Generally speaking, the packaging industry will never suddenly accelerate its pace, but COVID-19 has obviously made an unbelievable change in the carton industry, which occupies an important position in the packaging sector.
In the past 18 months, various levels of urban blockade have forced millions of people to switch from offline consumption to online purchase. This result also makes the prospect of the paper packaging industry with a value of up to $350 billion at the core of the e-commerce economy brighter. According to Smithers, a consultancy, the amount of paperboard used to transport goods from retailers to households surged by nearly 40% last year.
Previously unknown carton packaging company, now the stock is chased by all kinds of investors. Since the stock market fell to a low point in March 2020 due to the COVID-19 pandemic, the stock price of Gao Murphy Kappa listed in London has risen by 84%, and its rival Mondi shares has risen by 58%, while the share price of the international paper industry listed in New York has almost doubled.
These three companies are the heavyweight enterprises in the global corrugated packaging industry. They also supply all kinds of carton paper, corrugated paper and other corrugated paper for the global paper packaging market. As more and more daily life gradually becomes digital, the carton delivery boom promoted by the pandemic will help to alleviate the short-term and inevitable downward trend of paper demand caused by the pandemic.
Oscar Lindquist, an industry expert at McKinsey, a consultancy, said: “the paper and packaging industry is undergoing the most significant transformation in decades. COVID-19 has played a positive role in promoting the development of the industry.”
As governments around the world are determined to permanently reopen the economy, the industry faces difficulties and challenges whether the shopping habits that consumers develop during the new crown epidemic can last.
In the past six months, the price of raw materials such as waste paper used to make cartons has jumped from an eight-year low of 100 euros per ton to 160 euros. None of this has shaken the optimistic attitude of Tony smurfi, CEO of smurfi kappa group, the largest corrugated packaging company in Europe and a member of the FTSE 100 index in London“ The situation looks very positive. The epidemic has accelerated the development of e-commerce, and this trend will continue. “
▲ Tony Murphy, CEO of Murphy kappa group
In fact, executives of corrugated packaging giants said that their biggest fear was that they could not keep up with the pace of demand. Purchasing carton paper, that is, the paper used to manufacture corrugated board, is a complex task. The world’s packaging giants purchase in different ways. Mondi is all made of primary fiber and recycled fiber, and then used to produce finished cartons. DESMA, a British company, is a FTSE100 group listed in London and has also purchased a large number of raw materials for its carton production.
“The market supply is very tight,” said Andrew king, Mondi’s chief executive. The market value of his company has jumped from £ 7 billion to £ 9 billion in the past 12 months“ The supply of cartons will be limited at any time. We’ll sell out soon. “
Due to high costs, the operating profit of large paper packaging groups in Europe decreased by about a quarter on average in 2020, which usually takes several months to pass on the rising costs to retailers.
Investors who are enthusiastic about the industry’s prospects say they are not just counting on COVID-19 to accelerate its shift to electricity providers. The paper packaging industry is also considered environmentally friendly because consumer oriented companies replace plastic packaging with more sustainable alternatives.
Rebecca McLean, investment director of Aberdeen standard investment, said that enterprises are enjoying “the structural downwind brought by e-commerce demand. The industry is witnessing a shift in customer preferences and investments towards sustainable packaging solutions “.
For example, in the UK, multinational consumer brands and supermarkets must fulfill their commitments to eliminate unnecessary or problematic disposable packaging as soon as 2025. Suppliers are looking for a new range of paper packaging, such as six piece beer rings or sausage packaging. L’Oreal, the world’s largest cosmetics manufacturer, will launch paper containers for its Keyan and lifuquan brands this year.
“The question for brand owners is: are consumers willing to pay more for plastic alternatives – because plastic is the cheapest at the moment?” Justin Jordan, an analyst at exane BNP Paribas, said, “if my products adopt more sustainable packaging, will I gain more market share?”
Miles Roberts, DESMA’s chief executive, said the company recently signed a six-year contract with a consumer goods group to develop new packaging. He believes that as retailers and consumer goods groups seek large-scale suppliers whose packaging can meet the needs of different markets, large packaging enterprises will continue to prosper and develop.
“Our customers want to work with large companies and work in multiple regions,” he said.
Therefore, more and more people believe that this industry must realize innovation and development through integration. It is reported that Mondi discussed the acquisition of DESMA earlier this year.
The paper packaging market in Europe is still more fragmented than that in North America. In the United States, the top six companies, including international paper and westrock, control about 80% of the market. Thomas Lenz, an analyst at Investec, said that American companies may choose to target European groups to ensure the international influence that multinational customers want“ I don’t think European companies will be big enough to influence the U.S. market, but the U.S. market needs the kind of innovation consciousness that European companies have. “
If a larger production and enterprise scale is needed, M & A will encounter great obstacles in an industry where sporadic integration attempts will soon fail. In 2018, Smithfield kappa rejected the acquisition plan of international paper, the world’s largest pulp and paper company, calling it “opportunism”. Memphis based international paper told the financial times that it is now focused on acquiring smaller competitors in North America and Europe.
Post time: Aug-25-2021