Packaging for consumer products will become stronger and sustainable in the future, driven by the e-commerce boom and sustainability concerns, according to a new report from McKinsey and Company.
The rise of e-commerce is creating more demands on the package as traditional packaging hasn’t been designed to be shipped directly to consumers, according to the report from the global management consulting and advisory firm.
“E-commerce has hit a tipping point, especially in some parts of the world,” said David Feber, a McKinsey partner working primarily in the CPG and industrial sectors.
In the United States, there has been a strong e-commerce acceleration in particular for packaged grocery goods, going from just 3% of all sales to almost 17% and expected to reach up to 20% within the next five years, he said.
“This puts very different demands on the package. A lot of packaging hasn’t been designed to be shipped directly to consumer, so there’s been a strong focus to try and improve this,” he said.
Ron Delia, CEO and managing director of global packaging company Amcor, told McKinsey that the package needs to be stronger to protect against the demands of the e-commerce channel.
This supports the transition or migration from glass to plastic in many categories, as shipping a glass container through the e-commerce channel is riskier than shipping a plastic container, Delia added.
“The migration from glass to plastic in most categories has been well under way for a long time, but it also supports this move toward the e-commerce channel in a way that creates a robust package for the consumer,” he said.
Both Feber and Delia said that while plastic packaging is now frowned upon, it actually has a big role to play in the future of packaging and the quest for sustainability.
Feber said no single package is good at addressing all sustainability concerns—exhaustion of the world’s resources, production of too many greenhouse gases, and too much plastic waste.
“It may be counterintuitive, but in many formats, plastic will actually have the lower greenhouse-gas emissions and therefore the lower environmental impact, as long as you’re doing the right thing at the end. So the idea would be to help educate people on the total impact of the package, including the greenhouse-gas profile,” Delia said.
Feber said that most of plastic packaging can be made with recycled material, and most can be designed to be recycled or composted at the end.
“Now the infrastructure’s not always there, and the consumer may not understand that yet. But over time, those two things will be addressed. So I think there’s absolutely a future for plastic in the segments and categories where it plays a unique role,” he added.
Delia stressed the importance of educating people on the total impact of the package. “The consumer should not have to feel guilty or concerned about the package that they’re using. In some cases, it’s just a matter of getting people to recycle things that could easily be recycled today.”
Additionally, the two men said the higher cost of making a more sustainable package versus a more conventional package is insignificant as it relates to the retail price.
“There’s a premium on the package cost, but if you were to just flow that through to the retail price, you would only have to raise the retail price by 1 or 2 percent to fully compensate for the extra cost,” Delia said.
Meanwhile, e-commerce and sustainability trends are also accelerating innovation of packaging materials.
Delia cited as an example the coffee market, where the concept of convenience has led to coffee options like single-serve capsules.
Pet food packaging is also gravitating toward the stand-up pouch, which consumers have come to like because it is lightweight and easy to open. But the product is not environmentally friendly, because it’s made of a set of materials which are incompatible with each other in the recycling stream.
“So our innovation challenge and opportunity were to make that product in a way that had a better environmental footprint without compromising any of the consumer functionality. That’s a good example of the kinds of things that our innovation capabilities enable us to do,” Delia said.
To turn packaging into a competitive advantage, he advises companies to pursue and support better packaging because of the many benefits it provides. Returning to the coffee example, Delia pointed out that people willingly buy single-use coffee pods even though they cost more than buying half a kilogram of coffee precisely because of the packaging.
He urges companies to think about the many different roles that packaging plays, from extending shelf life to facilitating distribution to making it easy for the consumer to use, and not shy away from learning more about improving packaging due to environmental or cost issues.
“There’s an opportunity to lean into it and embrace the benefits that packaging provides for their brand and their business and not necessarily move away from the topic just because there’s an environmental requirement now that wasn’t there ten or 20 years ago,” he concluded.