Boxing clever in 2021 | Supplier Analysis – Cartons

The combined effects of the pandemic and Brexit have been a challenge to say the least. Waqas Qureshi reports back from the cartons sector on its recent performance.

How was trading in 2020 – did you hit forecasts despite the pandemic or was business affected? Did you find new revenue streams in new sectors because of the pandemic?

Olivier Serre, Essentra Packaging: 2020 was an unprecedented year and this resulted in a LFL revenue decline of 4%. However, despite the challenges of the pandemic, dialogue with customers has continued to be further strengthened. In 2020, the division was awarded more than US $5m (annualised) of new business as a result of its focus on supporting customers, and was honoured to be recognised as Company of the Year at the UK Packaging Awards.

Mark Pollard, Pollard Boxes: Turnover dropped by 20% but GP% increased, so it is safe to say it was year like no other. Lots of our customers initially closed when the pandemic took hold and while many reopened within weeks, some stayed closed for most of the year. Nevertheless, demand was soon strong again from many that did reopen.

Mike Lammas, Herbert Walkers: There were some cancelled orders during the initial knee jerk response to it all, and we dealt with that alongside the management headaches of finding our way round the furlough system and social distancing, but things turned around again relatively quickly. After really tricky months in April and May, we had extremely good months in June, July and August. Many of our customers adapted well and our expertise in print for the gifting sector has stood us in good stead because gifting and premium food and drink have done very well during the pandemic.

Giles Foden, Quantum Print and Packaging: Our core business turnover grew by 22% even after taking price increases in to account. We did produce a small amount bonus of PPE packaging business but we made a conscious decision not to get too committed to that sector due to its uncertainty and somewhat limited continuity as the prices got dragged down.

Tom Sene, The Alexir Partnership: Trading in 2020 has been sporadic but we have hit our forecasts. We lost business from sectors that were affected overnight by the pandemic but increased our revenue in areas which saw major growth.


Did Brexit and border delays have an impact and are these still an issue?

Olivier Serre: We did initially see an impact in Q1 2021 but the majority of these issues are now resolved.

Mark Pollard: Yes and yes. Imports from EU and exports to EU take longer and costs have soared. I can’t recall what Brexit was meant to achieve but if it was chaos, longer lead times and increased costs then it has succeeded! However, we have worked very closely with both our customers and our suppliers to try to minimise disruption as much as possible.

Mike Lammas: We’re a UK business and most of our customers are UK-based too, so we have been well-protected from any fall-out from Brexit. We are seeing some delays with the import of boards and foils from the EU this year, but mitigating risk is all about good planning. We’re working with our customers to ensure they place their orders in good time so that we can manage lead times effectively.

Giles Foden: Brexit and Border delays have been overshadowed by the ongoing lack of capacity in the raw material supply chain combined with shortages in drivers. Current issues seem centred around raw material ( paper / card ) lack of capacity perhaps until Far East starts supplying in to Europe once again.

Tom Sene: Yes, there were delays after Christmas this year with paperwork and transport issues. Like everybody we are still being affected by the shortage of HGV drivers and the rising costs of container ships. On top of this our industry is being severely affected by board supply issues, in part due to Brexit.


How has trading been so far this year and are you expecting to hit forecast for 2021?

Olivier Serre: Good progress has been made on our strategic initiatives, underpinning future profitability and providing the platform for industry average margin delivery in packaging towards the end of the year.

Mark Pollard: Robust given some customers are still not back to full strength.

Mike Lammas: Trading has been very good so far this year. We’ve seen a lot of companies reverting to a UK supply chain because the pandemic has highlighted the risks of overseas production and we’re hoping that trend will continue, even when things settle down.

Giles Foden: We will be over forecast by around 20%.

Tom Sene: We have just closed off our financial year and expectations are high. Business opportunities are good, and demand is high. We just have to manage the supply with our customers.


What’s your strategy for 2021? Capital expenditure, new staff, expansion etc?

Olivier Serre: We will focus on our value added products and services for our customers and continue our focus on sustainability and innovation. Having made some organisation changes, we are better aligned with the needs of our customers and the requirements of the market. We have a focus on servicing regional requirements within our global footprint.

Mark Pollard: Onshoring of previously Far East sourced packaging means lots of opportunities for us. As the economy continues to recover, consumer spending on ‘treats’ and luxury items are likely to increase and our expertise in helping to create a premium image and the best ‘opening experience’ through our packaging will be an important part of encouraging sales.

Mike Lammas: We’ve taken on five new trainees over the past year and are now looking for another. We’ve also invested in new equipment and are driving innovation in the luxury and gifting packaging world.

Giles Foden: We have increased staff level and increased finishing capacity by way of an investment in new folder-gluer machine.

Tom Sene: We have recently invested in a new printing press and this is beginning to show dividends. Due to the diverse nature of our service offering we will be expanding on this to enable our customers to use us for all their complex packaging projects.


What are the main issues in the various sectors you operate in, and what are your forecasts for 2021/2022?

Olivier Serre: E-commerce has accelerated during the pandemic, changing patient and consumer expectations regarding the way products are distributed. For example, increased use of online pharmacies and telehealth are pushing the healthcare industry to be more agile in their supply chains. Looking at the future, we think about the growth in biologics/biosimilar and new treatments which will require increasingly complex packaging formats such as injectables and cold chain. The appetite for more sustainable packaging is growing fast which is creating incremental opportunities for Essentra Packaging.

Mark Pollard: As outlined in the previous answer, our continued focus on luxury packaging will stand us in good stead for growth.

Mike Lammas: We’ve established an enviable niche in the luxury gifting and premium food and drinks packaging sector and we see that as an area of growth, both for Herbert Walkers and for the industry. Gifting and treating yourself are trends that support this and there is a need for packs that stand out on shelf and also have virtual shelf appeal for online channels.

Giles Foden: I think the sector, during 2022, will outperform 2021 but the growth curve will flatten out a little if Covid continues to decline. I also believe the environmental impact of the packaging that people use will come under closer scrutiny as well as the impact the manufacturing process has.

Tom Sene: We work mainly in the FMCG industry in food and luxury gifting. There are numerous legislative measures coming up in the next few years that will impact these sectors but are likely to benefit the carton industry.


What new print technology has caught your eye over the last year? And what should we be looking out for?

Olivier Serre: Digital printing is progressing fast, and is becoming a realistic solution not only for short runs but even high volume too, as some equipment manufacturers propose very credible solutions. The solutions help support the agility required in the market for quick turnarounds and customisations when required. Thinking beyond our walls, we see an increasing need for customers to be able to apply their own codes as a result in UDI legislation and supporting customers to be able to do this effectively on their lines has been a key focus of our ClearCode coating.

Mark Pollard: At Pollard we have a long history of investing in new decoration technologies and techniques, so we’ll always be on the lookout for new ways to enhance our customer offering.

Mike Lammas: It’s been more difficult than usual to see what new technologies are emerging because of lockdowns and travel restrictions – the industry has really missed Drupa! We’ve just invested in a new Bobst Vision Foil machine, which gives us increased capacity and speed of throughput. In fact, we’re already considering adding another.

Tom Sene: We invested in a highly specified ‘Plus 1’ eight-colour and double coater KBA 106 printing press and started production in March 2020. Since then production has increased by 25% so we are more than happy with this new print technology.


Is the cartons sector getting its recycling and sustainability message out enough?

Olivier Serre: I see a lot of communication from carton manufacturers, associations, and on the shelves as more and more products are presented in carton packaging – replacing plastic alternatives. So yes, I believe the positive message around sustainability benefits of carton packaging is getting out; however, I do believe we can always do more to inform consumers and our clients about the benefits of cartons and how to improve recycling of secondary packaging.

Mark Pollard: I fear not, especially as it is clear that this is something consumers are becoming increasing concerned and vocal about. Certainly, it is a key driver for our group and our investment in sustainable sourcing and production is increasing.

Mike Lammas: We need to be cautious about differentiating between what’s genuinely sustainable and virtue signalling. Fundamentally, what the print and packaging sector does is driven by what retailers demand and they, in turn, are being prompted to act by consumers, who want more accountability for reducing waste and increasing recyclability. There is confusion because there is no single standard to work to, but we know what we need to achieve.

Giles Foden: I think the shortages of cardboard that hit national headlines has had the silver lining of bringing recycling and sustainability to the front of people minds more effectively than the industry has communicated . How long this will last for though is anyone’s guess.

Tom Sene: It’s always difficult to tell when you are so immersed in the industry. We are, however, seeing an increase in demand from brand owners wishing to change pack materials to a more sustainable one.


What is your message to the industry, given we will still be adapting to the pandemic most of this year?

Olivier Serre: Agility will be the key to success. Covid-19 has accelerated the trend toward a more agile supply chain in many industries where the short term market changes impact immediately the supply chain. The industry will face challenges with the supply of raw materials, as capacity declined during Covid and is struggling to catch up with increased demand in some regions.

Mark Pollard: Hang on in there! Be adaptable and ready to pounce on the many new opportunities that the ‘new world’ will bring.

Mike Lammas: I’d like to think the industry will be loyal to the UK print firms that helped them weather the storm during the pandemic. With pressure on raw materials, they need to plan as much as possible to accommodate longer lead times but they can trust us to pull out all the stops to get them what they need, when they need it.

Giles Foden: Don’t panic, don’t panic buy. Do work together to be a stronger industry voice, trust one another and help each other out as we have the same highs and lows and more in common than we probably realise.

Tom Sene: We have managed to keep going throughout the pandemic and we are coming out of it stronger. The industry needs to be flexible with economic fluctuations, learn from them, innovate where possible and continue to grow.

Post time: Nov-22-2021