A new analysis released by McKinsey & Company (McKinsey) claims that high demand alone will not bolster performance for the packaging and paper market over the coming years, and identifies multiple market dynamics which have increased pressure on the industry.
Titled ‘No ordinary disruption: State of the packaging and paper industry’, it details how various market dynamics have increased pressure on the packaging and paper industry, including growing preferences for online purchases, geopolitical inference, persistent cost pressures and shifting sustainability attitudes.
The article states that external shocks such as COVID-19 related disruptions to supply chains and the workforce have challenged the industry and affected bottom lines, as well as consumer caution, with price and quality the most important product characteristics influencing purchasing decisions.
It adds that slower demand growth, persistent cost pressures and heightened investor scrutiny are pushing Consumer Packaged Goods (CPGs) to reconfigure their operating models and sustainability-led growth is concentrated in specific applications, rather than broadly distributed across portfolios.
McKinsey’s research indicates that industry growth is at or below GDP, with ‘tepid growth’ expected over the next one to two years before stabilizing at GDP levels, in the context of shifting global economic and geopolitical stability. According to the analysis, growth and margins have decelerated overall across major substrates due to weak demand and inflationary cost pressures. Growth in EBITDA margins also remains ‘nearly flat or slightly negative’ across the industry.
The article also notes a general environment of consolidation and talent turnover within the industry, with several major deals completed across substrates in recent years and an increase in CEO and senior leadership turnover across major packaging and paper companies.
To succeed within this environment of reduced demand growth and emerging challenges, the analysis recommends that packaging and paper companies embrace new strategies to address underperformance, identifying execution in commercial excellence; a ‘relentless focus’ on cost, rejuvenated talent and leadership; and value-oriented application of advanced analytics and gen AI as four elements that could make a difference to value creation in future.
Last month, an article from the consulting firm suggested that paper and packaging companies should pursue multiple smaller deals throughout the year rather than large acquisitions, to achieve growth, increase returns, and overcome industry disruption. McKinsey indicates that volatile demand, rising prices, and changes in customer mix are stifling growth as companies struggle to maintain strong volumes.
Towards the end of 2025, McKinsey released research identifying six key barriers companies face when considering sustainability-minded packaging materials, including performance concerns, limited market supply, and different definitions of sustainability. The research findings span four continents and eleven countries.
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