The P&P industry, over the past 50 years, has experienced a pendulum in thinking around organizational structure and operating models. As companies expanded from their original product, they often began to acquire a broad portfolio of offerings in line with growth strategies of other asset-intensive industries in the 1970s through 1990s. The general thinking behind this approach was likely that a diversified portfolio of products, customers, and markets could in effect smooth earnings and help provide for a more attractive investment.

This strategy resulted in many companies making each product line with a relatively small percentage of the whole. This often led to an undisciplined approach to capacity management—companies were running at full capacity to optimize their asset utilization and drive down their fixed cost ratio. This approach resulted in an increase in inventory and, in a commodity market with diminishing demand, unstable pricing.

Taking a cue from the steel and chemical industries, it was seemingly recognized that a consolidation of producers could be a better path forward. Small transactions could be seen as companies looked to determine their strongest product and market position based on their current asset mix.

This change of strategy, in North America, began in earnest in the early 2000s and resulted in a consolidation where fewer producers controlled a majority of the capacity for a product category; in effect, becoming more specialized with fewer primary products versus a broader product portfolio of the previous century. This often resulted in more discipline by the leading producers through market shutdowns to better manage inventory volume to demand. The benefit has been more stable pricing for most products.

This global industry has historically been served by regional producers with some integrated operators acquiring (or joint venture) assets in geographies outside their primary market (e.g., North America, EMEA). However, these explorations into new markets have not tended to be a material contributor to overall financial success. This may be changing.

There have been a few recent transactions that may indicate a global consolidation of companies/products is the new market strategy. Amcor’s acquisition of Bemis in 2019 strengthened their respective positions in flexible and rigid packaging across a global geography.¹ This was followed by Billerud’s acquisition of Verso in 2022.² And in 2024, Smurfit Kappa acquired WestRock.³ These transactions resulted in capacity and financial contribution from a new geographic market. It should be observed if others may follow this global strategy.

Industry 4.0 has been around for over a decade and describes the rapid advancement of Operational Technology (OT). The advancement in technologies has led to the ability to aggregate information on a production line, within the plant, or across the entire network of assets.⁴ This can offer management and operators the insight needed to help make decisions on efficiency, energy and labor that can lead to operational and financial improvements. There was early adoption of smart manufacturing (SM) by discrete manufacturers and the process industry is now beginning to embrace the benefits of this new operational strategy.⁵

Companies can stumble with digital strategies when a pure technological approach is employed in developing the capability. To help solve operational inefficiencies, an ecosystem of technologies is often required, however, the strategy should be business-led and address operational challenges such as overall equipment effectiveness (OEE), asset optimization, predictive maintenance, workforce management, etc. Companies that start with the business benefit and then determine which technology(s) is needed to achieve the change could be far more successful than those that push a “shiny object” out to operations. There are many success stories in the P&P industry where a SM strategy has resulted in an increase to OEE and quality, capital expenditure avoidance, and a decrease in unplanned downtime through predictive maintenance.⁶

The landscape of sustainability reporting is undergoing a significant transformation, marked by heightened accountability and transformative regulatory changes. As the SEC’s climate disclosure rule and the EU’s Corporate Sustainability Reporting Directive (CSRD) take effect, many P&P companies are feeling compelled to overhaul their sustainability oversight practices.⁷⁸ These regulatory frameworks are generally demanding more detailed disclosures coming from a more formalized internal control environment. That said, some sustainability reporting is being done by many companies today and much of the data is available; if not yet gathered and controlled. The effort is around shifting the purpose of sustainability reports to cover both compliance and strategic communication that highlights the company’s commitment to sustainability.

Another consideration is to stay tuned in to what suppliers and customers may need regarding data to support their sustainability reporting; particularly Scope 3 emissions.⁹ Customers in particular may start expecting not only data but also results of a company’s efforts to reduce the emissions footprints of the products delivered.

Finally, consider how the data collected can support business operations. For example, insights can be gathered on manufacturing equipment efficiency, energy usage, and even fuel choices. Data on customers' appetite for lower-carbon products can influence revenue streams for current and to-be-developed products.

Next-generation innovations, disruptive technologies, and sustainable solutions in the packaging industry are helping to reshape its future. These advancements include the development of intelligent, active, personalized, and e-commerce-focused packaging solutions, with a particular emphasis on sustainability. Sustainable packaging takes center stage, reflecting the industry's commitment to environmental responsibility amidst consumer-driven demands for eco-friendly solutions.

Key innovations that are setting trends in the packaging industry include:

1. Eco-friendly materials: Companies are increasingly turning to biodegradable, compostable, and recyclable materials to lessen their environmental impact. For example, one company is coating paper in a biodegradable plastic alternative to revolutionize bagged chips.¹⁰ Others are using plant-based materials like cornstarch to create home-compostable packaging, which provides an environmentally friendly alternative to traditional plastics.
2. Smart packaging: Sometimes referred to as “connected” packaging, companies are using a number of digital tools, such as QR codes and NFC tags, to engage with consumers, heighten transparency, and support sustainability.¹¹
3. Minimalist packaging: In an effort to help minimize waste, some companies are downsizing their packaging and focusing on what’s essential.¹² This approach could not only help address environmental concerns, but could also respond to consumer preferences for simplicity.
4. Reusable packaging: Consumers remain interested in convenience, so companies need to continue delivering on this, while considering sustainability. With a focus on reusability, packaging designs are becoming more user-friendly, with features like resealable closures, single-serve formats, and built-in dispensers that can enhance convenience for consumers.

The increasing visibility of climate change and its economic implications is compelling the P&P industry to act. Despite some executives questioning consumers' willingness to pay for sustainability, evidence suggests a growing consumer readiness to pay a premium for sustainable products. According to a recent Consumer Signals™ report, consumers in North America are willing to pay up to a 24% premium for sustainable food and beverage options.¹³

This willingness highlights the importance of continued innovation in packaging to meet both consumer expectations and environmental objectives.

P&P companies should be keenly aware of the evolving trends within the CPG industry, particularly the growing emphasis on sustainability which significantly influences consumer purchasing decisions. According to Deloitte research, “most consumers associate sustainable goods with a holistic, intertwined set of attributes.” While attributes related to material remain the most common association, other factors related to energy and resources used in production and production location rated relatively high -- highlighting the critical role sustainability can play throughout the entire production process.

The Consumer Analyst Group of New York (CAGNY) Conference in February 2024 underscored this trend, revealing a concerted push within the industry toward aligning product offerings with eco-friendly packaging.¹⁴ This movement is about meeting consumer demands and reducing environmental impacts and fostering innovations in packaging design and materials. For instance:

• Loliware’s introduction of the seaweed-based Blue Carbon straw¹⁵
• Ingredion's translation of consumer insights into ingredients and packaging solutions¹⁶
• PepsiCo’s switch to a paper-based solution to hold packs of beverages together¹⁷
• Coty's patent-pending formulation and sustainable packaging for Infiniment Coty¹⁸
• Conagra's plant-based fiber bowls¹⁹

Further, the conference highlighted several strategic approaches that P&P industry companies can consider:

• Innovation in packaging: Develop packaging solutions that cater to changing consumer preferences, such as varying sizes, shapes, and functionalities that address portion control and portability.
• Sustainability: Invest in sustainable materials and processes to minimize environmental impacts. This could include utilizing recyclable or biodegradable materials, reducing excess packaging, or improving production processes to lower carbon footprint.
• Premium packaging options: As the demand for premium packaging grows, companies should consider exploring using higher-quality materials and offering customizable options to meet these consumer expectations.
• Adaptability: Stay agile to accommodate changes in product formulas, which might involve alterations in texture and flavor, by developing packaging that maintains product integrity, enhances user experience, and emphasizes the product's unique attributes.

By embracing these strategies, P&P industry companies can help reduce their environmental footprint and foster a circular economy where resources are extensively recycled and reused. This commitment to sustainability is an ethical imperative and could serve as a strategic advantage in today’s environmentally conscious market.