The ‘pressure-verse’ calls for packaging strategy resets

A new report from McKinsey & Co. highlights a significant disruption in the packaging industry, driven by a "pressure-verse" of economic uncertainty, regulatory shifts, and changing consumer behaviors. As inflation pushes buyers toward lower-priced products and larger pack sizes, packaging companies are facing flat to declining sales volumes and weak market returns. This landscape requires a strategic reset for firms to navigate tepid growth expectations and a transition from voluntary sustainability goals to mandatory regulatory compliance.

The packaging sector is currently navigating a confluence of external shocks, including supply chain disruptions, workforce shortages, and a shift toward regionalization, according to McKinsey & Co. partners Daniel Nordigaarden, Abhinav Goel, and Gregory Vainberg. Market analysis and a survey of 11,000 consumers reveal that economic uncertainty is causing a pivot in purchasing habits, with consumers prioritizing price and quality over sustainability. This shift has led to decelerated growth and margins across all major substrates, resulting in the industry underperforming the broader market index over the past year.

Leadership within the industry is also in flux, characterized by high employee turnover and a wave of M&A activity over the last 24 to 36 months. McKinsey notes that these transitions are often used as opportunities to infuse new perspectives into executive teams as companies seek new pockets of growth in a volatile environment. Beyond personnel changes, the report identifies six primary barriers hindering the adoption of sustainable packaging: affordability, performance, lack of alignment on definitions, regulatory ambiguity, unreliable supply, and incomplete knowledge of available solutions.

The regulatory landscape is becoming a primary driver for industry change, moving away from voluntary targets toward mandates such as extended producer responsibility (EPR), recycled content requirements, and stricter labeling laws. To counter the anticipated tepid growth over the next two years, McKinsey recommends that packaging leaders focus on four key pillars: commercial excellence, a relentless focus on costs, deepening talent pools, and leveraging data and AI innovation. The report emphasizes that demand alone is no longer sufficient to drive recovery, necessitating a fundamental rethink of where and how companies compete.