No ordinary disruption: Winning with new models in packaging 2030

No ordinary disruption

Winning with new models in packaging 2030

Executive summary

Five major trends will “change the game” in the packaging industry and raise the bar for

performance in the next five to ten years. Much higher levels of innovation and agility will be

required to deal with the pressure and potential disruptions emanating from these trends:

— E-commerce everywhere. Intense focus on increased packaging requirements, including

for new products, along with last-mile delivery innovations

— Changing consumer preferences. Demand for much more personalization, convenience,

health, and affordability, driving SKU proliferation to new heights

— FMCG and retail margin compression. Further margin compression for fast-moving

consumer goods (FMCG) manufacturers and retailers, with pressure passed back up the

line to converters,

intensifying the threat of insolvency

— Sustainability requirements increasing at every step of the value chain. With rising

activist scrutiny

— Digitization/Internet of Things (IoT). Both to drive down costs and, increasingly through-

out the decade, gain a competitive edge with consumers; for example, by generating greater

customer value and service through technology integration in packaging.

All five trends are approaching at varying strengths and speeds, with a special role for digital

trends. The biggest increase in pressure is expected from e-commerce, which will move

from early adoption to early majority diffusion. The second rush of new pressure will likely

come from digitization. Initially, digital’s role will mainly be as a cost-efficiency booster via

automation, and then increasingly as a source of customer-facing interactive tools, both

to convey information and emotion and to collect data. The other three trends – changing

consumer preferences, margin compression, and sustainability – are already moderate to

strong in terms of their impact, and they will increase in strength.

Preparing for these changes requires packaging companies to think in new ways about their

focus and market approach (“intuition resets”). While growth in China is cooling, together with

other markets in Asia it will remain the industry’s top growth engine alongside North America,

which China has displaced as the global leader in packaging. Notably, while the use of plastic

has soared, the ecological burden is provoking heavier restrictions as demand rises for more

sustainable solutions across the board.

The overriding implications of these packaging trends differ according to substrate and

will demand substrate- and channel-specific strategies. Despite the surge of sustainability

pressure, the combined power of plastics’ attractive attributes in terms of cost, automation,

and quality will likely buoy rigid and flexible plastic substrates, if converters can increase

recyclability and recycled content. Paper and board will continue to benefit from e-commerce

growth and are ideal for integrating digital and IoT solutions (using QR codes, radio frequency

ID tags, near-field communication protocols, and so on). Paperboard will likely see more of the

convergence of primary and secondary packaging, a shift in focus or buzz around the last mile

(as will plastics), as well as more local or even captive converting operations to increase FMCG

customers’ agility. Glass and metal have an uphill battle in this more omnichannel world, but

their traditional strengths and sustainability profiles (recyclability and using recycled content)

still offer ways to fend off substitution by other substrates.

A “converter” is a packaging producer that takes raw material such as plastic resins and paper and transforms it into a

packaging product

No ordinary disruption – Winning with new models in packaging

Even with deep substrate expertise, most converters need to think through an array of moves

and revamp their approaches accordingly, giving attention to five priorities:

— Investing in R&D and innovation to secure a portfolio of competitive options

— Handling SKU proliferation driven by consumer preferences; for example, more flexible

and agile processes to manage shorter manufacturing runs, and faster new product

development and time to market

— Reallocating resources and assets and pursuing M&A to, for instance, achieve a global-

local presence

— Strengthening collaboration with FMCG manufacturers and input suppliers,

including technology

— Shifting the product mix (and processes) toward greater sustainability.

All of the improvement levers that these five focal points imply offer some opportunities–

the question is how to line them up or combine them effectively. While plans will have to

be adapted as the journey proceeds, attention to these five elements now will provide the

platform for building a winning formula. Controlled urgency is essential in all five areas.

Overall, “urgency” is most needed in reviewing and revamping R&D and innovation programs

within the next 18 to 24 months in order to have a portfolio of projects with horizons of a few

months to two to four years. At the same time, “controlled” refers to using sufficient quality

gates and milestones, with financial and market reality checks, and adapting projects as

needed or exiting. Moreover, this is not only about how to make the most of a company’s

current strengths and relationships to secure growth and profits, but also about developing

an outlook on where the pockets of growth are located (even if currently unserved), where

they will appear, and when to pivot and tap them.

3No ordinary disruption – Winning with new models in packaging

Introduction – welcome to the “pressure-verse”

Over the past decade, the global packaging industry has enjoyed steady growth, driven by

shifts in choice of substrates, expansion of new markets, and changing ownership dynamics.

Headline changes include increased use of plastics to replace other substrates and

accommodate consumers’ demand for convenience, the economic boom in China and other

emerging regions, and greater industry consolidation and growing private equity ownership.

Growth will continue in the decade ahead, but with more pressure and disruptive changes

likely. Although growth in China is slowing, together with other markets in Asia it will remain

the industry’s top growth engine alongside North America. Meanwhile, the use of plastic has

soared, but the burden on the environment is prompting increasing restrictions. And, while

e-commerce has been a boon to many converters, its spread has created new demands and

sharply compressed margins for converters’ customers, namely fast-moving consumer goods

(FMCG) companies and retailers.

So, what is in store for converters up to 2030? To find answers, McKinsey’s Basic Materials

Practice conducted extensive interviews with retailers, FMCG companies, and packaging

industry executives in major end-user markets and across the main substrates, and also

carried out deep-dive primary research and analyses from September 2018 to March 2019.

Our analysis has identified five major trends that will transform the packaging industry over

the next ten or more years. If companies can capitalize on them, these changing consumer

behaviors, technology disruptors, and sustainability trends will also present opportunities for

high growth and improved profit margins in some packaging segments in mature markets.

However, to succeed, packaging companies need to put strategy back on their agenda –

simply doing what everyone else is doing (like in the previous period) is no longer going to

cut it. Instead, packaging companies need to embark on a change journey with controlled

urgency: it will be essential for them to revise their approach from one based predominately

on continuous improvement-type actions with reliance on market growth; rather, they should

increase their strategic focus on innovation and agility in order to preserve value and capture

growth. All the while, the forces at work are shaping up to form a new higher-pressure

universe, what we might term a “pressure-verse.”

This white paper discusses what it will take to win under increasing pressure on multiple

fronts. In chapter 1, we offer a snapshot of where the industry and its major segments stand

today, with a focus on North America. We then devote chapter 2 to unpacking the five top

trends that we believe will reshape the industry. These trends have certainly been present

during the past few years, but mostly in nascent form; however, in the decade up to 2030,

their pace is expected to pick up strongly and potentially become disruptive, as accelerated

adoption will also hasten and compound innovation.

In chapter 3, we turn briefly to the overriding implications for substrates in particular, and

the focal points for action more generally. While plans will have to be adapted along the way,

attention to these areas now will provide the foundation on which to build. Success going

forward will not only be about how to make the most of a company’s current strengths and

relationships to secure growth and profits, but also about developing an outlook on where

the pockets of growth are located – even if currently unserved – where they will crop up, and

when to pivot and tap them. For packaging players that find a winning formula and continue to

enhance the products they carry, present, and protect, the coming decade could be a bonanza.

4 No ordinary disruption – Winning with new models in packaging

1 Context – the need to reset intuition

in a rapidly changing packaging world

There are opportunities for profitable growth in North America; the fastest-growing

segments are among the smallest.

China has surpassed North America and is now the world’s largest packaging market. By

2022f,

China’s faster growth will make it the “king of the hill” in packaging, with a global

market share of roughly 28 percent. While this shift is notable, North America’s relevance

at 22 percent of the global market remains substantial due to its size and rate of innovation.

In such mature markets as North America (and also Western Europe with 17 percent of the

global market), converters that reset their sights to a more granular view will more readily find

pockets of growth and make successful decisions on how, where, and when to compete. For

example, at USD 2 trillion in spend, the US “food ecosystem” – by which we mean the value

chains from farm to table – represents roughly 10 percent of GDP and is larger than both the

nonfood retail market and the market for construction. Over the next five years, the overall

food market is expected to grow at a modest 1 percent annually, but there are still pockets of

high growth. In particular, grocery delivery and ready-to-eat meals are expected to generate

double-digit growth rates. Furthermore, organic-labeled foods, restaurant delivery, and new

niche brands are expected to grow at close to around 10 percent per annum.

Overall, with packaging’s ability to boost a product’s value and cost competitiveness, the

industry can look forward to continued growth, roughly in line with world GDP. At the same

time, however, given its midstream positioning, the industry is inevitably under pressure from

multiple directions in the value chain. The industry is also still fragmented, and this, too, makes

converters vulnerable to increased pressure – both upstream to price hikes and shortages

of raw materials, and downstream to demands from industrial, FMCG, and retail customers

as well as consumers – for more economy and creativity. Therefore, in the rougher terrain

ahead, many converters will likely have to work harder to secure their share of the industry’s

moderate growth.

Before turning to the trends in chapter 2, let’s look briefly at the current context of the

packaging landscape: geographic markets, end uses, and substrates, with a focus on the

mature North American market.

North America – mature, but some fast-growing segments

Globally, packaging is a diversified USD 850 billion plus (2018) industry with healthy growth

prospects of some 3 percent per annum.

Geographically, most of this growth will be fueled

by emerging markets, which can expect to see packaging consumption increase by

USD 107 billion in the period 2017 to 2022f (Exhibit 1). In the same period, markets in Western

Europe and North America are projected to grow at approximately 1 percent per annum but

from a large base, with packaging consumption in developed markets (also including Japan

and Oceania) set to increase by about USD 22 billion by 2022f.

In dates, “f” refers to following years

Derived from Smithers Pira: The Future of Global Packaging to 2022 (December 2017)

Euromonitor

All forecasts constant (2016) for prices and exchange rates

Ibid.

No ordinary disruption – Winning with new models in packaging

The main intuition reset to highlight is that North America is now the second-largest market

after China. As of 2017, apparent packaging consumption in China was an estimated

USD 214 billion, while North America stood at some USD 203 billion. By 2022f, China’s

lead is projected to widen to USD 276 billion, making North America about three-quarters

(approximately 78 percent) the size of China’s market by value.

Although developed regions such as North America and Europe have lower growth rates, their

large absolute size maintains their importance, and granular opportunities for growth still exist.

To illustrate the relative sizes, in the industrial/transit packaging sector, North America and

Western Europe are expected to see apparent consumption rise by 2022f to about

USD 78 billion and USD 62 billion respectively, together exceeding the forecast for total

packaging demand in other Asian markets (excluding China and Japan) at about USD129billion.

In food, the biggest consumer packaging segment, other Asia (excluding China and Japan) is

again the largest emerging market, with a projected consumption by 2022 of some USD 35

billion. However, it is still far smaller than the combined total for North America and Western

Europe of approximately USD 120 billion (USD 69 and USD 51 billion, respectively).

North American snapshot across end uses and substrates

The second main intuition reset to note is that even those markets growing slower than overall

GDP offer hot spots – pockets of fast growth – that converters can capitalize on. Although

the North American market is expected to grow by only around 1.2 percent up to 2022f,

its overall size ensures some attractive opportunities for granular growth. Of the end uses,

consumer segments represent around 65 percent of total North American packaging, with a

projected value in 2022f of some USD 136 billion. The largest end-use segment is food, while

Ibid.

Growth in global packaging

consumption, 2017 - 22f¹

USD billions and percent

Geographically, most of the global growth will be fueled

by emerging markets

107

Developed

markets

Emerging

markets

1.0% 4.5%

<2%

CAGR 2017 - 22f

2 - 4%

>4%

1 At constant 2017 prices

SOURCE: Smithers Pira (Dec 2017); McKinsey

Exhibit 1

6 No ordinary disruption – Winning with new models in packaging

the fastest growth is projected to come from healthcare and cosmetics, essentially the same

as the global packaging growth trends.

— Largest end use. Food accounts for approximately 50 percent of consumer packaging

and is growing thanks to increased demand for convenience. It is projected to have a

CAGR of some 1.2 percent, which will expand this end use to USD 70 billion and a North

American packaging market share of 32 percent by 2022f.

— Slowest growth. Within the drinks segment, the largest category, bottled water,

continues to be the key driver of drinks packaging, supporting demand for PET

bottles. Niche categories also continue to outperform the overall mass market favoring

metal cans. However, drinks packaging overall is shrinking, which is mainly due to the

downturn in carbonated soft drinks in response to health concerns. With a growth rate

of –0.2percent, consumption is expected to stay flat in the 2017 to 2022f period at

USD22billion, with a North American market share of around 10 percent.

— Fastest growth. At approximately 3.5 percent, healthcare is the fastest-growing end

use, boosted by increased demand for healthcare products for an aging population. The

forecast for consumption in North America is an increase from USD 9 billion to some

USD10 billion, representing a North American market share of approximately 5 percent.

Given that the fastest-growing end-use segments are small, converters may want to consider

a diversification strategy, comprising a portfolio of segments that have some affinities; for

example, some combination of health, wellness, and/or cosmetics packaging related to

existing food packaging or functional food related to existing healthcare packaging.

Turning to substrates in North America in the 2017 to 2022f period, plastics are still expected

to see growth despite mounting pressures for more sustainability. Perhaps optimistically

given the surge in restrictions, industry forecasts still show the highest growth rates for

flexible plastics at some 2.3 percent, rigid plastics at around 1.9 percent, flexible papers

at approximately 1.9 percent, followed by paperboard at around 1.1 percent.

The main

contributors to plastics growth, taking tailwinds into account, are the lightweight trend and

technological improvements. For example, stand-up pouches continue to be favored for new

product launches because they offer both lightweight and high consumer appeal. The growth

in board is positively driven by online retail (e-commerce).

Despite slower growth rates across end uses, opportunities do exist for high growth and

margins. They will be driven by changing demographics and shopping behaviors that

make new demands on packaged foods and other goods, creating new requirements for

packaging. However, the opportunities to earn higher margins through differentiation will be

accompanied by higher “churn” and other challenges discussed in chapter 2.

PET: polyethylene terephthalate

All forecasts constant (2016) for prices and exchange rates

No ordinary disruption – Winning with new models in packaging

2 No ordinary disruption – five trends

changing the industry’s game

All trends in packaging offer some opportunities; they also differ in that they are approaching

at various different strengths and speeds, with a special role for digital trends.

Our interviews and analysis have identified five major trends that will “change the game” in the

packaging industry and raise the performance bar over the next five to ten years (Exhibit 2):

— E-commerce everywhere. Intense focus on increased packaging requirements, including

for new products, along with last-mile delivery innovations

— Changing consumer preferences. Demand for much more personalization, convenience,

health, and affordability, driving SKU proliferation to new heights

— FMCG and retail margin compression. Further margin compression for fast-moving

consumer goods (FMCG) manufacturers and retailers, with pressure passed back up the

line to converters,

intensifying the threat of insolvency

— Sustainability requirements increasing at every step of the value chain. With rising

activist scrutiny

— Digitization/Internet of Things (IoT). Both to drive down costs and, increasingly through-

out the decade, gain a competitive edge with consumers; for example, by generating greater

customer value and service through technology integration in packaging.

While none of the trends are new, most are now leaving infancy and coming at converters

head on with increasing pressure and speed that could prove disruptive. Sudden turbulence

could blindside an individual company or segment of the supply chain.

As before, converters will need to meet rising e-commerce and sustainability requirements,

particularly last-mile customizing and concerns about plastics. Also, as always, converters

must satisfy consumer preferences – this will drive the proliferation of SKUs to meet demand

for personalized, healthier, more convenient, and more affordable packaging. All the while,

packaging companies will also be dealing with a severe margin squeeze passed back up the

line by FMCG manufacturers and retailers. Finally, even with challenges, increasing adoption

of digital solutions and IoT will provide all-important options for improving cost efficiency and

(later) faster customization.

A “converter” is a packaging producer that takes raw material such as plastic resins and paper and transforms it into a

packaging product

No ordinary disruption – Winning with new models in packaging

1. Growth of the e-commerce channel – trend impact shift from two

(moderate) to five (very high)

Can any packaging company win without fully integrating e-commerce as a key component

of the business? Retail business is shifting from the traditional bricks-and-mortar channel to

online and mobile shopping, with the global e-commerce market set to double by 2022.

More and more traditional businesses, such as grocery, are embracing e-commerce.

Is the online glass half empty for packaging …

The move to online retail in general will continue to have a significant impact on packaging

needs and the traditional converting value-chain constellation. E-commerce packaging must

meet new and different needs, with increased requirements for strength and less investment

necessary in “on-the-shelf” printing. Instead, there is a much greater need to optimize the

overall packaging for last-mile shipments, improve the consumer’s unboxing experience, and

facilitate easy, efficient returns.

The pessimistic view is that e-commerce will radically diminish the traditional role of primary

packaging designed to attract consumer interest in retail stores as part of the purchase

decision. Has this role already peaked, and could it continue to decline until, at some point

after 2030, it will become a quaint relic of the past? Customers are becoming increasingly

digitally savvy, so the argument goes: they seamlessly roam between the best of both online

and offline channels, and they have already made up their minds before ordering or buying an

item. This may well imply a large-scale shift to utilitarian protective packaging only. Moreover,

consumer tools are being developed for easy replenishment and reordering, and such tools

will tend to reduce impulse purchases by consumers in stores.

Forrester

5 major trends will change the packaging industry’s game

over the next 10+ years

SOURCE: McKinsey

Last 5 years Next 5 - 10 years

x x

Growth of e-commerce channel. Grocery e-commerce is growing by ~17% YoY

but still has low market share. More ecient packaging designs will be

required to support growth

Digitization of packaging (IoT). The IoT is opening new ways for companies

to interact with customers and improve the supply chain

Increasing pressure on sustainability. Consumers, CPGs, and governments

are pushing for sustainable packaging (e.g., corporations’ sustainability commit-

ments, increase in regulations and policies – plastic and single-use bans)

CPG and retail margin compression. Many CPGs are losing the battle for shelf

space and margin growth, which is increasing pressure on suppliers such as

packaging manufacturers to slash cost

Rapidly changing consumer and customer preferences. Consumer preferences

are shifting towards personalized, convenient, healthier, and aordable products

that will require creative ways to increase manufacturing exibility to deal

with SKU proliferation

51 32 4Moderate Very high

2 4

1 3

Key trends impacting the packaging industry

Trend impact

Exhibit 2

9No ordinary disruption – Winning with new models in packaging

... or half full, with new avenues for growth?

More optimistically, however, e-commerce also brings with it new and different opportunities

for packaging. In the short term, this is especially true for the next generation of transportation

packaging; for example:

— New volume. At the most basic level, the strong growth trajectory in parcel delivery

implies that the demand for individual packaging will increase, driven by the underlying

growth in e-commerce activity (purchases and returns). This is already benefiting

converters that make flexible packaging (pouches), corrugated boxes, and other

protective packaging used in the last-mile delivery to consumers. In fact, e-commerce

will, through its sheer growth rate, drive half the growth of the European fiber-based

transportation packaging.

— New types of packaging. Different types of packaging will emerge with new features

and characteristics to fit the omnichannel environment; for example, easy-to-pack,

customer-focused unboxing, simple returns, and robust handling in the supply chain – that

is, individual packages able to withstand at least some of the rough handling of shipping

outers and crates. E-commerce requirements for robustness are currently roughly three

to four times higher than traditional standards for package units; for example, packaging is

typically drop-tested from 5 angles for store deliveries but from 18 angles for e-commerce

shipping by some e-retailers.

Additionally, we also expect further disruption in packaging because e-commerce will require

significant supplementary investment in product development and R&D to develop even more

competitively efficient solutions to support this channel’s expansion.

— Next generation of e-commerce transportation packaging. Basic requirements for

e-commerce parcel packaging have so far been quite simple – prevent product damage

and optimize productivity – but the bar is rising quickly. The pressure is especially

noticeable given that e-commerce is highly competitive with very slim margins and

demands packaging that can act as an enabler to improve profitability. Cost pressure has

so far been especially prominent in fostering the use of pouches. They are cheaper and

also faster to fill on production lines, take brand imaging well, and, in many cases, include

design elements for easy returns.

— Convergence of primary and secondary packaging. We expect to see a tipping point

emerge when purchasing volume via e-channels reaches over 20 to 30 percent. As

volume increases, many more product manufacturers will be looking to e-channel-

enabled packaging – in other words, the merging of primary and secondary packaging.

We expect large e-commerce players to lead the way in removing the outer box by

demanding primary packaging designed to allow direct shipment to consumers without

a secondary protective outer layer. For example, the recent US launch of a new laundry

detergent presented a product specifically for online orders. The detergent was

reformulated to be more concentrated, and its packaging innovated to reduce its overall

weight in transit. Handling has been improved with a plastic container fit snugly into a

rectangular board shoe or raft. The hybrid mix of substrates adds another sustainability

benefit by using less plastic and being even lighter than the original version.

— Design for high automation. With the expansion of e-commerce, demand is increasing

for packaging designs that also efficiently meet the needs of advanced/AI-enabled or fully

automated warehousing and filling technologies.

Finally, as e-retailers tackle the challenges of increased shipments of individual parcels and

repackaging, we expect to see changes to the traditional packaging conversion value chain.

10 No ordinary disruption – Winning with new models in packaging

For one thing, business models requiring quicker turnaround and flexible conversion will

encourage increasing use of automation. For another, it is likely that conversion will need to be

more localized – that is, will be increasingly done close to or even in-house at brand owners –

where converters need to be nimble to offer rapid prototyping, fast turnaround, and new

technologies such as digital print.

2. Consumer preference shifts – trend impact shift from three to four

How can packaging help satisfy future demand from consumers in addition to just

convenience?

We see consumer preferences shifting along five main dimensions, demanding more of each.

These are convenience, personalization, “local hero” products, health, and affordability:

— Increase in convenience. The need for convenience in packaging is certainly not

something new; it has been driving innovation and multiple substrate shifts over the past

decade (and earlier). Going forward, we expect consumers to continue to demand an

increasingly effortless and less time-consuming consumption experience.

New product launches around the world specifically target consumer demand for

convenience. The result is relentlessly high and rising requirements for packaging (easy-

open and resealable closures, freshness retention, ready-to-eat/convenient foods/

portability, one-hand use, and single-portion/smaller packs) where consumers are often

unwilling to accept a trade-off for other advantages, such as sustainability. The strong

preference for convenience points to the necessity for stronger packaging innovation to

combine convenience with requirements related to recyclability.

— Increase in variety and personalization. Consumers want more package options and are

increasingly opting for personalization on packaging. Accordingly, to satisfy this demand,

the range of SKUs and number of pack sizes offered have increased exponentially from

traditional channels to today’s online-with-marketplace format. While a store may have a

dozen different SKUs for a category such as “air freshener,” the online-with-marketplace

format often offers literally tens of thousands, augmenting its own selection with third-

party products. Linked to this, FMCG manufacturers are increasingly testing digital

printing for mass customization and increased personalization.

— Less loyal, more local. Consumers appreciate locally manufactured products (“local

heroes”), as it gives them a sense of greater product safety along with additional positive

attributes (for instance, “good for the local economy”). Millennial consumers are especially

likely to seek out the new, different, and authentic, which is not a good fit with the core

consumer goods marketing model. Compared with boomers, millennials are:

• 2.8 times more likely to believe newer brands are usually better or more innovative

• 2.5 times more likely to prefer shopping at independent and specialty stores over

traditional grocery chains

• 3.7 times more likely to try to avoid buying products from “the big food companies.”

McKinsey Millennial Survey, US only

No ordinary disruption – Winning with new models in packaging

— Focus on health and wellness. US consumers are migrating to value/private label and

premium segments, putting pressure on the traditional mainstream segment. As part of this

larger shift in the consumer journey, consumers are increasingly becoming highly aware

of their health and wellness; for example, concern for obesity – particularly child obesity,

desire to stay healthy despite aging, and heightened sensitivity to food safety. Overall, fresh

produce and health-oriented packaged goods are growing far faster than other categories.

As consumers spend more on related products, such as functional foods and organic

products, health and wellness no longer represent a strategic differentiator; they are

a requirement, hygiene factor, or table stakes for major food FMCG manufacturers.

New product launches around health and wellness require packaging that fits and

communicates the value proposition.

— Increased price awareness. Price pressure is a constant of business life, but with a new

twist: disposable income is decreasing for the majority of the population in advanced

economies. Millennials are poorer than their parents. Consumers are increasingly focusing

on price, and their need to economize is fueling market share growth of private-label

products. McKinsey’s Global Consumer Sentiment Survey (2017) shows that 42 percent of

the US consumers surveyed are looking for ways to save money. To cope with increased

price pressure, FMCG manufacturers typically target packaging as a focus for cost

savings. Cost has historically been king, serving as the single most important purchasing

factor for packaging, especially as converters have had less negotiating power given their

smaller size relative to their FMCG customers.

These changing consumer preferences will result in SKU proliferation and product-mix

changes, requiring converters to have more flexible and agile processes to manage shorter

manufacturing runs and faster new product development and time to market.

3. FMCG and retail margin compression – trend impact shift from two

to four

It will not get any easier, but just how severely will margin pressure increase for packaging?

Cost pressure in the packaging value chain will almost certainly accelerate even further.

Consumers’ increased price awareness thanks to the transparency provided by digital

shopping channels is already exerting enormous downward pressure on retail prices. At

the same time, input and resource prices (commodities, labor rates) are expected to rise,

increasing the cost of goods sold. The increasing complexity of products, materials, and

suppliers plus the requirements for higher-skilled labor are also expected to increase the

cost base. Furthermore, the trend toward the automation and digitization of interlinked FMCG

manufacturers and retailers requires not only additional investment, but also write-offs of

physical real estate assets, intensifying cost pressure from yet another direction.

The combined effect of these shifts will put intense, relentless pressure on the income

statements of FMCG manufacturers as well as retailers. For example, if not actively managed,

these pressures could erode the FMCG manufacturers’ margins almost entirely, with net

profits declining from around 15 percent to 0 to 5 percent, with corresponding pressure

passed back upstream to converters. Margin compression will require strong collaboration

between converters and packaging customers to develop creative solutions to reduce costs

without compromising convenience features and, increasingly, sustainability. Leading FMCG

manufacturers also increasingly expect to have global partners for the majority of their packaging

volume, which will require further consolidation efforts and the formation of a global presence.

12 No ordinary disruption – Winning with new models in packaging

4. Increasing pressure on sustainable packaging – trend impact shift

from two to four

Pressure to reduce packaging waste has risen sharply, and so have actions by FMCG

manufacturers, retailers, and legislators. How should packaging companies manage this

challenge? FMCG manufacturers and retailers are experiencing severe pressure regarding

their plastic packaging choices. Visceral images of ocean plastics have stirred up consumer

sentiment around the world, and regulators are responding:

— Public awareness of plastic leaking into the environment has increased significantly over

the past 12 to 15 months to an all-time high (Exhibit 3).

— Most consumers claim to be highly concerned about the environment, with the highest

rates registered in emerging economies.

— Governments have started responding to public outcry and are acting to increase recycling

and put in place selective regulations to reduce plastic use. In the US, 16states so far

have enacted statewide plastic bag legislation.

As a result, there are currently about

52 approved bills in the US compared to 30 in 2015, which mostly revolve around banning

single-use plastics, replacing plastics, and increasing recycling targets.

In addition, 90

plus similar bills are pending to be approved over the next 3 years.

Europe and India are also

pushing toward bans on single-use plastics, as announced in 2018. For example, the EU is

targeting plastic beverage bottle recycling at 90 percent by 2029 across member states.

National Conference of State Legislatures and press search

Ibid.

European Commission

100

15132004 05 06 07 08 09 10 11 12 14 16 17 18

USA UK

Google trends on “plastic waste”

Indexed use of search term over time

24.6% of UK consumers expressed

“extreme concern” about plastic

packaging in grocery

Feb 2018, The Grocer

... and companies and authorities

are nally taking action

Nine out of ten people call for

“plastic-free aisle” in supermarkets

Jul 2017, Independent

Consumer goods groups join war

on plastics

Jan 2018, Financial Times

EU moves to ban single-use plastics

May 2018, Reuters

SOURCE: Google trends; press search

Public awareness of plastics leakage into environment has increased

signicantly over the past 12 - 15 months to an all-time high

Consumer concern is high …

Exhibit 3

13No ordinary disruption – Winning with new models in packaging

This increasing pressure from the public, regulators, and the industry itself encourages

companies to move toward more sustainable packaging solutions. Consequently, both

top retailers and FMCG manufacturers have made bold sustainability declarations

and

commitments for the years to come; for example:

— Reduction of packaging material in terms of size, weight, and thickness – varying from

20 to 33 percent in terms of weight

— Increased recyclability, reusability, or compostability of packaging material – with most

targets aiming at 100 percent

— Increased use of recycled plastic in packaging material – ranging from 9 to 100 percent

depending on material properties

— Further commitments on designing for recyclability and educating customers on proper

waste management.

However, while FMCG manufacturers and retailers may have pursued a rigorous packaging

sustainability agenda with a focus mainly on “lightweighting,” new challenges around waste

management and recyclability are posing challenges that exceed the capabilities of the usual

tools and strategies. The largest and most troubling mismatch is arguably between stated

desires for sustainability and consumers’ willingness to pay. Most evidence indicates that, so

far, consumers’ willingness extends only to a low premium.

For packaging companies, pressure for sustainable packaging will require investment and a

large scale-up of innovation capacity to reduce the environmental impact of packaging, comply

with regulations, and satisfy consumer preferences. One implication, for example, is that more

converters will supply fully recyclable packaging with little compromise on material barrier

properties; another is that more packaging will have high recycled content. Efforts are already

underway, and several packaging products are now being introduced as part of fully sustainable

systems. Going forward, packaging companies will need to focus more than ever on cost-

effective sustainability solutions. As the optimal combination of economics and environmental

protection might, in many cases, lead back to substituting plastics for other substrates, the

industry may need to consider conducting more extensive public education programs.

5. Digitization of packaging – trend impact shift from one to three

Will there be any room left for “dumb” packaging in the future? Over the coming decade,

intelligence and digitization in packaging – meaning technology integration and use of new

technologies – will increasingly be aimed at enhancing customer value and pursuing new

business areas.

In general, intelligence and digital in packaging offer a broad range of growth opportunities.

Over the next 10 to 15 years, solutions that integrate digital technology into packaging

substrates will likely also change the way consumers interact with packaging. Here, digital

devices can add value for consumers by boosting packaging’s power as a platform for

information and brand messaging. Multiple technologies are available to facilitate such

interaction (for example, QR codes, RFID, and NFC). Over the next decade, we expect to see

their increasing adoption for use in packaging to interact with consumers. Such interaction

helps differentiate brands and makes them more consumer-centric, thereby uncovering

unmet needs by segment, assessing willingness to pay, gaining early signals on new

packaging trends, and so on.

Derived from company public sustainability reports

No ordinary disruption – Winning with new models in packaging

In the shorter term, we see more potential for packaging digitization to create value directly

for FMCGs and retailers; for example:

— Developing track-and-trace solutions at the packaging-unit level to enable complete

supply chain traceability (for instance, for product recalls, food safety, quality tracking)

— Conducting continuous, integrated demand planning (for example, to optimize production

runs and inventory using customer and third-party data)

— Digitizing customer interactions to deliver a better customer journey, increase sales, and

improve service, particularly for small-scale customers

— Increasing customer collaboration (for instance, co-development/co-design with

customers)

— Pursuing new areas of business with opportunities to serve a broader range of smaller

customers directly and efficiently (for example, developing an e-platform where smaller

customers can order their packaging directly from the converter and not go through the

traditional distributor channel).

Converters’ adoption of such digital solutions with business partners will be accelerated by

the effect of increased margin compression on FMCG manufacturers and retailers, and by the

development of the e-commerce channel with growing automation and use of AI, which will, in

turn, require more intelligent packaging. Application of digitization in packaging is, however,

still in its infancy and will require further economies of scale to make costs competitive for

unit-level implementation.

15No ordinary disruption – Winning with new models in packaging

All main improvement levers offer some opportunities – the question here is how to line them

up or combine them effectively.

The breakthroughs achieved by packaging industry winners as they navigate the change

journey over the coming decade will be many and various. Some that seem audacious or

nearly impossible will result in great rewards and much acclaim, followed by widespread

imitation. Others may be achieved with the help of intuition, conferring a strong competitive

edge that is hard for rivals to unlock. Still others will be the result of close study of the

substrate’s physical properties and how they can be used to good advantage, including

production and supply chain features that may be hiding in plain sight. In turn, all this

packaging-specific knowledge will need to be harnessed to the machinery of a new business

model that builds on five elements – innovation, agility, asset and resource reallocations

(including M&A), collaboration, and sustainability – to meet the demand for lower cost and

greater value for the customer and consumer.

These five game-changing trends will create different tailwinds and headwinds depending

on a company’s substrate focus. Most favor continued plastics substitution but only if the

makers of plastic packaging can create more sustainable circular or recyclable offers.

For example, innovation that results in a cost-efficient, easily recyclable flexible pouch

with appropriate barrier and aesthetic properties will likely win big. Similarly, improving

recyclability of polyethylene-coated paper (such as coffee-to-go cups), which today has

very low recyclability properties, will be another area requiring collaboration across the value

chain. Efforts are already underway, as illustrated by a recent contest sponsored by major

coffee-to-go retailers that received more than 400 entries and yielded a dozen finalists, who

are obtaining funding to develop their solutions, ideally to commercial viability.

Converters that harness knowledge of the trends, substrates, and processes along the value

chain to a new business model will have the best chances of preserving value and capturing

growth. As resources and attention are scarce, we suggest focusing on the five elements

described above to develop a winning formula for lower cost and/or greater value for the

customer and consumer.

Devising a winning formula for the change journey will involve both deep insights into substrate

features (Exhibit 4) as well as answers to questions about how a company can revamp its

approach and strategic focus to best exploit these features for a given end use and geography,

and thus follow these trends to success.

3 The change journey to preserve

value and capture growth

16 No ordinary disruption – Winning with new models in packaging

Exhibit 4

ILLUSTRATIVE EXAMPLES

Trend aspect examples

Paper

and board Plastics

Metal Glass Examples

Growth of

e-commerce

Packaging optimized for

omnichannel

+ + – –

Need for robust packaging

benefits for flexible plastics

Convergence of primary and

secondary packaging

+ + – –

Overall less material used but

upside for flexible plastics/

board

Strong increase in parcel

shipments

+ +

Corrugated and flexible

pouches gaining

Small and close converting

– – – –

Challenge for overall

packaging asset footprint

Rapidly

changing

consumer

and

customer

preferences

Mass personalization

Plastic highly customizable

for differentiation

Preference for local products/

growth of small businesses

+ – +

Natural/organic trend in

favor of glass and fiber

Health and wellness trend

+ – +

Increase in convenience

– + – –

Plastic highly customizable

for differentiation

Increased price awareness

– + + –

Plastics/metal low-cost

options

CPG and

retail margin

compression

Transportion and handling

costs

+ + – –

Retail-ready packaging needs

benefit for paper board

General shift to cheaper

materials

– + + –

Increased use of low-cost

packaging

Increasing

pressure on

sustainable

packaging

Increased policy pressure for

sustainability

– – + +

Design for recycling/

reusability

– + +

Metal and glass highly

recycled materials

Increased recycled content

+ + +

Metal, glass, and board

already large users

Food contamination concerns

(e.g., BPA, mineral oils)

– – – +

Recycling systems in place

+ – + +

Compostability

Paper with no barrier

coatings and PLA plastics

Digitization

of packaging

(IoT)

Digital printing

+ +

Large billboard surface in

favor of board and metal

AR- and AI-enabled

packaging

RFID/NFC integration into

material

Integration possible as early

as the paper-making stage

1 Includes both rigid and flexible plastic packaging (and multimaterial plastic laminates)

SOURCE: McKinsey

Mega trends will affect packaging substrates in different ways

Substrate groups and how they could grow

Even with disruption, all the main consumer packaging trends continue to favor plastics

over other substrates in most dimensions – apart from sustainability. In the context of this

increasingly influential trend, paper and board, metal, and glass have stronger recyclability and

renewability profiles. Glass, as in the past, has some premium association, and even kraft paper

has gained a newly found status as a signal for health and wellness with its eco/natural look.

Rigid and flexible plastic packaging – sustainability’s surprise winners?

How can plastics regain customer and consumer trust and acceptance?

While consumer trends and the need for convenience have historically favored plastics,

society has long had a love-hate relationship with the substrate that is synonymous with

“artificial.” Plastics now face headwinds from much stronger trends toward sustainability,

with a noticeable surge over the past 15 to 18 months to an all-time high in negative response.

And yet, finding the right focus could still help plastics emerge as the surprise winners of the

sustainability trend.

The mounting pressure to reduce or avoid plastic waste has unleashed action on multiple

fronts: programs and policy changes have been announced and are being implemented

by FMCG manufacturers, retailers, and policymakers. To navigate through the challenges,

converters should consider four main levers:

— Reduce plastic material. Reduce weight and excessive packaging further by using next-

generation lightweight materials and simplifying material formulas and packaging designs.

— Improve loops in the value chain. Increase recyclability/reusability, boost recycling, and

raise the share of recycled materials used in packaging.

— Look for truly biodegradable plastic materials (to reduce the impact of any leaked

plastic packaging) but also so as not to disrupt, contaminate, or undermine other recycling

streams of plastics.

— Innovate to create products and technology road maps that address current

sustainability shortfalls – for example, a flexible pouch that is fully recyclable but still has

high barrier properties compared with multilayer solutions.

Plastic packaging will likely continue to enjoy an advantage into the next decade because the

obstacles to switching to alternative materials are still significant. These hurdles include cost

position, weight, barrier/material properties, and currently installed filling lines at customers.

With the right collaboration and focus, there will also be tailwinds for monomaterial plastics

(PET/HDPE

bottles and high-barrier monomaterial plastic films). Such plastic packaging

is already highly recyclable and can incorporate more recycled content, especially for

rigid packaging formats in nonfood applications. With current customer sustainability

commitments, such packaging could be favored by FMCG manufacturers and retailers

that are giving priority to recyclability. Additionally, other substrates such as plastic-paper

laminates will struggle to meet some of the shelf life and barrier requirements. Thus, assuming

closed loops (a circular economy approach with partnerships across the value chain), higher

recyclability, and high use of recycled content, plastic could become a winner – the objective

of initiatives to create and market “better plastics.” Moreover, with plastic packaging overall

being a low-cost, lightweight, and highly formable substrate with strong barrier properties, it

could also benefit from other trends, such as the demand for e-commerce-ready packaging

HDPE: high-density polyethylene

No ordinary disruption – Winning with new models in packaging

or particularly easy-return pouches. However, to succeed on this path, converters will need

both significant collaboration with customers and other stakeholders (recycling system firms)

and successful innovation – particularly of material formulas and package design – likely

backed with public outreach to educate consumers about the relative sustainability benefits

of new formulations and how to recycle.

Paper and board packaging – innovation hat tricks may deliver the

winning edge

What is the next big thing in paper and board: the convergence of primary and secondary

packaging or captive converters – or both?

Paper and board packaging materials are already benefiting from developments in

e-commerce, which have increased demand for secondary protective packaging. Changing

consumer perception has also boosted paper and board for primary packs; for example, the

health and wellness trend has adopted “brown as the new black” or rather “the new white,”

associating purity and authenticity with brown paper/eco-looking packaging.

Along with continued growth, there will also be challenges. As the volume of products supplied

through the e-commerce channel grows, it will increase pressure to develop e-commerce-

ready packaging that can be filled and shipped directly on its own. Such solutions would

basically merge primary and secondary packaging, potentially reducing the need for protective

fiber-based packaging (corrugated, protective packaging and wrapping). In addition, large

e-retailers are testing new formats for converting their transport packaging in-house or nearby

to minimize void fill and improve efficiency. If these experiments develop to a large scale, the

result will be a significant relocation of converter assets. From a sustainability standpoint,

plastic-coated paper is difficult to recycle; hence, given FMCG commitments, we expect

to see more demand for paper solutions that offer both strong barrier properties and high

recyclability and, in some cases, even high recycled content. For example, enabling and scaling

up use of paper cups with a natural barrier coating that is fully recyclable in the fiber waste

stream is a great opportunity to improve sustainability within single-use packaging.

The trends also offer new potential upsides for paper and board. With the right innovations,

paper and board packaging could help customers off-load some of the effects of margin

compression. New comprehensive solutions are needed; for example, shelf-ready packaging

for the “future retail store” that works both in automated restocking and fits future store setup

and layout. If innovation can perform a hat trick – improve barrier properties, keep or even

increase running speeds on customers’ filling lines, and do so at a competitive price –

it would likely increase demand for fiber across end-use segments. Similarly, demand for

large billboard surfaces could favor paper and board as a substrate able to integrate new

IoT technology (NFC, RFID, and QR codes) to enhance consumer interactions regarding

consumer communication and food safety, for example. With innovation, it should be feasible

to integrate such IoT technology into the material as early as during the paper- or board-

making process.

19No ordinary disruption – Winning with new models in packaging

Metal and glass – leaving no stone unturned

Will store shelves see a revival of glass and metal?

Metal and glass packaging have historically suffered from the growth of plastics, driven

by cost and consumer convenience. New growth opportunities could emerge – but not

without concerted action and innovation by these two industries. With the emergence of new

trends, there are opportunities to reposition glass and metal packaging by highlighting their

strongest features: robust barrier properties, high recyclability, potential for reusability, and a

large share of recycled content. These growth opportunities can be spotted by taking a closer

look at ways to match these features with applications that demand or need them:

— Superior recyclability, reusability, and high amount of recycled content. These

attributes will offer by far the biggest opportunity for both glass and metal substrates.

Consumers and other stakeholders are pushing FMCG manufacturers and retailers to

offer alternatives to plastics and packaging materials. In addition, tighter “reuse” loops

could further benefit glass and metal packaging as refillable containers.

— Small containers with superior consumer perception and shelf life. “Good things come

in small packages,” as the saying goes. With the right focus, cans, decorative tins, and

glass can be positioned as the premium alternative to shelf-stable foods and other goods

to build on the health and wellness trend. A related avenue for growth is smaller-sized

containers, where glass and metal have barrier advantages over plastics, and metal offers

similar printability.

— Lowest-cost metal packaging options. Metal cans in particular typically remain a low-

cost option for customers. The next generation of packaging down-gauging could fuel

stronger competition that will boost metal relative to plastics.

Without innovation to capture opportunities created by these trends, metal and glass are

likely to continue losing share to the other substrates. However, with focused actions,

customer collaboration, and strong innovation momentum, converters can harness aspects

of all the trends to recharge demand for metal and glass.

To come up with a winning formula, converters are challenged to think creatively: how can

substrate properties, from composition to “look and feel,” and their production and logistics

processes, locally and globally, best address the trends to give their packaging a competitive

edge? They also need to act with controlled urgency: how can a converter quickly align or

realign plans for packaging with people and financial resources and vice versa, to advance

swiftly on the journey in areas that will lay the foundation for success?

20 No ordinary disruption – Winning with new models in packaging

Getting started on the change journey

Packaging companies have a window of opportunity to revamp their approach and strategic

focus in order to preserve value and growth. Through our research, we believe future winners

in packaging will be those converters that develop a new business model based on the five

key elements described above: innovation, agility, asset and resource reallocations (including

M&A), collaboration, and sustainability. These will be integral parts of the arc or bridging

mechanism needed to achieve success.

Building readiness for ordinary and extraordinary disruptions

In the following, we will take a look at each element in turn.

Significantly increase investment in R&D and innovation through organic efforts and

partnerships to change the product mix and keep it competitive. What can converters

and their partners come up with to address ever-more demanding consumer preferences,

sustainability requirements, and e-commerce needs? Over the past five years, top flexible-

packaging companies have been spending most on R&D (approximately 1.5 percent as a share

of revenue), while other substrates such as rigid plastics, metal, and glass have been trending

at around 0.5 to 0.8 percent, and paper and board significantly lower at 0.25 to 0.3 percent.

Going forward, we would expect that packaging companies at least need to match the spend

of flexible plastics and likely more will be required to excel in new areas around technology

integration, recyclability, and recycled content. Hence, it will not be enough just to innovate

based on cost and convenience; in addition, step change innovations in material, design, and

digital will be needed. Rising pressure in sustainability and e-commerce will also change the

product mix; staying ahead or even just keeping up will require strong partnerships across the

value chain with key customers, upstream suppliers, and third-party research institutions.

More agile processes to address SKU proliferation driven by e-commerce requirements

and consumer preferences. Demand for personalization, in particular, both on the store

shelf and in unboxing online purchases, will require more agile supply chain and operations

processes to respond to increasing pressure from consumers, FMCG manufacturers, and

retailers for more novelty and delight at less or no extra cost.

M&A and asset reallocation as a response to e-commerce growth, consumer preferences,

and FMCG requirements. As in the past but with higher intensity, converters will continue to

pursue strategies such as expansion, vertical integration, and reallocation of assets to stay

relevant. In paper and board, in particular, converters should keep an eye on the trend to captive

converters downstream at retailers’ sites and potential ownership shifts. Thorough preparation

for any M&A and asset decision will be crucial in other segments as well. In North America,

for example, the fastest-growing segments, such as healthcare and cosmetics packaging,

are among the smallest, suggesting a roll-up strategy and diversification via mergers and

acquisitions. In plastics, vertical integration should be considered to secure long-term access

to recycled feedstock.

Stronger collaboration with FMCG manufacturers, retailers, and suppliers to preserve

long-term relationships. Collaboration has always been essential given converters’ midfield

position in the value chain and typically much smaller business size. Going forward, the

struggle with margin compression practically demands that existing relationships will need to

be strengthened and new long-term partnerships established with suppliers and customers.

These moves are critical to reduce frictional losses across organizational interfaces and to

develop other creative ways to maintain long-lasting revenue and profitability streams. For

Capital IQ

No ordinary disruption – Winning with new models in packaging

example, we already see plastic packaging companies partnering with customers, recycling

facilities, and research institutes to enable both quality and quantity of recycled plastic

feedstock in their packaging.

Understanding the future of sustainability and its impact on the current and future

product mix. This implies actions to prepare for shifts in the product mix to address trends in

regulation, initiatives by FMCG manufacturers and retailers, and activism that alters consumer

preferences. To succeed in the sustainability pressure front, converters will need partnerships

to create more circular value chains to eliminate waste and to be assured of improving

packaging product experience through improved materials and design.

Simultaneously, packaging companies will need to think through the impact of technology and

partnering with technology companies to win in the IoT space.

We recommend asking five key questions:

— Are my investments in innovation in line with shifting consumer trends and e-commerce

requirements going forward?

— Are my supply chain and manufacturing processes agile enough to address increasing

SKU proliferation and consumer personalization preferences?

— What do I think of M&A and asset decisions driven by a potential change in the future

product mix? What are my options as an acquirer and/or target?

— How can I better partner with FMCG manufacturers, retailers, and suppliers to create

stronger and longer-term value-based relationships that will foster revenue and profitability

growth (ideally for all of us)?

— What product and technology level sustainability investments am I or should I be making to

deal with increased demand with regard to packaging as part of product sustainability? What

partnering opportunities are there for circular recycling, including renewable materials?

Looking outside of the packaging box

While searching for answers to these and related questions, companies will benefit from

studying market and competitor analyses as well as looking outside the packaging box. This

is due to the fact that converters and packaging designers generally apply the Osborne or

SCAMPER design checklists

– as in, for example, plastic detergent bottles combined with

cardboard shoebox “feet,” a new design hit because the hybrid reduces material used overall

while becoming e-commerce friendlier. Most companies also have at least loose relationships

with relevant university departments and start-up centers.

Tried-and-tested design approaches – substitute, combine, minimize, maximize – will continue

to deliver valuable sparks for substrate innovation and process optimization. However, ideas

should also be gathered by looking at product and process innovation in other industries and

activities – not only among FMCG manufacturers and retailers, who will certainly have ideas

and wish lists for packaging, but also beyond. As a thought starter, in a classic heavy industry

such as steel, the postindustrialization era has brought forth the electric arc furnace minimill, a

radically local and recycling-friendly change in the technology and business model that depends

almost exclusively on scrap steel. Are there analogies here with fully recycled packaging? Or in a

different vein, with captive converters embedded within leading retailers’ distribution centers, or

for the stepping stones toward setting up a distributed local-global presence?

On Alex Osborne’s list, see, for example: https://www.mycoted.com/Osborn%27s_Checklist; SCAMPER is a 1971

adaptation of Osborne’s 1942 list (Substitute, Combine; Adjust; Modify, magnify, minify; Eliminate; Reverse, re-arrange),

see: Eberle, Bob (1996). Scamper: Games for Imagination Development. Prufrock Press Inc.

No ordinary disruption – Winning with new models in packaging

It is also critical to look at your company from a private equity investor’s perspective, whether

publicly listed or a closely held family operation. Investors can see that the packaging industry

was growing moderately in the past decade and is likely to do so again, with some hot spots

driven by the society’s shift to e-commerce. While investors differ in assessing challenges

such as shrinking disposable income, new consumer preferences, or environmental

regulation, they all look at a company’s position relative to competitors in the segment. How

well can your company capture slivers and chunks of the packaging market profitably?

Relative to your top competitors? What plans do you have for innovation and for capital

allocation to expand organically and with partners or acquisitions? Investors assess the

answers compared to past financial performance as well as current strengths and the outlook

(for publicly listed companies) for returns to shareholders.

  

In the words of Alfred Marshall, whose 1890 book Principles of Economics continues to

influence value creation in business today, it is useful to have both a language to describe

the parts of the problem of finding a winning formula as well as the machinery for handling

these elements. That said, it is essential for managers to study the particular problems and

their actual conditions in the “pressure-verse.” Otherwise, knowing the language of the

trends and the machinery of coping with their effects will be little better than having built

“a derrick for sinking oil wells [...] where there are no oil-bearing strata.” In the decade up to

2030, packaging companies that assess the strategy cube of market segments, end uses,

and substrates in light of the trends and the key elements of a winning formula, and revamp

their approach and strategic focus accordingly, will increase their chances of landing their

packaging in profitable growth-bearing markets.

23No ordinary disruption – Winning with new models in packaging

About the authors

David Feber is a Partner in McKinsey’s Detroit office, Daniel Nordigården is a Senior Expert in

the Stockholm office, and Shekhar Varanasi is a Partner in the Silicon Valley office.

The authors wish to thank Anna Granskog, Oskar Lingqvist, Nick Santhanam, Peter Berg,

Richard Sellschop, Mili Bustamante, Suku Ponkshe, Abhinav Goel, Stefan Rehbach, and

Kristen Jennings for their contributions to this article.

24 No ordinary disruption – Winning with new models in packaging

Sources

Charles Duhigg: The Power of Habit. Why We Do What We Do in Life and Business, Random

House, 2012

EAF minimills: McKinsey report (China)

Euromonitor

European Commission

Forrester Data: Online retail forecast, 2018 TO 2023 (US, Western Europe, and Asia-Pacific)

McKinsey Millennial Survey (2016), US only

McKinsey Consumer Survey (2018): Sustainable Packaging – attitudes and behaviors;

n = 1,000 per country

National Conference of State Legislatures

On Osborne’s list, see, for example: https://www.mycoted.com/Osborn%27s_Checklist;

on SCAMPER, a 1971 extension of Osborne’s 1942 list (Substitute; Combine; Adjust; Modify,

magnify, minify; Eliminate; Reverse, re-arrange), see, for example: Eberle, Bob (1 January

1996). Scamper: Games for Imagination Development. Prufrock Press Inc. ISBN 9781-

882664245.

Richard Dobbs, James Manyika, and Jonathan Woetzel: No ordinary disruption, PublicAffairs

(May 12, 2015)

Smithers Pira: The Future of Global Packaging to 2022 (December 2017)

Source of Marshall quote is Principles of Economics.

Full quote: I admit that these terms and the diagrams connected with them repel some

readers, and fill others with the vain imagination that they have mastered difficult economics

problems, when really they have done little more than learn the language in which parts of

those problems can be expressed, and the machinery by which they can be handled. When

the actual conditions of particular problems have not been studied, such knowledge is little

better than a derrick for sinking oil wells erected where there are no oil-bearing strata.

– Alfred Marshall (in the public domain)

25No ordinary disruption – Winning with new models in packaging

May 2019