How An Unexpected Year Will Influence the One Ahead for the Packaging Sector
The following article was originally published by Packaging Impressions. To read more of their content, subscribe to their newsletter, Packaging Impressions inBOX.
Very little about what the world went through in 2020, and continues to endure in 2021, can be considered normal, says David Luttenberger, global packaging director for market intelligence firm Mintel. But as the packaging industry looks ahead in 2021, with hopes that the end of the pandemic is in sight, the experiences that shaped the tumultuous past year will be beneficial in preparing for the unpredictable year that lies ahead.
That is why Luttenberger eschews the phrase “new normal.” Rather, he says, 2021 can be looked at as the “next normal,” as brands and their packaging partners adjust to ever-evolving consumer behaviors and preferences.
“What happened yesterday is different from what’s happening today, and what’s going to happen tomorrow is also different,” Luttenberger says. “That’s why we felt it was important to help our clients, whether they are printers, converters, brands, or retailers, to understand what’s shifting and what is coming next. ‘Next’ indicates a fluidity of the situation. We don’t know what’s coming next and we have to be prepared for many different things and just be flexible.”
Life at Home
Taking stock of how the pandemic impacted consumers, packaging market segments, and package printers sheds light on what can be expected in the coming months, despite the continued lack of certainty. Over the past year, one of the most evident results of the pandemic is in how it shifted consumer culture from that of constantly being on the go, to one of spending far more time at home.
As a result, one of the most significant changes in consumer behavior was the massive growth in e-commerce over the course of 2020. The shutdowns many stores endured were compounded by consumers’ reluctance to shop in person at the stores that remained open while concern spread about potential exposure to the virus.
While online purchases of household essentials and cleaning products skyrocketed, the internet also became many consumers’ outlet for grocery shopping, says Taylor Getler, business development associate for Works Design Group, a packaging design and branding agency in Pennsauken, N.J.
This transition from in-store to online shopping, Getler says, has altered the ways in which packaging design communicates with consumers. In-store, items tend to be grouped in aisles by category, and consumers generally know where to go to find the products they need. But in an online setting, where products are located via searches and filters, Getler explains that on-pack claims become an important tool.
“In e-commerce platforms, you have to get it so you can tag [products] accurately based on what people are searching for,” she says. “Things like specific callouts will be more important in the hierarchy. You’re really going to want them to be one of the bigger elements in the package design, because if you have a brand that is gluten free or satisfies one of these search trends that we’re seeing, you’re really going to want to make it prominent on your packaging so that when people are looking for these specific terms, your product comes up.”
Meanwhile, for the consumers who did venture out into brick-and-mortar grocery stores, a much different shopping strategy emerged. In recent years, the perimeter aisles of the supermarket saw an influx of traffic, as consumers who prioritized freshness trended toward more trips to the grocery store to purchase fewer items. Luttenberger explains that these consumers, who often skewed younger, preferred to shop for what they needed for the meals they planned to prepare in the immediate future, and return to the store soon after for fresh ingredients in the following days.
But as the pandemic resulted in consumers making far fewer shopping trips, Luttenberger says a “renaissance of the center of the store,” took place, as consumers stockpiled shelf-stable items they could keep for extended periods of time. Not only did this result in a renewed consumer appreciation of packaging, but an opportunity for a variety of packaging formats to demonstrate their benefits.
“We began to see some introductions of some new package formats and some reintroductions of traditional [formats],” Luttenberger says. “[We saw] steel cans and flexible pouches in categories where we might not have seen them. We began to see consumers saying, ‘I’m looking to packaging to extend shelf life and to preserve freshness. So when I put it in the pantry, I don’t want to have to go back to the store a week from now or two weeks from now. I want to stockpile for two months, three months, or six months if I can.’”
The Bounce Back
As if the public health crisis and the upending of day-to-day life wasn’t enough, the COVID-19 pandemic was also at the crux of an economic recession that struck the United States in 2020. But unlike recessions of the past that stemmed from financial crises, this recession, which resulted from a biological event, is not expected to last as long.
In fact, according to economic analyst Taylor St. Germain, compared to the fallout of the recession of 2008-09, which lasted about five years before the industrial economy fully recovered, the recession resulting from COVID-19 is forecast to end in the first half of 2023.
St. Germain, an analyst for economic forecasting firm ITR Economics, explains that when tracking the health of the economy, it is important to consider both GDP and industrial production. He says that GDP typically tracks slightly ahead of industrial production, and is expected to return to level by the middle of 2022. And for the packaging industry, he adds that consumer market segments are expected to not just bounce back in 2021, but pick up steam as the year progresses.
“Retail is expected to accelerate throughout 2021,” St. Germain says. “The manufacturing and industrial economy are expected to rise to positive growth rates by the end of this year. So really it’s an all-encompassing uptick when it comes to the demand that the packaging industry will see, whether it’s the B2B side or the consumer side.”
As the economy recovers from the current recession, and the retail industry returns to pre-pandemic stability, Getler says that new packaging designs will be prevalent across multiple market segments. This is in large part due to an increase in new consumers that may have interacted with a brand for the first time in 2020.
For example, Getler explains that younger consumers who were more likely to eat at restaurants or while they were on the go, found themselves cooking at home much more frequently during the pandemic. As a result, they purchased food items and ingredients from brands that they may not have in the past. With these younger consumers on board, Getler says that brands would be wise to conduct market research into these demographics and incorporate packaging designs that entice them to remain on board into the future.
“You have these brands that have all these new consumers that they really don’t know anything about,” she says. “I think what you’re going to see in 2021 is that brands really need to get to know these new consumers. What are the demographics? What are their needs? What are their habits? What are their behaviors? That’s really going to be what influences these new design initiatives because they’re going to want to retain these new consumers that they got.”
Preparing for the Road Ahead
Of the silver linings that can be found among the tragedies of COVID-19, for the packaging industry, perhaps the most prominent is a renewed appreciation among consumers for the benefits that packaging provides. Luttenberger says that in 2019, one of the top packaging-related trends that Mintel tracked was consumers’ growing aversion to plastics.
While Luttenberger says that eyeing ways to reduce the reliance on plastic will be important going forward, consumers are recognizing that there are significant benefits it provides. With increased scrutiny on the hygiene, safety, and health benefits of the products and packages they brought into their home, the protective elements of packaging led to a shift in many consumers’ mindsets.
“[Consumers] began to see the value in plastics and in all package types,” Luttenberger says. “So the industry now has an unprecedented opportunity — whether it’s through shelf markers, on-pack messaging, or social media — to really reinforce the positive role packaging can play in consumers’ lives. Not only for safety and hygiene, but for environmental responsibility.”
Another opportunity for the packaging industry to seize in 2021 is in finding creative ways to communicate the added benefits of certain products, Getler says. In 2020, she explains, consumers were drawn toward items that provided added functionality, such as beverages that offered benefits beyond just taste and hydration.
Added vitamins, relaxing properties, or an energy boost to get through the day were key product claims in this emerging “functional beverage” trend, she says. And as a result, imagery on packaging is now being used to signify these benefits, rather than solely referring to flavor, for example.
“Now you’re seeing the illustrations of the ingredients coming to the forefront because we want to see quickly that this is full of fruit, or has vitamins and minerals,” she says.
On the package manufacturing front, St. Germain says that it will be important to monitor the supply and price of materials, and packaging demand. During the pandemic, demand for packaging increased dramatically, and as a result, pricing pressures increased as supply needed to be filled.
With e-commerce on the rise, paperboard is an important material to monitor, St. Germain says, and while production is up 4.7% compared to the same point last year based on the most recent quarterly data available to ITR, if a material shortage is to occur as demand ramps up, pricing could continue to increase.
“If you’re in this space, make sure that you have a nice inventory of this available based on what the demand is suggesting,” St. Germain says. “And be ready for that demand to increase as the vertical markets continue to see much higher growth rates at the end of this year.”
But if 2020 has left a lingering impact on the packaging industry as it looks ahead toward 2021, it is the understanding that flexibility in production is going to remain imperative as the nation and the world emerges from the pandemic. Whether it’s the efficiency of digital printing, accommodating an unexpected design change, or speed-to-market demands, printers and converters that can quickly adapt to the unexpected will be at an advantage in the year ahead.
“When brands are looking for new partners, that’s going to be something that will be a consideration,” Getler says. “If we need something changed really quickly, or something new out the door the next day, what are you able to do for us in the worst-case scenario?”
Cory Francer is an analyst at NAPCO Research. He formerly served as editor-in-chief of Packaging Impressions.