Boxmakers' Boon

Over the past year, brick-and-mortar stores were forced to, or chose to, shut down their physical facilities. This, along with consumers’ ongoing concerns about personal safety during the coronavirus pandemic resulting in an en masse shift to purchasing online, means that e-commerce sales have been booming.

So have demands for box manufacturers to provide the packaging required to ship products to both stores and consumers.

This rise in demand, though, isn’t solely because of the virus, Ron Sasine, principal of retail packaging consultancy Hudson Windsor, points out. Even back in 2018 and 2019, year-over-year growth in the e-commerce merchandise channel was already underway. “There was a significant amount of growth that the large retailers were forecasting, and they were working to make sure that they had fulfillment centers, delivery systems, and supply chains aligned to make that happen,” he says.

The corrugated box industry was already doing well, says Sasine. “There was going to be significant growth that would foster a stronger box market—no doubt about it,” he says.

That growth, of course, has risen exponentially over the past year.

How Boxmakers Have Been Impacted

In their financial results for 2020, Walmart, Amazon, Target, and Kroger all reported that they saw the equivalent of three years’ worth of e-commerce progress occur in just three quarters, says Sasine. “We saw year-over-year economic growth in the 70% range for some of them—well over 100% was reported by Target,” he says.

When the virus first emerged, though, there were initial concerns about the potential for a negative impact on demand for boxmakers’ products and services. Much of this concern proved to be unfounded.

As Justin Stacey, vice president of e-commerce at Fantastapack, notes: “The fear of sales results through last April–June has dissipated and has been replaced by a tidal wave of demand.” A rapid rise in sales during the third and fourth quarters of 2020, says Stacey, “created a lot of opportunities to capitalize on this growth as well as exposing many processes that were not load-tested to that degree.”

The COVID-19 pandemic has caused an increase in demand for digitally printed packaging as brands were forced to pivot to e-commerce to stay alive, says Stacey. “This wave of demand has caused constraints in both supply chain and manufacturing throughput and lead times,” he says.

It’s not only box manufacturers that have been impacted by this demand, Sasine points out. Ancillary services have also been affected—“things like machinery, gluers—all of the ancillaries had very big years.”

Unexpected Barriers and Challenges—and New Opportunities

Sharon Chesler is marketing manager at HP PageWide Industrial Corrugated. “The packaging market is experiencing powerful trends these days that span the entire value chain—consumers, brands, and converters,” she says.

HP’s customers also have experienced an increase in demand for high-graphics corrugated packaging, Chesler says. “E-commerce was a major factor in the increase, but not the only one,” she says. “In general, the demand for HP digital packaging increased, as it demonstrated a resilient supply chain when traditional printing businesses closed.”

Greater demand has also led to longer lead times, says Stacey. At Fantastapack, he says, “we’ve been educating our customer base that longer lead times are now the new normal.” In addition, he says, Fantastapack has invested heavily in plant capacity and expanding locations to meet the increase in demand.

“We just installed our first Highcon laser converting device in an effort to greatly increase order throughput,” Stacey says. “We also acquired a digital print company and will break ground with them on a new building where we will double our operational output by the latter half of 2021.”

Rapid continuous improvement, Stacey says, has become a way of life. This has been necessary both to address emerging challenges and to take advantage of new opportunities.

“E-commerce created an opportunity for companies to reinvent themselves, instead of closing their businesses,” says Chesler.

“We’ve had a few new product launches directed at e-commerce selling that are in direct response to the current market climate,” says Stacey.

The unboxing experience also has grown in importance during the pandemic, offering opportunities for boxmakers producing high graphics of corrugated packaging, Chesler says. “Consumers appreciate an unboxing experience when getting their boxes ordered online,” she says. “The plain brown box became a marketing vehicle for companies to promote themselves and to provide upsell offering. Personalization, customization,

seasonal offerings are all available with digital packaging as part of the e-commerce businesses.”

What people order has also changed, Sasine notes—and changed in a way that increases the demand for boxed products. “There is a very important difference between what we used to buy in e-commerce and what we buy now,” he says. Before, purchases tended to be of higher dollar-value items and dense products, he says—DVD sets, expensive books. “Whatever we were buying was very easy to ship, had quite an expensive price point, and was fairly impervious to transit damage.” For instance, he says, ordering a pair of shoes on the internet comes without much risk of product damage.

That’s not the case for the grocery, health, and beauty products that consumers are buying online now. These purchases, Sasine says, “tend to be at a lower dollar value and larger in geometric dimensions. Add those principles together, and what you end up with is spending $100 on grocery items is going to require a much larger geometric space to ship than spending that same $100 on three books.”

It’s not just that consumers are buying more, it’s that they’re buying differently. “That difference is what’s driving all of this additional volume,” Sasine says.

How They Have Responded

Sasine says he thinks the industry has responded well, overall, to new challenges and increased demand. In part, this is because many had already made investments and process improvements to address increased demand that was already being predicted prior to the pandemic.

In 2020, says Chesler, “the industry has discovered new opportunities for digital corrugated technologies, highlighted the need for tight security, and encouraged the implementation of sustainability measures at every step of the manufacturing process.”

HP, she says, focused on developing innovative and sustainable technology for presses while their customers focused on growing their business despite the challenges the pandemic raised.

Meeting demand, says Stacey, requires “a speed of service that can’t expand within the traditional analog world of packaging.”

In addition to expanding plant capacity, Fantastapack is investing heavily in automation to expedite front-end purchases and back-end production flows to allow the company to scale with new customers and the number of orders they’ve received. But it’s been challenging. “Digital printers and cutters have a top speed, and there are only 24 hours in a day,” Stacey says. “Whether you are a brand or a supplier, it’s important that we all see the issue for what it is and acknowledge that challenges have sprouted up in unforeseen ways.”

His advice: “Be kind and empathetic to each other when we realize supply chain disruptions, overcapacity, and a tidal wave of demand are pushing lead times out beyond what we were all used to pre-COVID. There is a new normal in the marketplace, and your business planning really needs to take that into account.”

The new normal is likely to continue moving forward, even after fears of COVID-19 have subsided.

What the Future Is Likely to Hold

Chesler says she believes the boost in e-commerce is a trend that has just started. “Many converters started offering online package ordering, which offers small, medium, and even big companies who play in the e-commerce arena to reduce their costs and to serve their brands,” she says.

Stacey agrees. “We’re confident that e-commerce packaging will continue to be the largest growth segment for us, directly or through our trade partnerships,” he says. “All signs point to this trend continuing its meteoric pace of adoption.” The only thing that could slow them down, he says, would be capacity constraints in the marketplace.

As Sasine points out, consumer shopping patterns have changed—and have likely changed for the long term. “Many consumers have learned over 2020 and the beginning of 2021 how easy and beneficial it is to purchase grocery items online—they’re not likely to snap back immediately simply because they can go in a store without a mask at some point this year,” he says. The convenience factor that consumers have experienced has been significant, he adds.

“Data and analytics are key to knowing when these changes are happening,” Stacey says. “It’s too late to be at the forefront of this digital revolution, but you can watch market leaders in how they approach these challenges and not be afraid to follow their lead. E-commerce isn’t going away, so your operations should be moving toward capturing the changing needs of your customer.”

Efficiency in automation is the real key to staying on top of this rising demand, Stacey says. It’s highly likely that 2021 will be another banner year for box manufacturers.

Lin Grensing-Pophal is a Wisconsin-based freelance writer and a frequent BoxScore contributor.