Can paper steal the packaging crown?

Sarah Cosgrove
Monday, July 27, 2015

'Graphic is dead, long live packaging’ could well be the unofficial slogan of vast swathes of the paper and print industry at the minute, as companies reposition themselves to take advantage of changing markets, or risk business failure.

The administrators of Paperlinx UK and Tullis Russell Papermakers both cited falling demand for graphic papers as a feature in the companies’ downfall and since then three papermakers have announced price rises in response to, as Sappi Europe put it, “unsustainable” margins in the graphic paper market.

Indeed, Sappi this month pledged to develop at least one new speciality packaging substrate a year as part of its strategy to become a packaging innovator. It is creating a division for speciality papers at its Alfeld Mill in Germany, now a 100% specialty paper mill following a £60m rebuild of its PM2 paper machine that was completed last year. As Speciality Papers sales and marketing director at Thomas Kratochwill put it: “We want to get away from being a pure substrate supplier to a company that’s offering packaging solutions.”

Asia Pulp and Paper (APP) is of a similar mind, says UK & European sustainability director Lee Henderson.

“On the R&D side we’re working with large brand owners to produce the best quality fit for their brands. I can understand what Sappi are saying, you’ve got to be more than a substrate supplier now. Those who don’t work with the brand owners are no longer here. 

“You have to be able to offer that innovation, the technology, that value for money.” 

APP recently commissioned industry analyst Smithers Pira to produce a white paper, Paper-based packaging trends to 2019, which noted “significant growth opportunities”.

Paper and board currently accounts for 35% of worldwide packaging sales, which totalled around $280bn (£180bn) in 2013. Cartonboard and containerboard is 31% of the packaging market, according to the report. Despite a drive by many brand owners and retailers to reduce packaging, there is still overall growth, not least because of increased online sales. 

The key drivers for the growth of paper-based packaging are growing GDP, changing demographics – more single serve packs and convenience packaging – sustainability and recycling concerns, technological advances, security, and the ongoing drive for added value, which is responsible for much of the innovation in luxury packaging, according to the white paper.

Smithers Pira packaging consultant Dominic Cakebread says paper and board was “an unloved backwater of packaging”, adding that much of the focus of R&D goes on plastic and “not so much on paper”.

But the focus on paper and board is increasing, he says, as paper is seen more as a sustainable and attractive option for consumers, and innovations in coatings enable it to be used in more applications.

Luxury is thought to be a key opportunity. Here paper and board has the biggest share of the market by value – glass is the biggest by volume – and this is growing by an average of 4.4% a year during 2014-2019 to reach £17.6bn. While the growth rate is highest in South and Central America at 9%, it is still growing at an annual rate of 3% in Western Europe and North America.

“In Europe increased competition and strong drive for brand and product differentiation at the luxury end of the market is resulting in a shift from standard to higher added-value folding boxboard grades such as GC1 and SBB,” the report says.

Roger Wright, head of technical packaging, general merchandise at Marks & Spencer, is seeing growth in packaging in the luxury market despite sustainability concerns. 

“In our beauty department, brands are coming in with packaging that’s bigger and the customer buys that. Sometimes the perception is that bigger is more luxurious,” he says. 

Lowestoft-based Saxon Packaging is taking advantage, bringing print techniques more usually associated with magazines, such as fragrance bursts, spot UV varnish and textures, into packaging to ramp up its value. 

Technology in another key draw in the luxury market, according to the report. “Packaging that... has the ability to interact with digital technology, prevents counterfeiting and uses the latest state-of-the-art printing technology are all features that are predicted to have a greater presence in luxury packaging over the next five years,” it says.

“Digital interaction with print is a way for luxury brand owners to... engage with their consumers.”

The rise of digital print will also have an impact. Currently the vast majority of packaging is conventionally printed, but digital is likely to eat into that market. “It could take very significant parts of the market if the investment is there,” Cakebread says.

The report predicts ID codes, QR codes and augmented reality will have a large presence in luxury packaging over the next five years. 

Wright also says retailers are seeing a trend towards more intelligent packaging. He adds: “Packaging definitely has a part to play in anti-counterfeiting and the new technologies and clever print techniques around make this more affordable than ever.”

Legislation may have an impact here. The EU adopted the Falsified Medicines Directive in 2011, due to be implemented in 2018. The full requirements are yet to be decided but it is thought that individualisation will be a factor.

Environmental concerns are another strong theme in the study, which referenced one survey that found that 25% of men and 33% of women said their buying choices were influenced by how recyclable the packaging was, although attendees at the report’s launch event agreed there was much confusion among the public about what is and is not recyclable.

Wright says sustainability has made Marks & Spencer more profitable but stresses: “You have to make it easy for consumers. They want to recycle but if there is inconsistency with the collection schemes they become confused. In terms of coated papers, the industry should be making them recyclable as a pre-requisite.” Affordable bio lamination would be top of his wish list.

Whether it is recyclable or not, paper-based packaging remains popular with consumers, something Saxon sales manager Mike Impson is quick to market: “We’ll always push paper-based packaging over plastic because it’s seen as being more environmental. I think consumers like an element of doing their bit for the environment.” 

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