Each week brings encouraging developments about vaccines to fight COVID-19, but leaders in the flexible packing industry haven’t been waiting for that relief to start planning for 2021 and beyond. Even so, the experts suggest that the outlook for next year must be viewed through the lens of how the pandemic disrupted just about every aspect of doing business—sometimes offering adjustments that will strengthen their operations.
“A challenge we see in 2021 is understanding which emerging trends, habits, and behaviors are short term and which are here to stay,” says Nestor de Mattos, North America commercial vice president for Dow Packaging and Specialty Plastics, Midland, Michigan.
“The environment is ripe for consumer products companies to source their flexible packaging domestically and reduce their exposure to offshore suppliers.”
—Daniel C. Staker, executive vice president at Plastic Packaging Technologies, LLC
For all the disruption caused by the crisis, the challenges created some lessons and opportunities that will become part of long-term strategies. Several leaders, including de Mattos, note that 2020 required their companies to become more agile and to take decisive actions to increase competitiveness and better serve customers. That flexibility was needed in numerous areas, including operations and financials.
“The pandemic reminded us how important it is to have strong partnerships with our customer base,” de Mattos says, offering as an example GPS tracking that was introduced to better monitor deliveries. “This pandemic has reinforced just how important it is to be nimble and quick to react to changing market conditions.”
Thomas Morin, president at TC Transcontinental Packaging in Montreal, says his company learned to develop backup systems in just about every area, which will serve the company for years. That included backups in the supply chain, as well as with customers, wherever there wasn’t a redundancy for the company with operations in Canada, the U.S., and Latin America.
Industry leaders acknowledge that the future holds a lot of unknowns, so the solutions involve how to best anticipate changes and respond accordingly.
“The biggest question will be the potential change of the business model and our capability and possibility to maintain the past business model of service-intensive customer support,” says Guenther Hering, vice president in the North Carolina office of Flexible Packaging NA, Henkel of America. “Will companies consider replacing face-to-face time with video conferencing? How will this impact the service level and speed of implementation of new technologies? Are there new regulations of hygiene and cleanliness for packages and other materials in the future?”
Some of those answers will depend upon how the consumers and customers respond, not only during the pandemic but long term, he and others say. Indeed, companies worldwide realized quickly that they needed to intensely focus if they were to stay competitive, if not survive.
“Responsive and accurate forecasting has always been a priority for our business,” says Laurel Spencer, vice president, sales and marketing, at Amcor, a global leader in packaging. “During the pandemic, we accelerated and increased the frequency of customer check-ins. This has delivered updated forecasts—daily in some cases—monitoring marketplace activity and making needed adjustments in our operations so that our customers can reliably get their brands to the shelf.”
Amcor, which has operations in more than 40 countries, is taking the same approach with suppliers.
“The results have been remarkable,” Spencer adds. “These process improvements will continue to be a focus for us as we move forward.”
She points out that the pace of change increased during the pandemic and that Amcor continued to concentrate on innovation and research and development, too.
“We recently announced significant investments in R&D and our capabilities,” Spencer says. “Our task is to always provide our customers with more sustainable options that help them achieve their strategic goals. If we can advance our sustainability position and accelerate progress, that’s also great—it helps us grow together with our customers.”
Sustainability
Some industry observers note that sustainability issues have remained critical during the pandemic but became less of a concern as customers looked to safety and reliability in packaging for the short term. As 2021 nears and a vaccine becomes closer, the focus on sustainability will accelerate, the leaders suggest.
“One of the larger topics for the industry is the ‘bad reputation’ with respect to environmental impact,” Hering says. “It would be good to collect our thoughts on how we can change this reputation and become a preferred consumer choice for an environmentally friendly package.”
In the meantime, he says, questions remain about how consumers and the markets will react.
“Is the consumer market back to normal or could we see large shifts of consumer behavior due to the COVID impact?” Hering asks. “All large companies established sustainability goals in a very aggressive timetable. Are the pressures of these goals becoming even larger? And how does this impact any other important aspects of our business?”
The issue of reputation has been a tough obstacle to overcome, even though the industry has worked on it for years and will continue to do so, observers say. Although the pandemic temporarily shifted the focus of many companies, the issues around sustainability remain a top concern.
“The importance of single-use plastics in ensuring safety and health has been clearly demonstrated in this crisis,” says Dhuanne Dodrill, CEO of PAXXUS in Addison, Illinois, which specializes in flexible health care packaging. (Learn more about Dodrill on page 38 in the FlexFocus™ section.) “Building on this, we need to shift the narrative from ‘banning plastics is the solution to plastic waste’ to solutions that create an infrastructure to gather and recycle flexible packaging.”
Others agree that the focus on sustainability and a circular economy will accelerate.
“As I look forward, I know I’m in good company in dreaming about a time when the COVID-19 crisis is under control.”
—Laurel Spencer, vice president, sales and marketing at Amcor
“The world changed quickly in 2020, but we continue to maintain our focus on long-term goals as we manage short-term impacts,” says de Mattos. “We haven’t just maintained our commitment to long-term environmental sustainability during this uncertain time. We added to it, with new circular economy and climate-protection targets focusing on reducing carbon emissions and eliminating plastic waste.”
Coming out of the pandemic, the industry should reinforce the role that packaging plays in protecting products while providing the most sustainable solution possible, Spencer says. And, as companies think about end users, it will be increasingly important for packaging suppliers to advocate for consumer recycling, she adds.
Raw Materials
In the months after the pandemic began, an increase in the cost of raw materials, such as resins and inks, started to flow through the supply chain, which some observers expect to see continuing in 2021.
“This is something that we continue to monitor,” Spencer says. “For our part, we believe that our broad global footprint and industry-leading purchasing power will minimize cost increases to our customers, which is always a focus for them.”
Hering says that the issues with raw materials might linger well into 2021.
“The global supply chain of raw material and intermediate material that are critical to the industry can still be impacted negatively,” he says.
Morin thinks some of the increases, such as with resins, were more out of reaction to the pandemic than with normal concerns over supply and demand, which usually drives price hikes. For example, the price of oil was dropping while the price of resins was rising, which he had not seen before. “This came as a big surprise, to be honest,” Morin says.
Daniel C. Staker, executive vice president at Plastic Packaging Technologies, LLC, based in Kansas City, Kansas, expects continued uncertainty in raw material costs as demand remains strong, especially as companies evaluate their supply chains to mitigate potential supply disruptions in the future. Staker is among those who think that some of the disruptions could be solved in ways that will make the domestic economy stronger. In fact, he says, “Made in the USA never sounded so good.”
“Without question, companies are evaluating their overall supply chains and sourcing strategies to ensure they mitigate the risk of supply disruptions while leveraging tools to create more transparency with their customers and suppliers,” he says. “Yes, domestic producers need to focus on continuous improvement to reduce costs and manage lead-times, but the environment is ripe for consumer products companies to source their flexible packaging domestically and reduce their exposure to offshore suppliers.”
The pandemic highlighted vulnerabilities in the supply chain globally, Dodrill says, and she suggests that companies worldwide will be looking for ways to streamline operations and to stay local or regional in doing so.
“As companies perform risk assessments to evaluate their exposure, they will be simplifying and reducing supply chain complexity,” she says. “Domestically, we’ll be seeing more onshoring, while international companies will be looking for regional sourcing.”
Staker—who has been in the flexible packaging industry for more than 18 years—remains optimistic about 2021 and beyond. His company expects continued strong growth, with a greater acceleration of e-commerce applications and retail packaging.
“It may not have been fully evident for everyone as we led our way through the chaos and craziness of the last number of months, but there is a growing realization of the important benefits of flexibles that likely outweigh some of the perceived negatives and, consequently, a renewed appreciation for flexible plastic packaging,” Staker says. “As such, there is no question that the best days for this industry are ahead of us.”
Spencer says a lot still needs to be learned, especially since a vaccine still is on the horizon.
“As I look forward, I know I’m in good company in dreaming about a time when the COVID-19 crisis is under control,” she says. “At that point, we’ll be looking back to assess how we managed through the pandemic and what we can learn from it to be even more prepared to support our customers and their businesses. For Amcor, we want to understand the consumer trends we saw and how that improves our customer and supplier partnerships for the future.”
Thomas A. Barstow is senior editor at FlexPack VOICE™.