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Impact of COVID-19 on paper packaging

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Food suppliers flourish while demand for shelf ready packaging is set to fall.

While public perception is that demand for paper packaging has been booming during the COVID pandemic, due to the exponential rise in online retailing, the statistics paint a different picture.

According to experts at NOA, specialists in market research into the paper packaging sector, demand for corrugated and cartons for the food service industry in particular has almost disappeared.

The global picture of demand for corrugated in a comparison year on year, shows volumes are slightly down at 98% of last year. In the UK, mid-2020 volumes were down by an estimated 0.5%. In Europe, demand is also down – for example, Italy and France range between 5 and 10% down. Further afield in North America, demand in the USA has fallen by a similar level as the UK, while other countries such as Mexico and Argentina have seen significant double digit drops in demand.

Paper packaging suppliers who count the food service industry among their major clients have been experiencing large falls. By contrast, those mainly supplying food and drink into retail have been booming.

“It’s a story of winners and losers,” said Neil Osment, Managing Director of NOA. “Some paper packaging suppliers for the food and drink retail sector have been seeing demand rise by 120% plus, while those in the food service sector may have lost up to 70% of their trade, perhaps even more.”

Hidden in this trend are some interesting regional variations, which NOA researchers have uncovered.

For example, demand has fallen away more steeply in the North West during lockdown, where customers tend to be of a more industrial nature. However, in the South West, where a growing number of food and drink producers are based, paper packaging producers have found increased demand.

“We’ve spoken to one business which has seen an increase of 125% in volumes year on year and they believe their competitors are having a similar experience. Clearly, the level of demand depends on which sectors are being served, and this is feeding through to the end use market as well as regional variations,” said Neil.

“However, we believe the North West will bounce back, as demand begins to rise again and items in the supply chain need replenishing. Demand and stock replenishment for food and drink are much more immediately responsive. The industrial economy will tend to be slower to respond to changes in demand.”

NOA predicts the food sector will remain buoyant, sustaining its paper based packing suppliers. However, there will be a shift within this sector from shelf ready packaging (SRP) towards distribution outers (or what NOA describes as MODIE – mail order, distribution, internet and ecommerce cartons).

With an increase in online food sales, retailers will want producers to adjust production away from the more expensive SRP style packaging, and provide goods instead in cheaper format corrugated packaging, which never has to hit the shelves.

Neil said: “Retailers will want simple, inexpensive corrugated, so we will see a work mix change, as producers alter production away from SRP format packs and towards distribution outers. We were starting to see this move last year, but this will be accelerated, as retailers realise they can make savings by swapping out of SRP formats for a cheaper alternative.”

The NOA team also note that sustainability – which disappeared from the agenda in the early days of the pandemic – is creeping back in, as consumers renew and increase their desire for sustainable packaging, and demand more information about its provenance.

Neil added: “Some international corrugated producers are showing great leadership regarding the environmental qualities of corrugated. For the first time, one of these global corrugated companies are taking out full page adverts in the national papers in Europe to highlight their credentials in sustainable packaging. And of course, Sir David Attenborough is back in the news, and that is good news”

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