Ultimately, the impact of the pandemic is still being felt within the industry – back in March 2020 those in our sector ensured their survival by responding to changes in the market and shifting focus to new product information to support customer needs during the pandemic.
Following this, the e-commerce boom from May 2020 onwards resulted in a mass increase of demand for packaging – which would have been a huge success had the supply chain been moving quick enough to deliver the materials required.
Looking ahead to 2021 and the e-commerce boom is set to continue. Reports suggest that from April to October 2020 online retail sales exceeded the annual total for eight of the past 10 years and add to that it is predicted that by 2040 e-commerce will represent over a third of all retail sales.
This vast growth is already putting the warehouse sector under a huge amount of pressure. Last year, warehouse owners leased out 13.3 million sq. ft in the three months through September 2020, more than double the year-earlier level. Going forward, the growth of e-commerce could drive demand for 92 million sq. ft of warehouse space across the UK by 2024. Forecasts predict that for every additional billion pounds of online retail sales, 1.36 million sq. ft of warehouse space is required. The three-fold boom in e-commerce will have wider implications on the supply chain and of course including packaging.
The growth of online retail sales will result in a continued increase in demand for packaging. There are however a number of challenges which companies will need to manage carefully to remain successful.
The supply chain is still recovering, battling rising freight costs, which in some cases has increased by up to 10%; the sector is experiencing a lack of corrugate, with prices for raw materials steadily increasing; the continued growth in e-commerce and rising demand for warehouse space, and then there is Brexit.
After an incredibly drawn-out process, many companies were not as prepared as they could have been when the end of the transition period arrived late 2020. At Southgate, we put in months of preparation. To a certain degree, we were ready, but there were a number of uncertainties which were only made clear at the last minute, leaving us, as with all other businesses, in a challenging situation.
In order to combat all of the above, the packaging industry will need to be resilient. Sensibly managing freight costs and movement, creating products which utilise alternative sustainable materials and working closely with both customers and partners to remain transparent is the only way to safely move forward.
In addition, the introduction of Plastic Packaging Tax (PPT) is high on the agenda for the industry. It is a result of the estimated two million tonnes of plastic packaging being used each year and how the UK is in the top five processors of plastic in Europe.
Taking effect from 1 April 2022, the new legislation will see a PPT applied to plastic packaging produced in, or imported into, the UK. The industry needs to be prepared for this and businesses need to act now to avoid paying tax by ensuring they have a suitable product range available which adheres to the new packaging requirements, that all packaging must contain 30% recycled plastic.
Once the sector has navigated through the current challenges, we will experience ongoing steady growth, but this will rely on the economic development of the UK post pandemic and how we fair in a post Brexit Britain.
Why is it necessary for businesses to prioritise sustainable packaging?
Prior to Covid-19 the packaging industry was largely focused on one goal – its sustainability drive – with companies coming up with products that were environmentally friendly, reusable and biodegradable. As a result of the pandemic, the sustainability movement, which has been ongoing since 2018, was slightly halted with concerns raised around the hygiene and safety of reusable packaging.
Sustainable packaging is one of the most desirable requirements on every manufacturing and distribution company’s agenda. Consumer led campaigns are driving the movement, with large brands fearful of the negative impact should they not follow the sustainability drive.
The facts speak for themselves with recent reports that 64% of consumers want packaging that is recyclable, 53% want packaging that is reusable and 46% want products that do not over package.
The industry is being incredibly proactive to combat the issues but for eco-friendly packaging to be truly viable it must be equal in terms of cost-efficiency and performance to the products it will replace.
For Southgate sustainability product innovation is of the utmost priority. We recently launched a recognition scheme, The Green High Five, to highlight products that offer one or more of five criteria: sustainable, recyclable, reusable, biodegradable and waste reductive. This way businesses can easily choose packaging they know falls within their own sustainability goals and promises to consumers.
What products are breaking the mould within the sector?
In keeping with the sustainability trend, businesses are utilising technology and innovation to create products which meet the desired environmental requirements for not only businesses but also consumers.
Earlier this year Southgate recently launched its new Eco Brochure – solely focused on sustainable packaging products. We have created products for Mailing, Void Fill, Water Activated Tapes, Hot Melt Glues, Paper Protection and Stretch Wrap Machines.
Specific products to highlight include Southgate’s X-FILL automatic paper void fill system which can process paper up to 1.7 metres per second. Alongside the patented anti-jamming paper fee and load and go system it will dramatically increase time efficiency as opposed to other void fill systems, and most importantly is environmentally friendly.
In addition, Tegrabond water activated tapes and dispensers, which are supplied by Southgate through their network of approved suppliers throughout the UK and across Europe, provide multiple benefits – most notably it has near-perfect eco credentials but at the same time outperforms conventional plastic tapes. It also works out cheaper per sealed carton and the combination of water activated tape and an electronic dispenser reduces both taping time and operator strain, leading to a happier, healthier and more productive operation.
A balanced approach
Another hot topic currently trending within the sector include the ‘plastic is not evil’ debate on whether developing a better infrastructure around waste rather than focusing solely on paper-based packaging is the answer. If we worked on developing an efficient waste stream, would it give us a more balanced approach?
In addition, is the ongoing discussion around how the UK will source enough warehouse space to cope with the increase in demand, following predictions that the spike in online sales in 2020 alone will create demand for an additional 30 million sq. ft of space, rising to a total of 92 million sq. ft by 2024 when it is forecast that online sales will hit a sustained level of 32% of UK retail sales. Suitable solutions are yet to be found and open to debate across all industries set to be impacted by the mass increase in demand for space. With more than 50 years of packaging industry experience, and a policy of global sourcing and innovative product development, Southgate ensures customers stay at the forefront of the packaging product market via its sustainable supply chain.
Sustainability is a key focus for Southgate, with the brand recently awarded a bronze certificate by EcoVadis, the ratings platform to assess corporate social responsibility and sustainable procurement.