Covid-19 Executive Briefing
Understanding the economic impact of the Covid-19 pandemic and the implications for the packaging sector
- ECONOMIC IMPACT -
Latest update: 27 April 2020
Many economists have cut their GDP forecasts. The 2020 consensus forecast for GDP growth is currently -2.2% and many predict a recession.
Unemployment rates are expected to rise in all major economies. The International Labour Organization estimates 6.7% of worldwide working hours will be wiped out in Q2 2020.
IMF forecasts that the global economy will contract by 3% in 2020 as the ‘Great Lockdown’ will cause a dramatic drop in economic activity.
Expected reduction in investments in the commodity-rich exporting nations, according to UNCTAD.
Impact of Covid-19 on asset prices
- SECTOR IMPACT: packaging -
Latest update: 28 April 2020
consumer market impact
Falling oil prices are positive for key industries such as FMCG logistics and couriers, as business costs come down. Geographic and product diversification will provide resilience to companies from the worst effects of Covid-19. Demand for online delivery is high during lockdowns. Retailers are adapting to accommodate this through click-and-collect as well as increased home delivery services.
Coca-Cola reported volume losses of 25% due to a mixture of changing demand and the closure of foodservice outlets.
Covid-19 could change longer-term consumer behavior; the most successful companies will alter their strategies to accommodate this.
Global logistics have been disrupted by the availability of staff, ingredients and materials. While some firms, both large and small, are switching production to alternative categories, others struggle to keep up with demand or the altered types of demand, such as altered consumer preferences and retail stocking policies, in particular the reduction in SKUs.
Social and corporate responsibility continues to be spotlighted, with recent studies highlighting that large majorities of consumers believe brands should help consumers in their daily lives and not exploit the present situation. Involving and engaging consumers with this process is a key mechanism to achieve this.
packaging market impact
Packaging companies continue to innovate and update their services in light of the epidemic and altering demand patterns. For instance, companies such as Macpac continue to update their operations to produce safety visors at cost-price for medical workers. Another example is Smurfit Kappa’s “Design for Help” ranges of corrugated solutions, such as workplace dividers.
The use of single-use plastics is again rising in the Covid-19 era, contradicting the recent trend towards protecting the environment. While multinationals such as Nestlé and Mondelez have signed the European Plastics Pact to make 100% of packaging recyclable or reusable, reducing the use of virgin plastic by one third by 2025, the immediate threat of the pandemic is forcing short-term forgiveness. 'Eco'-driven innovation in single use plastics will be key in addressing these concerns.
Supply chain disruption and higher demand in many areas are resulting in companies re-evaluating their own supply chains and operations. With international disruption, there is a focus on more national or local-level supply. As part of this, there is evidence that contract manufacturing and co-packaging enquiries are on the rise and specific food and beverage solutions are also in high demand.