitization of the business model offers important opportunities. Service, product and process innovations can help to offer digital, product-related services or expand the service business.
- By digitizing their business model, companies can increase their profitability and growth and effectively differentiate themselves from the competition. To achieve this, they must improve product development and review and, if necessary, realign their business model. In this way, companies can ensure that they remain successful in an increasingly competitive environment and achieve profitable growth in the long term.
Example:
Based on the growing demand for individually printed and sustainable packaging solutions, the Siegwerk Ventures subsidiary Packiro offers recyclable stand-up pouches that can be individually designed, are versatile and suitable for almost any filling material. Target customers are in particular smaller companies with high demands on individuality, environmental friendliness and the further technical quality of packaging, for which corresponding packaging solutions were previously difficult to obtain.
Trend #3: B2B platforms
Background:
The emergence of B2B marketplaces for packaging may disrupt the traditional B2B market. The platform economy is fundamentally changing the way companies source and buy packaging. As a result, new markets may emerge because companies are able to quickly and easily connect, collaborate and trade goods as well as services through platforms. The platform’s efficiency advantage facilitates business transactions and collaborations while providing access to new markets and customers. In addition, a B2B marketplace can also provide companies with a platform for developing new products and services that would not be possible in the traditional B2B market.
Opportunity:
- Developing an edge: Companies that act now and work to take advantage of B2B marketplace opportunities will gain advantage and leave competitors behind. While we can’t predict exactly when the upheaval will occur, it’s clear that the impact will be greater than expected. Companies that take the necessary steps now to prepare for the upheaval will be better positioned to reap the rewards.
- Expand market reach: As companies increasingly use B2B marketplaces to source packaging, industry players have the opportunity to expand their market reach and reach new customers. This is because B2B marketplaces expand the packaging market by giving FMCG companies, for example, access to a wide range of packaging options and suppliers, enabling them to quickly and easily find the best solution for their needs.
- Collaboration and innovation: A B2B packaging marketplace gives small businesses access to larger packaging suppliers and manufacturers. This creates new opportunities for collaboration and innovation.
- Increased efficiency: B2B marketplaces enable companies to place orders quickly and easily, reducing the time and resources spent on procurement.
Example:
Currently, B2B marketplaces such as Lumi, Packmatic and Bizongo (packaging) as well as Packpart (machines) are mainly used by smaller brands. These include, for example, digital native companies that source their packaging in this way and have so far hardly been served via traditional transaction channels. Step by step, however, larger, established brands (such as P&G and L’Oreal) are also turning to B2B platforms to source their packaging.
Trend #4: Rise of e-commerce packaging
Background:
E-commerce is fast becoming the preferred platform for purchasing products. More and more FMCG companies are now developing innovative solutions to make their products stand out in the online market. These include customized packaging solutions and the creation of brand experiences. Another area of focus is product protection, as it is necessary to ensure the integrity of products during transport.
Opportunity:
The opportunities for the packaging industry are enormous. In our estimation, far too few companies are still proactive in this field. This is despite the fact that demand for e-commerce packaging will continue to grow this decade. For example, according to a Packworld survey, about a quarter of brand owners plan to develop new primary packaging specifically for the e-commerce channel, and another quarter plan to upgrade e-commerce in all packaging they use. According to a study by L.E.K.. Insights, a customized packaging solution is worthwhile from a 10% share of sales in e-commerce. Packaging suppliers therefore have an opportunity to score points with existing customers through targeted product innovation and also to differentiate themselves more strongly in the market and win new customers.
Example:
Smurfit Kappa launched an e-commerce focused health and beauty packaging portfolio in late 2021 to drive growth in the online health and beauty market.
Trend #5: Digitization to achieve sustainability goals
Background:
Digitalization is proving to be an enabler for sustainability. Apps, Internet of Packaging (IoP) and increasingly also Artificial Intelligence (AI) hold a lot of potential and offer previously undreamed-of possibilities. This also applies in particular to applications in the area of sustainability, for example with regard to the circular economy.
Opportunity:
The need and demand for digital solutions, especially for achieving sustainability goals, are more than foreseeable. We already see solutions for reusable and reuse systems, for example, as central aspects of sustainable packaging strategies. If you are smart, you will position yourself accordingly at an early stage. However, early means as soon as possible, because the train is already rolling.
Example:
- Circleback launches deposit system for cosmetics and hygiene packaging.
- Lidl tests “intelligent” refill machines with “smart” bags for detergent
- The start-up Good Goods launched in New York with an incentive-driven deposit system for wine bottles. This involves scanning the barcode of the bottle and sending a QR code to the customer’s smartphone. The next time wine is purchased, this code can be used for a $2 discount.
- Algramo’s contactless refill kiosks allow consumers to purchase staple foods, hygiene and personal care products by the gram. Digitally upgraded reusable packaging is used. The model promotes circular economy, reduces packaging and is a smart marketing tool for long-term customer loyalty.
Learnings for the packaging industry
The implications of the trends highlighted are clear: companies in the packaging industry must embrace digital transformation to remain competitive, meet customer needs and grow. By leveraging digital technologies, they can create new business models and solutions, differentiate themselves in the market, develop new opportunities and tap into new revenue streams.
Our recommendation
Our advice for companies is to make digitization a priority. With the right strategy and suitable tools and processes, companies can tap into enormous growth potential as outlined.
Specifically, we recommend that companies consider a marketing check. In doing so, we check how future-proof marketing is, how well digital communication works, and where there is the greatest need for action. On this basis, we can quickly derive concrete and relevant recommendations for action.
