Packaging MEA team gathers prominent views and perceptions from across the packaging value chain even as the FMCG and other sectors of the industry makes a stand against Covid-19 pandemic
The coronavirus pandemic has dampened the spirits of a hitherto burgeoning industry, with Q1 2020 being the toughest quarter for manufacturers since 2009.
Amid the turmoil, there seems to have been a huge shift in consumer choice and preference as we see a sudden surge in demand for personal care items, especially hygiene products and healthcare supplements. And retail and consumer industry experts reckon this trend will continue long after the situation improves.
“In the longer run, the Covid- 19 recovery is likely to result in a more permanent shift in consumers’ attitudes and shopping behaviour, especially in urban areas, with increased usage of home and personal hygiene products and an accelerated shift to digital purchases,” said market research firm Euromonitor International.
Furthermore, while the crisis has negatively affected many industries, packaging is one of the few to have actually benefitted.
With most countries placed under some form of lockdown measures, consumer demand for necessary supplies such as medicines, dairy products, food, sanitisers, facemasks, disinfectants, and many more has been high. Production of these goods has been ongoing at a higher rate than ever, and they all need packaging.
As for the food and beverage sector, brand owners, packaging converters and print production have all seen sustained business levels, while some leading converters’ production levels have spiked in recent weeks, particularly in the food packaging sector. Interestingly, shelf-ready packaging for the retail sector and on-the-go groceries is moving fast with shelves emptying and restocking quickly, creating a challenge for the supply chain.
Packaging in the pandemic
We have clearly seen an upsurge in demand for packaging materials during this pandemic, especially for food packaging and shelf-ready packaging, with a major upswing for goods such as hand sanitisers, hygienic wipes, non-perishables, canned foods and pet food.
The health crisis has triggered a debate over safety versus sustainability. Prior to the pandemic, the world was trending towards more sustainable options such as biodegradable and eco-friendly packaging solutions and replacing plastic materials and single -use packaging. However, Covid-19 has put plastic back in business. Lots of companies which had implemented or planned to introduce alter- natives now prefer plastic, as it offers higher safety standards as well as being more affordable at a time when many businesses are suffering.
Whereas plastics had until recently been cast as the bad guy, they are now literally lifesavers in some instances, considering their presence in scrubs, syringes, hand sanitisers and hand wash, not to mention medicine pack- aging. Many places have now lifted their bans on plastic containers, dis- posable cups, stirrers and straws, since reusable alternatives carry viral transmission risks. Even after the pandemic passes, the public trend is expected to shift back towards plastic as people recognise it offers greater hygiene.
Amid the current crisis, nothing is more important than maintaining safety and hygiene. And after all, how do you supply food without a container? With some countries implementing nationwide closures of restaurants, those food businesses which are continuing to operate have shifted their model to takeaway and delivery services. Food sold in this manner requires good creative pack- aging to ensure it is safe, hygienic and fresh. Furthermore, even single-use plastics have made a major comeback as studies have shown reusable bags can carry the virus.
As the saying goes, where there is crisis, there is opportunity, and that looks true of packaging in the time of coronavirus. Investors are likely to place greater value in packaging, and we are also likely to see consolidation in the market as businesses come together to survive and strengthen their market position. There has been a sudden upsurge in e-commerce, with packaging serving to protect and preserve goods as they make their way along the supply chain. Without appropriate packaging, the food we survive on in today’s crisis would not be available. This void was prevented thanks to plastics.
The impact of plastic pollution, which triggered the backlash against plastic packaging, still needs to be considered. Poor handling of contaminated waste still needs to be con- trolled. But protecting the environment shouldn’t mean eliminating plastic. Pandemic, plastic and planet can all co-exist!
Brand Owners
Unilever sales
flat as demand for hygiene products rises
Covid-19 has contributed to flat sales at Unilever, with the global FMCG giant seeing a surge in demand for hygiene and in- home products. In its trading statement for the first quarter, the company delivered volume growth of 0.2% and negative price of 0.2%. Turnover was up 0.2% while Unilever reported a “positive impact of 0.6% from acquisitions net of disposals”.
Alan Jope, Unilever chief executive, said we are opening up new capacity where it is most needed, such as in hand hygiene and food.
Nestle: Resilient margins amid rising cost pressure, higher base
Nestle has been working closely with local authorities and business partners to safeguard the health and wellbeing of its staff, ensure business continuity to meet consumer needs and support communities all over the world with local relief efforts.
During the first quarter, the company remained resilient: Organic growth reached 4.3%, with real internal growth (RIG) of 4.7% and pricing of -0.4%. Growth was sup- ported by strong momentum in the Americas and Zone EMENA.
Reckitt posts sales growth
as disinfectant demand surges
British consumer goods firm Reckitt Benckiser Plc (RB.L) reported record quarterly sales growth as customers stocked up on its Lysol disinfectants, Mucinex cough syrup and Dettol soap.
First-quarter like-for- like sales rose 13.3%, easily beating analysts’ predictions of 5.3%. The growth marked the best sales increase since the company was formed in 1999. Net revenue rose 12.3% to 3.54 billion pounds in the three months ended March, ahead of analysts’ estimates of £3.29 billion.
P&G sees revenue lift amid shift in consumer habits and preferences
Consumer-products giant Procter & Gamble Co reported its biggest US sales increase in decades as Americans stocked up on toilet paper, laundry detergent and cough medicine. Net sales for the quarter were up 5% year on year at $17.2 billion.
In the midst of the coronavirus pandemic, advertisers are all in a quandary: to spend or not to spend. P&G has committed to spendciting “mental availability” of its brands in a time when their physical availability may be lacking.
Dabur expects rosy future
for health and hygiene products
Consumers are expected to buy more immunity-boosting, personal hygiene and nutrition products, as well as wellness foods even after the pandemic is over.
The packaged consumer goods firm said it has advanced the launch of an immunity- boosting health product, while Zydus Wellness, which owns the Complan brand of food-drinks, has fast- tracked the launch of its Nycil brand of hand sanitiser, whilst increasing production of its existing range of healthcare products.
Coca-Cola eyes digital future
as consumers move online
The Coca-Cola Company is taking swift action to adapt to near-term challenges presented by the pandemic. The company said it is “recalibrating” its business strategy in real time and working with bottlers and customers to address “seismic” shifts in consumer behaviour across all channels.
Coca-Cola is partnering with grocery customers to promotion of core brands and SKUs like multipacks as consumers adjust to stay-at- home lifestyles. Package sizes are also being made fit for purpose for online sales.
Some key points to ponder amid this time of change
Commerce
- The UAE and Saudi Arabian governments have both announced massive economic stimulus plans, of AED100 billion and SAR120 billion, respectively, to promote liquidity in the private sector by lending to SMEs, reducing credit card fees and defer- ring bank payments for six months.
- Considering the sudden increased strength of the US dollar and the fact that many GCC currencies are pegged to it, it is not expected that the prices of goods will spike in the region.
- There has been a marked increase in online shopping and e-commerce.
Personal & Health Care
- Sales of hand sanitisers, soaps and home cleaning products have risen.
- Dettol and Purell dominate the hand sanitiser market but a window of opportunity has opened up for local players, such as Epoch Cosmetics & Toiletries LLC, with the Elegant brand. With ramped up manufacturing, local players could gain share at the expense of multinationals. Foreseeing potential bottlenecks in production and supply chains will be key.
- With salons closed, it is expected there will be an increase in products for at-home self-care rituals, popular especially among the millennials market.
- In the UAE and Saudi Arabia, sales of Clorox and Dettol wipes and cleaning products have skyrocketed, and there is an expectation that recently adopted habits of increased hygiene could develop into permanent lifestyle changes.
- As it is unknown how long Covid-19 will remain a threat, there is elevated consumer demand for pharmaceuticals that can be stored for long periods.
- There has also been a spike in demand for paracetamol, zinc, vitamins and immunity-boosting supplements.
- The virus plays right into the strengths of the plastics in packaging industry: disposability and hygiene. Researchers found the greatest spikes in demand have been for facemasks and the thin film used in plastic wraps.
Food & Beverage
The food service sector has had to reconsider its approach to using reusable or refillable items, as these could carry transmission risks.
- Restrictions on flights have shown the need to reduce our dependency on imports. This will likely encourage a shift towards greater local production of food & Beverage.
- Non-perishable food has seen a huge upswing, as people opt for foods with longer shelf lives. This is increasing demand for flexible, mono- carton and corrugated carton packaging alike.
- The UAE’s snacks industry is expected to see marked growth with consumers preferring to stay safe indoors.
Drawbacks
- Many packaging units have either suspended operations or significantly reduced output, due to either low staffing levels or massively reduced demand for non-essential items.
- Furthermore, the events calendar has been wiped out, with global packaging conferences scheduled for the coming months either cancelled or postponed. This has cost organisers a lot of money and has also reduced the potential for international mergers which may have come about at such events.
As we pass through this ebb and flow of change in less than 90 days, what does the future hold for our industry and in particular to all of us as packaging professionals?
Whether you like it or not, we’ll all have to change our entire thought process, plans and corresponding actions to craft a sustainable business model moving forward.
We must focus on weaker fringe areas that are weak and strengthen them. The health and safety of employees during this time of uncertainty should come as the top priority for all companies. This could involve regular health check-ups, educating and demonstrating social distancing and allied practices, providing personal protective equipment such as masks, gloves and hand sanitisers, and regularly cleaning buildings.
Brand owners and packaging printers-converters should keep a close watch on their sup- pliers and service providers and make sure that shortages and non-availability issues are addressed, with contingencies in place.
Secondly, packaging companies should immediately work on a recuperation strategy. As the adage goes, the longer you procrastinate, the longer recuperation takes, and sometimes it will be too late. Brands, converters and suppliers alike have to be more prudent with their finances, choice of jobs and the allocation of production and operations. Such a customer- centric strategy will keep us afloat.
Conclusion
As we observe the changes in the dynamics of the industry, decision-making by top management should be based on which sectors of pack- aging fulfillment can be sustained in the near future and the long term.
For example, e-commerce is one area that has shown a tremendous spike across sectors, while hygiene products have become a necessity for everybody. All primary, secondary and tertiary packaging for groceries, in-house or at-home products across packaging formats and sizes will continue to grow, as consumer choice and preferences have changed.
Please share your thoughts by emailing ben@ packagingmea.com as we work out a comprehensive report in the next issue to gauge and measure the true impacts on our industry in Q1 and Q2 of 2020.
The upcoming edition will feature interviews with brand owners, converters and suppliers across the packaging value chain to see how we have overcome the ebbs and flows of coronavirus, and to discuss what the future hold for us.
Cheer up and stay safe. The clouds will pass and the gloomy skies will soon pass.