Everything was fine one moment, and then someone ate a bat in China that led to the devastation of the entire world. Yes, you guessed it right, we are talking about COVID-19. COVID-19 made every country infected, which not only caused economic issues but hundreds and thousands of people died during this pandemic. When it comes down to economics, every industry was hurt drastically.
With economic challenges rising, every business and brand is considering layoffs and terminations. The topping point of economic challenge imposed by COVID-19 is has signaled the termination of positive economic upraise, reducing the profits. One important industry is the packaging industry, but no one knows how it was impacted. So, have a look at how the packaging industry has been impacted during this pandemic.
COVID-19 & Packaging Business – Consumer and Luxury Packaging
First of all, the packaging industry tends to have low exposure to this pandemic, but again, some companies have higher exposure and vulnerability as compared to others. According to the report conducted by GlobalData for COVID-19, the packaging sector might not be immune, but it surely less susceptible. Even more, the packaging businesses for pharmaceuticals, food, and beverage are the same.
That’s to say because the packaging industry has demonstrated resilience in the present situation. On the other hand, companies designing and manufacturing packaging for travel, hospitality, and cosmetics have a downscale in their services and profits. Also, according to Moody, the cost control will be much stronger with the COVID-19 cases because companies are looking for government support and wage subsidies.
There are some non-paper packaging sectors of Africa, Europe, and the Middle East which have been lined out with lower exposure to COVID-19, as compared to other packaging sections. According to Moody, the non-paper packaging manufacturers are generating aggregate revenue from the food and beverage industries, which are usually known as resilient end markets.
The beverage markets are focusing on 48%, skincare and cosmetics hold for 7%, food has 31% focus, and the healthcare and pharmaceuticals have 6% place in the graph. Also, the other sectors conclude for a 5% value. With this being said, it is pretty clear that the packaging companies with resilient sectors as their clients tend to show a positive response to this situation.
That’s to say because the demand patterns are changing, along with stockpiling. With increasing government measures to contain the virus exchange, the demand for such products and to find the best packaging company is increasing exponentially. Recently, research was conducted by the packaging industry of the UK that concluded that industries trying to supply groceries, pharmaceuticals, consumer goods, and e-commerce would experience a positive increase in demand.
On the other hand, packaging companies catering to industrial products and luxury products will experience a steep decline in demand. With this being said, social distancing measures and other precautions are imposed globally, which has led to lower demand. The bottom line of Moody's research is that consumer spending will have a negative impact.
Short-Term & Long-Term Trends of COVID-19
Over the matter of a few months, this pandemic has sucked in the entire world, and multiple disruptions have been witnessed in the packaging industry. In this section, we have outlined the short-term and long-term trends caused by the COVID-19 trend. Also, you will gain information on how investments in this industry will be impacted!
Resilient Sector
It is needless to say that packaging is a relatively mature market with a vast market area. It is clear that some industries are experiencing better growth rates as compared to other industries. The packaging industry will track down the GDP in the long run. After the ever-famous recession, the growth was pretty strong in some sectors, leading to better returns on investment.
Also, there are multiple et natural favored assets that tend to experience growth. When it comes down to the GDP and packaging company, it is pretty cyclical because they function in infamous and mostly used end-markets. These markets include the pharmaceutical and food industries. Previously, the packaging industry has experienced defensive features.
During these uncertain times, the investors with their financial investment in resilient sectors will take great value out of this industry. The demand for raw material for packaging material has already seen a spike. The raw material is ordered for the shelf-ready food packaging. The demand for raw material is expanding, given the high consumer demand and the need to fill up those shelves.
Sustainable Options
When it comes down to modern consumers, they have a heightened need for environment-friendly packaging because of a higher awareness of the environment. During this pandemic, such notions might be hindered in the long run, but the speed will change drastically on a short-term basis. For instance, the DEFRA has already bushed back the ban on plastic stirrers, straws, and cotton buds till October 2020.
Even more, the food industry is rethinking its approach to use refilling and reusable items because they want it to overcome the transmission. That’s to say because the coffee shops were returning the disposable cups before the imposition of lockdowns. Consequently, they are shifting to pre-packaging food times because they don’t want to buy loose items.
These food options demand speedy restocking because consumers consider them safe. But again, the packaging principles have been around for a long time. With this being said, the need for good integrity, safety, and hygiene will be maintained during the pandemic. This trend is short-term, of course, but a fewer packaging trend isn’t welcomed for a long time now.
Rise in E-Commerce
Believe it or not, the buying habits tend to evolve and make up for the long-term change in behaviors through which the packaging industry might witness strong growth. It was evident that retail stores were closed down, given the pandemic and with a need to implement social distancing. However, online orders have increased in numbers because retailers want to keep sales constant.
In the previously known normal world, the retail stores that didn’t have any eCommerce podium shifted to the internet. That’s to say because they have now looked on social media platforms and business websites to keep up the sales and revenues because they don’t want a bankruptcy. With the eCommerce trend, the need for specific packaging has increased.
This is pretty evident because businesses and brands are trying their best to transit their goods and products to the end consumers. It is crystal clear that packaging needs have become more crucial than ever before, given the resistance technology. The retailers are trying their best to minimize product damage and loss trends because they cannot afford the negative returns and financial losses.
The returns of packaged goods will enhance the chances of retailers returning their products efficiently without causing any damage. Consequently, the ability to place products back in the sales pool will be quicker. According to the packaging specialists of eCommerce, the demand for packaging has increased, and they are forecasting this continual demand.
Sure, the world will open up someday, and the consumers will be back to the retail stores, but it is pretty clear that shopping habits will experience a long-term change.
Impact On The Supply Chain
Packaging companies are adapting to this global pandemic, and it is pretty clear that there is an obvious disruption in the supply chain. These trends are encouraging the packaging companies to look for a backup plan because they need to understand the supply chain with in-depth insights. Also, the companies need to acknowledge and understand the vulnerability. Also, the demand for domestic suppliers will extend.
Coronavirus – Helping Businesses At Brisk of Shut Down
The packaging companies that were previously at the brisk of shutting down before the pandemic have hit the market again. That’s to say because the demand for this sector has increased. Also, it is expected that packaging businesses will need to provide their services for a long time. This signals that people have understood the knacks of the right packaging and the importance of hygiene. Some people have also shifted permanently to the packaged productive (yes, even if they are costly).
Drawbacks Of The Industry
It is pretty clear with this discussion that the packaging sector has experienced a growth in demand, but there is a fair share of drawbacks involved. First of all, the major drawback is shut down, and the employees were either laid off, or they were driven to their homes. This way, multiple companies, and their factories were closed down, with a lower production rate.
If the packaging industry doesn’t belong to medicine or essentials, they are all shutting down and are already experiencing losses and bankruptcy in extreme cases. That’s to say because people are only looking for the essential items to stock up. Even more, the big conferences of the niche, such as the Plastics Recycling Show of Europe have been postponed. The event cancellation has led to money loss, and the international merger chances are also declining.
Demand
Some of the packaging companies aren’t able to increase the production rate as per the demand. However, such companies won’t be able to stay in the market during this pandemic, and also, their chances of survival in the post-corona world will be hindered. That’s to say because the majority of companies looking for packaging have already tied knots with new companies to meet their demand.
China & Market Leader
Previously, China was known as the packaging sector leader, and it has experienced the loss of clients. Even more, the economy is decreasing by 50% post this pandemic. We are saying this because China has lost clients since the businesses have already found alternates for their packaging needs. Also, people are skeptical about choosing China since it’s the origin of COVID-19, and nobody wants to take chances.
What Should Packaging Companies Do?
Assess The Present
If you are a player in the packaging industry, you need to jump on the bandwagon of creating the crisis-response center because it will become the information source and advisory point. These podiums will help manage the risks and talk to the stakeholders. The prime responsibility of companies should be to ensure support and the utmost protection of employee health.
Well, that’s the ultimate responsibility of employers, but it has become a necessary response to maintain the functionality of the businesses. For instance, the companies need to comply with the health risks and make sure there is streamlined communication among employees and employers. This notion will require proper training and provision of PPE, such as hand sanitizers, masks, and gloves.
Plan Your Come Back
Every packaging company tends to have a leadership team, and yours needs to design the recovery strategy. The recovery strategy needs to cover financial resilience, customer-centric moves, action plans, and operational plans. The companies need to outline the packaging categories and domains that will have a higher demand.
The production planning and supply chain prerequisites should be on the top because it needs to address the footprint. The leadership teams need to look for higher potential in the growth sector. On top of everything, the packaging companies need to work on product design that addresses the modified consumer demands, inclusive of health and safety concerns.
Prepare For New Normal
The world we knew before the pandemic is long gone, which means everyone needs to adapt to the new normal. The leadership teams need to assess the shifts that might impact the sentiments and behaviors of the customers. That’s to say because packaging companies need to work on sustainability and hygiene and safety requirements.
The packaging companies need to rethink their business models to ensure there are healthy balance sheets and consistent cash flow to ensure the protection of the integrity of the business. It is suggested that you line down the current substrate consumption. The businesses need to look up for opportunities and acquisitions that can help strengthen the business. The bottom line is that businesses need to inculcate vigilance in their daily routines because it fixes the majority of the supply chain, raw material, and network issues, along with production and provision.
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