CDI Global

Corrugated Packaging: A Growing Sector During the Pandemic

The COVID-19 pandemic has considerably disrupted the global economy and is expected to have an important long-term effect on the market. However, industries such as healthcare and packaging have had a low impact from the pandemic. We could even say that the pandemic has busted the growth of these sectors. In particular, the packaging industry has proven its resilience even in countries with stringent lockdown rules such as China and India.

The corrugated packaging industry is now living its golden age. In 2020 it saw - in major European countries -  a total production of about 27 billion square meters of corrugated board, which is + 1% over 2019, in spite of a prolonged shut down in 2020. The countries that have contributed the most to this result are Italy and Germany with respectively 4.5 and 8.1 billion square meters. This positive trend is also replicated in 2021, where the first two months of the year have shown a strong increase both in terms of weight and surface production. In particular, the leading countries are UK and Italy. The UK registered an increase in production of 15.5% in terms of weight and 17.7% in terms of surface. On the other hand, Italy has registered an increase in production of 7.4% in terms of weight and 7.5% in terms of the surface.

We can attribute this success to two primary causes: The booming e-commerce industry and the market demand for packaging shifting from plastic to fiber-based packaging.

With the pandemic and the consequent lockdown, many distribution businesses were forced to close. To satisfy the market demand for goods, consumers turned to e-commerce platforms. Once the item is ordered via the online platform, it must be sent to the final consumer. The packaging for these goods is primarily transported in corrugated board cases, we can easily bring the Amazon packaging example to mind. These factors inevitably led to a production increase for corrugated boards.

Moreover, we are now witnessing a huge cultural change in terms of sustainability. For this reason, the packaging industry is now required to shift its production from plastic to fiber-based packaging. The industries that have been involved in this process are mainly food and fruit & vegetables with substitution of wood and plastic cases and household appliances.

The Corrugated Packaging Industry, despite a growing market, is still quite fragmented with MNC representing 50% of the market, and the remaining production is split over thousands of sheet plant.

We can conclude that the packaging industry is now living a very interesting and dynamic time. This will inevitably lead to great interest from financial investors in terms of aggregation and therefore to M&A deals.

 

 

Cesare Tocchio

CDI Managing Partner, Italy

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