2023 has been a turbulent year, with the sector stabilising after a lockdown-related peak, quickly followed by surging costs and supply chain challenges triggered by high interest rates, Brexit, conflict, and economic uncertainty.
Looking ahead to 2024, we’re anticipating huge shifts in how firms react to protect margins, safeguard their businesses, and respond to consumer and trade demands.
The five trends that will shape paper and packaging in 2024:
1. Protecting margins as the price of paper falls
Between June 2020 and January 2023, paper prices almost doubled, with commodity shortages, energy prices, Brexit and surging freight costs feeding into rising prices. At the same time, significant growth in e-commerce – driven by national lockdowns – brought an overwhelming increase in home deliveries. As demand soared, the price of paper did too.
While the price of manufacturing paper has stabilised this year amid weaker demand and falling energy prices, a faltering economy means that producers are reluctant to let go of elevated pricing.
In 2024, we will see paper and packing manufacturers starting to ease prices, though high costs, supply chain challenges, and economic uncertainty may mean the benefit is not felt until the second half of the year.
2. Buoyancy in e-commerce
While the high street used to be a weekend fixture, we’ve seen big hitters, like Topshop and Wilkinsons, shut shops over the past five years as consumers flock to the comfort and affordability of next-day, one-click-driven e-commerce. This shift was put in superspeeded by the arrival of national lockdowns in 2020, which increased online spending by 48% YoY to £116 billion, according to Ofcom. The huge uplift in deliveries naturally created a new wave of demand for packaging materials.
While online retail sales fell by 0.3% in September MoM to 26.7% - sales remain buoyant and well above the same point in 2019 (18.1%). This buoyancy, within the context of evolving consumer demand and spending trends, means that we should see an opportunity for agile paper and packaging suppliers in 2024.
3. Greater use of bags
As a result, of the growth of e-commerce, brown packing boxes have become a major tool in our arsenal. We are now seeing consumers becoming more aware of our choices and their impact on the environment.
This - alongside the search for cost savings - is driving a shift towards the use of smaller, more lightweight packaging. In addition, increasingly, boxes are being replaced by bags as the packaging of choice.
Although these bags are made of plastic, they are often both recycled and recyclable, and their flexibility, size, and weight mean greater savings on transport, with the environmental benefits that entails.
As retailers look for cost-cutting options for delivery, we are also seeing multi-use bags becoming more popular, as returns can also be completed using the bag. Then, once the retailer receives that bag back, they put it back into the system for recycling again.
There are lots of advantages to using bags, and this is reflected in their growing popularity as a means of transporting goods, and we may see greater use of these in 2024 as retailers look for more efficient options.
4. Making better use of boxes
Of course, bags can’t always do the same job as boxes. Sometimes a standard cardboard box remains the best solution.
However, in the current market companies will be doing all they can to find efficiencies and cut costs. That includes finding ways to use packaging more efficiently. Ikea does a great job at this - they really use all the space inside a box. This enables to use the smallest-possible box for each product.
Expect more companies to take an Ikea-style approach, finding new ways to make use of every corner of the box, grouping orders, and reducing the size of packaging. This will have a knock-on impact on paper prices and producers.
5. Food and medicines and pharma to stay resilient
With the economy teetering on the verge of a recession, and cost of living struggles, there will be a continued impact on sectors such as fast fashion and FMCG, which will start to impact the packaging sector next year.
However, demand will hold up in recession-proof categories. The first is food: we have to eat, and for that, we need packaging; gone are the days when your butcher was allowed to wrap your meat in a sheet of yesterday’s newspaper.
In fact, the cost-of-living crisis is driving innovation in the sector: when times are tough for many consumers, as we tighten our belts, it drives demand for packaging that preserves our food for longer.
The other sector that will weather economic difficulties is medical and pharma. The pharmaceutical sector is generally resilient during economic downturns, as medicines are so essential. Medical packaging is impressively high-tech: today’s blister packs are designed to maintain the right level of atmospheric pressure to protect each tablet until it's consumed.