Let the Good Times Roll?

March 21, 2022

It seems incongruous that the box business should be enjoying such good times amid a resurgent COVID-19 omicron variant, unprecedented supply chain challenges, high inflation, and government dysfunction. But that is the recurring theme among AICC members.

Independents have always risen to challenges as they’ve come along. That is not a new trait. But in the past two years, dealing with the pandemic and all that it has entailed—including labor shortages and increasingly high product demands—independents have flourished. They’ve satisfied customers as best they could. They’ve installed new equipment and become even more efficient. Many have expanded plants and entered into new partnerships. Independents have adapted and grown.

There are several factors behind the strong demand for boxes. Online holiday sales growth was up 10% in 2021 compared to the previous year. U.S. e-commerce, according to Digital Commerce 360, surpassed the $200 billion mark for the first time, hitting $211.41 billion. This is 55% growth compared to 2019, pre-pandemic. Again, this is just holiday growth. We know that e-commerce demand has been up throughout the previous two years. Manufacturers’ demand for boxes has also been strong, fueled by demand, fueled by supply chain disruptions, and anecdotally fueled by the reshoring of operations back to the U.S. Meanwhile, automobile production has scaled back due to chip shortages and other factors. When car plants come back fully online, there will be resurgent demand from that sector.

In retail, U.S. consumers spent $933 billion on e-commerce in 2021, up 17.9% from the previous year. This number represents 15.3% of total retail sales, so still just a scratching of the surface. Shoppers returned to in-person shopping in 2021 as the delta variant eased and before omicron became a factor. These numbers come from eMarketer.

In the B2B environment, U.S. manufacturers, distributors, and wholesalers saw combined growth in 2021 that sent total online and offline B2B sales to $13.09 trillion—up a healthy 15% over 2020. Without including manufacturers, B2B sales by distributors and wholesalers surged 25% last year to $7.10 trillion from $5.09 trillion in 2020, according to data from the U.S. Department of Commerce.

Industry statistics indicate a flattening in box demand based on a read of Q3 and Q4 2021 estimates from the American Forest & Paper Association and others. Like the broader industry numbers cited above, our members are currently telling us a different story.

AICC monitors numbers, data, and the sentiment of our members. What they see in their own businesses is reflected in the activities of our committees and programs because these are populated and led by AICC members. We plan relevant events, education, and information, and we measure the impact and the use of the products and adjust our direction—just like you do.

Our crystal ball is no clearer than yours. How long will strong demand at independent box plants last? What is going to happen in the paper pricing arena with a fourth increase announced? When will supply chains detangle? Will inflation continue to rage, or will it be tamed? What about our ongoing political divisions and their impact?

I have the sense that our members and our industry are in decent shape for whatever the future holds. The restrictions on labor have kept plants lean during these strong times, and that means they are able to adeptly respond to changes in the business cycle. New capacity is scheduled to come online in the next couple of years, and this will affect paper supply for the better or not. Consolidation continues unabated.

No new challenges—but certainly challenges dressed differently from what we have seen in the past. For now, let the good times roll.