We’re over halfway through 2025, and this was supposed to be the bounce-back year for the paper packaging sector, which saw a drop in demand post-COVID. But this hasn’t been the case. Neil Osment, managing director of packaging market research company NOA, explores why.
Cast your mind back to the pandemic, and it was a time of huge demand across Europe for paper packaging, both for corrugated and folding cartons.
In 2020 and 2021, everyone was at home, everyone was ordering online, and e-commerce – particularly for the food and drink sector – exploded.
But by 2022, consumer demand had spiked, and the paper packaging supply chain system was fully stocked. The consequence was, 2022/23 saw destocking, initially of corrugated and then of folding cartons.
In 2023, corrugated had its second consecutive negative year for growth, and folding cartons experienced its first.
The hope and expectation was that 2024 would start to see recovery and 2025 would be a bounce back year. Yet 2024 saw only modest growth (+2.1% for corrugated and +0.7% for folding cartons), which didn’t bring it anywhere near to peak COVID demand levels.
So what happened? Where is the 2025 bounce back?
While NOA are this year celebrating our 20th anniversary, in all that time we have never seen such a rollercoaster for the packaging sector. Here is what we’ve identified as a perfect storm of factors which, combined, are contributing to the missing bounce back, both in terms of recovery in demand and of profits.
For starters, across Europe there is more bureaucracy around environmental regulation to contend with; geopolitical factors like the Ukraine war and the well-reported yo-yoing of US tariffs are affecting confidence too.
Hand-in-hand with a drop off in demand has been an increase in packaging production costs, fuelled by inflation. At the same time, there are significant cost reduction pressures coming from retailers, and in turn brand owners are pressing to make savings. For paper packaging producers this means having to trim prices, which eats into their margins and takes vital resources, focus and investments away from environmental matters too.
We have also seen new factors coming into play: the growth in demand for, and production of, private label (or own label) products is having an impact on demand for paper packaging, because stock keeping units (SKUs) have usually favoured plastic formats (until now, anyway).
Eastern European suppliers (from lower cost economies like Poland, Hungary and Romania) are supplying more and more Western European customers, taking market share.
Of course, not all sectors have been in the doldrums, and not all sectors are equally affected – for example, chilled and frozen foods are doing relatively well. However overall, 2024 and now 2025 haven’t seen the growth that was anticipated.
So when will the recovery come for the paper packaging sector, and how will it be fuelled?
The answer to ‘how’ may lie, ironically, with private labels. Own brand producers are beginning to move towards paper packaging, and away from plastic packaging formats, all in response to consumer’s sustainability demands. Also, improvements and greater confidence in the recycling system should help fuel consumer demand for, and purchase of, products packed in sustainable paper pack formats (because consumers like renewable products that don’t damage the environment).
So ‘when’ will recovery happen? Taking into account the cyclical nature of economies, there has to be a bounce back at some point – but it’s not going to be this year. We’re still on the rollercoaster.
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