As we all are tracking trends to outlook our short and midterms business decisions, we share our review from the “2023-24 Trends Industry Outlook & Market Data Report summary”, released by the Paperboard Packaging Council (PPC) this January 2024.
Let’s review the key takeaways for the US and Canadian carton markets study, how it operates and the factors driving future trends, as well as the 17 end-use markets that are the primary sources of demand for folding cartons.
How end-use markets will react to the shifting spending?
What trends will drive carton usage in the coming years?
Background
Carton shipment growth had been in decline since the Great Recession. Prior to 2020, losses in shipments were largely the result of continued headwinds facing major processed food and consumer product companies. Processed food exports were challenged by the appreciation of the US dollar in 2015, which trickled down to recycled boxboard demand and folding carton shipments.
Over the decade of 2010-19, folding carton shipments were under persistent downward pressure and declined at an average annual rate of 1.2%. When COVID-19 hit in 2020, industrial production dropped 7.2% and consumer spending fell 3%.
From COVID-19
Consumers flush with stimulus money and stuck in lockdown greatly increased their spending on goods, helping boost carton usage to some of the strongest years in recent history with an extraordinary growth of 5.5% year on year in 2020. These gains were maintained in 2021 when shipments grew another 0.2%.
Lockdown measures and consumer wariness to return to in-person dining caused spending on food service to contract 21% in 2020. Food service spending grew 23.5% in 2021 and another 9.8% in 2022, finishing the year 7.2% above 2019 pre- pandemic levels.
Consumer spending on processed food witnessed strong growth of 5.7% and 3.7% in 2020 and 2021 respectively. With people returning to restaurants and fewer people working from home in 2022, processed food spending dropped 4% in 2022.
2022, insights of the “New Normal”
With the remaining pandemic restrictions lifted in 2022, consumer behavior provided the first insights into what the “new normal” would be. Normalization trends have seen that spending shifting away from goods and back towards services, but strong inventory rebuilding throughout the supply chain helped push shipments up another 4.5%.
While 2022 had the highest volume of carton usage since 2010, it was still 8.7% below the pre-recession peak in 2007. Spending grew 2.7% but began to shift toward services, which increased 4.5% for the year.
The gains in folding carton demand reflected consumer spending trends. While e-commerce supported some growth in folding carton demand, this will change in the medium term. Folding carton is best suited for shelves in brick-and-mortar stores. However, the shift to e-commerce for dry foods and non-food products could create a separate packaging and delivery channel, which could shift market share from recycled boxboard to corrugated packaging.
2023 and Changing Consumer Behavior
Changing consumer behavior and the increasing demand for non-carton intensive products, such as liquid soaps and detergents added to the economic uncertainty, lower levels of consumer spending on goods and an end to the inventory rebuilding cycle, caused carton usage to drop an estimated 3.8% in 2023. In the years that follow, however, macroeconomic indicators suggest that demand for folding cartons should continue a positive but slow growth.
Forecast period of 2022-27
The study estimates that folding carton demand will grow an average 0.4% annually. The output growth in nondurables, which comprises many carton- packaged goods including processed foods, will expand 0.7% over the forecast. General economic fundamentals in the US economy, such as the unemployment rate, will remain strong. A potential recession is becoming more of a concern for the near future as inflation eats into consumer budgets but growth will remain strong over the forecast, with consumer spending growing 1.7% in 2022-27.
In addition to the overall economic performance, there are other factors that play an essential role in folding carton growth dynamics, such as:
- Shifting consumer spending habits
- Substitution away from plastic packaging and
- Efforts to reduce packaging waste
The macroeconomic environment in Canada over the outlook will be supportive of carton shipment growth, however, the planned closure of a cartonboard mill in 2026 will reduce Canadian folding cartonboard capacity by nearly 30%, greatly reducing the amount of folding cartons that can be produced and shipped in Canada. As a result, folding carton shipments are expected to decline by 2.7% per year over the next five years.
On prices, the situation is somewhat challenging, particularly for independent converters, mainly due to cartonboard prices consistently outpacing actual folding carton prices for several years. To provide some perspective, market prices for cartonboard grades increased at a 5.1% average annual rate from 2012-22. Over the 2017-22 period, boxboard prices grew at an average rate of 8.9% per year, while the average value per ton for folding cartons rose just 5.2%.
Folding carton end-use markets
The US folding carton end-use markets can be grouped into three broad categories: growth, mature and declining.
- Growth markets are classified by average annual growth of 1% or more. The study finds four end-use markets to grow by more than 1% per year. Nine end-use segments classified as mature markets are expected to maintain current levels of demand over the five-year forecast cycle. The remaining four market segments are classified as a declining market this year.
The 17 end-use markets analyzed:
Food products
- Beverages
- Cereals/milled grains
- Confectionary
- Dairy
- Dry foods
- Frozen foods
- Meat
- Perishable baked goods
- Retail carry-out
Non-food products
- Cosmetics & toiletries
- Hardware & household supplies
- Converted paper products
- Pharmaceuticals
- Recreational & sporting
- Soap & detergent
- Tobacco
- Miscellaneous
For extended consultation and reference you can find the 2023-24 Trends Industry Outlook & Market Data Report summary at https://paperboardpackagingcouncil.growthzoneapp.com/ap/CloudFile/Download/pjRlGJxp . Access the full report through the cover of the same summary.
If you are interested in how nearshoring can benefit your packaging operation with folding carton packaging, write us at info@dortega.com.mx , contact us by WhatsApp +52 33-1162-4934 or visit https://dortega.mx .
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