Packaging Industry: Digital Boost as a Result of the Crisis?
Digitalization and sustainability have been the leading trends in the paper and packaging industry for years. Nevertheless, current study results show that only a few companies have a well-developed strategy to address these topics. Will the COVID-19 crisis finally force the industry to adapt its approach?
Bonn, July 28, 2020 – The strategy and marketing consultancy Simon-Kucher & Partners conducted a survey at the beginning of 2020, which asked managers in the paper and packaging sector about trends in the industry. As in previous years, sustainability and digitalization dominated the trend radar. The industry knows the aspects it needs to address but is reluctant to act. According to a mood barometer conducted by the management consultancy during the coronavirus crisis in May 2020, the effects of the pandemic could force the industry to rethink its processes.
Companies still respond to these topics in a very reactive way, especially when it comes to sustainability. Customers and retailers are increasingly demanding sustainable packaging, but only 12 percent of companies surveyed stated they took the initiative to promote this topic out of their own vision. In addition, more than half of companies have yet to develop a clear strategy for sustainability and have only introduced various individual initiatives.
Dr. Daniel Bornemann, Partner and expert for the Paper & Packaging practice at Simon-Kucher, confirms this observation. “Again and again, we’re seeing that sustainability is often viewed as a ‘hygiene factor,’ one that is interesting to customers and only serves to create a positive image for the company. It is quickly labeled a marketing topic and not actively promoted as a growth path to, for example, develop new products for the mass market.”
Increasing willingness to pay for sustainability
Sustainability has become less of a priority in recent weeks, primarily due to change in demand behavior and strong refocusing on security of supply and hygiene. However, in the medium term, companies should consider taking a more strategic approach to the topic. The study results show that over a quarter of B2B customers are now willing to pay more for sustainable products.
Bornemann recognizes major opportunities for companies in this area. “Tapping into this additional willingness to pay requires effective storytelling that can be used in sales. Companies have to address the needs of different customers because everyone has unique preferences.”
Will more digital processes be the new reality after the pandemic?
Digitalization continues to be a major topic in the industry, primarily affecting company processes. For 37 percent of those surveyed, digitalization plays the most important role in sales processes, closely followed by production and logistics processes. The latter benefit, in particular, from increased demand for transparency and traceability.
The study results suggest that sales teams are also reluctant to take full advantage of the opportunities offered by digitalization. While the importance of eCommerce is increasing in the industry, it will be overshadowed by traditional wholesale and direct sales, with around 40 percent of companies surveyed stating they will continue to see them as predominant sales channels compared to just 11 percent for eCommerce.
However, the effects of the coronavirus could create an unexpected upswing for eCommerce. Bornemann has observed that the limited mobility in recent months has made remote selling a new sales reality at many companies. To him, the future is clear: “So far, it seems the industry has been missing out on the opportunities generated from switching to the online level. The need for customer-specific solutions in the sales process was often overestimated. As a consequence, companies were reluctant to push more sales into e-channels. However, modern technology enables them to configure semi-customized products online and allows to put more focus more on e-channels.”
Simon-Kucher & Partners, Strategy & Marketing Consultants: Simon-Kucher & Partners is a global consulting firm with more than 1,400 professionals in 39 offices worldwide focusing on TopLine Power®. Founded in 1985, the company has more than 30 years of experience providing strategy and marketing consulting and is regarded as the world’s leading pricing advisor.