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Packaging

April 28, 2024

Most of my shopping is online. I can’t even say that my behavior changed after Covid – it didn’t. But one thing that has seemed to change is that items are more often shipped individually. They often aren’t bundled and shipped all together. Of course that has to do with things like warehouse inventory and distribution, spurred by the demand for ultra-fast shipping, but it amazes me just how much packaging is required for all of these small, frequent deliveries. My daughter ordered some stickers the other day. They arrived in a giant plastic, padded envelope.

Based on the Environmental Protection Agency’s last study on packaging from 2018 (which seems particularly dated given requirements for health/safety as well as convenience), packaging waste made up over 28% of Municipal Solid Waste in the US. But customers are beginning to notice the absurd levels of packaging in so many products. As a response, companies from Amazon to Proctor & Gamble are working on ways to reduce packaging waste and increase use of more easily recyclable and/or sustainable materials. The growth in sustainable packaging is therefore expected to steadily increase over the next few years (see chart below).

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“Sustainable Packaging” in this case means packaging and solutions that reduce environmental impacts. They include items made of recycled content, items that are biodegradable, or ones that can be easily recycled.

 

While many governments, notably those in Europe, but even in China and India, are using regulation to drive use of sustainable materials, consumer demand and economics tend to drive more willingness for companies to adopt sustainable business practices. Benefits include:

  • Reduced material cost from smaller, more efficient packaging sizes

  • Reduced shipping costs due to reduction in size and/or weight

  • Brand reputation for being forward-thinking

  • Values aligned with customers

Sustainable packaging touches any industry that deals with physical goods. It impacts consumer packaged goods companies that package products to sell, health and medical device producers that have to balance sustainability with safety, e-commerce sites that ship their goods, transportation companies that deliver the goods, energy and even agricultural companies that provide the raw materials for plastics (and bioplastics), packaging manufacturers, and more. Packaging manufacturers who embrace the rising demand for sustainable packaging are most likely to benefit from this trend. While the packaging can be considered to be commoditized, innovators in the space, the ones that can develop more sustainable packaging products more efficiently and economically, are the ones poised to reap the benefits of changing consumer demand. Somar will continue to monitor the space since it impacts so many of the companies we follow, directly and indirectly.

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