Consumer Packaging Strategies: Adapting to Cost Pressures

Delivery

This report comes in PPT.

Key findings

Managing costs is a big priority for brands, packaging suppliers and consumers, as inflationary pressures persist

The consumer packaging industry is strong in its ability to withstand crises, given the value of everyday groceries to its business. Food and drink accounted for 92% of retail packaging volume sales in 2023. Inflation, rising interest rates and geo-political instability amplify costs. Packaging is energy-intensive. Volatility in energy (somewhat eased in 2023) has combined with raw material prices and logistic costs to increase packaging prices for brands and consumers.

Use innovation in packaging design to improve operating efficiencies and affordability

Consumer brands and retailers are employing packaging design strategies to maximise margins, and increase operational efficiencies to offset increased costs. Altering materials to use flexibles/refill pouches as an economical alternative to rigid plastic is apparent across food, drinks, beauty and home care. Reducing components cuts costs and eco-footprint. Bag-in-box (ships-in-own-box) is seeing new detergent launches.

Pack sizing is an important brand tool to tailor to consumer budgets and changing habits, and aid the company balance sheet

In response to increasing operating costs, of which packaging is only one (along with ingredient, manufacturing and shipping costs), consumer brands are using diversified pack size strategies. Reducing pack sizes to keep retail prices accessible is widely in use, eg to tackle higher ingredient costs in dairy and edible oils. Upsizing strategies – bundling, multipacks and bulk buy options – help sell products in a softer consumption climate.

Circularity is a driving force in packaging development and regulation, and a reputational opportunity

With higher corporate costs and more price-conscious consumers, advancing sustainable packaging is threatened. There is, however, mounting regulation (national, regional, global) on packaging circularity, to reduce waste and increase recycling, recycled content use and material reuse, as well as a consumer expectation of sustainable packaging. Lack of action or reneging on pledges carries with it reputational risks of losing consumer loyalty and investors.