The impact of COVID-19 in the Packaging industry

Inarguably this episode of the COVID-19 pandemic will have an impact in our society. Our personal lives, as well as our professional careers will be somehow affected by the current situation. Indeed industries are different and in the countries were governments have imposed bans, like Spain, depending on your sector you have been impacted in a way or another. In Spain, for instance, the Government stated that some industries were strategic so they had to keep on working, whether other sectors had to close and stop their activities. We are generally speaking about factories activities, because, in one way or another, the office personnel has been told to work at home whenever possible. I am personally sure that after the confinement many jobs will be home-office based; it will allow companies to reduce some of their costs (building rentals, electricity, etc) while providing a real quality benefit for its employees, enabling life conciliation.

My current industry, Packaging, was considered as one of the strategic sectors that didn’t stop. It’s understandable because we provide service to the industries covering the most basic needs of population, most of them in the FMCG business: Food & Beverages, Health Care, Personal Care, etc. Another critical sector as part of our clients is the Pharma industry. The impact has also been very important in the Online shopping because, though retailers are still open, consumers prefer to avoid contact as much as possible, especially our elders. But not only our customers have had to face unexpected demand explosions; some of them had also to switch their operation models because demand is different. Take the Food business for example: with restaurants closed, the Food Service formats have to be transformed into Retail formats, and believe me it’s not so simple to change easily the production lines!

COVID-19 pandemic has impacted the Packaging industry in many ways, and the initiatives taken by most players have been huge. I will classify these impacts in four big areas: Employees, Business, Industry and Brand & Corporate Responsibility.

Employees Impact:

In one hand all the players have had to ensure the security and the wellness of their employees. Our industry main concern is Security so it couldn’t be different in this pandemic. Companies have implemented contagion prevention measures, either inside the company but as well in their external relationships; this has lead to new safety protocols in factories and offices and new specific contingency plans to facilitate early detection of possibles infections and their contention. Transparency of the information has been as well one of the industry priorities, in order to avoid rumorology and comparisons with the sectors that had to close. Some players used Digitalization as their own intranets were adapted to give the latest updates and informations concerning the crisis situation. You might have been surprised when I mentioned the “comparison with closed sectors”. Well, you have to keep in mind that employees were frightened to get infected and somehow could have some kind of ”feeling of injustice” as theirs neighbors or friends could safely stay at home. In this sense, because the Packaging industry is a strategic sector, plants haven’t stopped producing, and companies had to develop communication plans to put in value and acknowledge the efforts of industry employees.  

Business Permanence:

The Packaging industry has faced many concerns, either questions from our customers, either inquiries from our shareholders. Customers were obviously concerned by the stability of our business, especially in the first phases of the pandemic where there was a lot of uncertainty. For instance, in global accounts, the concerns regarding coordination between local and international activities where massive. Another understandable question was concerning our capacity to absorb the unforecasted important demand pics in some sectors, because of the particularities of home confinement (online shopping, more demand of hygienic products, format switch in Food & Bevs). Let me please tell you a real anecdote: in Spain, in the first days of confinement, one of the most demanded products was toilet paper (like in other countries)....well, just a couple of weeks afterwards, it was beer and wine (+70% according to Nielsen/IRI retail data). Just a question of priorities... Global accounts asked us for specific assurance on our production capacities and ad-hoc plans to offer back-up plants in case of shut-downs, even from country to country, a real new situation never seen before! There was a new reality coming that injected us lots of hope: some industries, forced to close in a way or another (Government ban or simply lack of suppliers/clients), reshaped their production lines and in a big social responsibility exercise, decided to produce the items that society was missing: respirators, face masks, hydro-alcoholic disinfectant, etc. Some Spanish companies have to be mentioned: ZARA (Inditex), SEAT, Mango, etc. whose contribution we can all acknowledge as a society and our Packaging industry had to respond quickly to this new demand: design, tools, set-ups, production, etc. Our industry has also been asked by our customers to re design and re engineer our solutions so they can mitigate the contagion risks, whenever possible. Some studies where carried showing that cardboard was one the materials where coronavirus stayed less time, probably because of its porosity, but, especially in online shopping where boxes are manipulated more than 50 times between the customer factory and your home, we have reshaped our boxes and our supply chains to minimize the risks. We also had to cover very special demands and it was great to see how our industry also contributed to society wellness: we used all our creative efforts developing either PoS (Point Of Sales) solutions to help keeping social distance that were used not only in shops but as well in hospitals, factories and any place with people concentration. Not to mention that we also gave for free cardboard medical stretchers, hospital examination tables, and even coffins.

Our shareholders also had lots of inquiries and concerns, that were amplified during the pandemic crisis. All the players had to prove its control over the P&L account more than ever, and an accurate financial management of its KPIs. This has lead to a major alignment between the Financial departments and all the areas of business. The Packaging industry also experienced a bigger demand towards its shareholders regarding its contingency plans to face economic uncertainty. The focus was also put in the communication plans of these actions, either internally and externally, mainly sustained by digital capacities (webs, intranets, etc.). We can mention in this area as well how many companies of the industry adopted similar responsible measures: dividend payment, bonus of the Board cancellations, etc. Ultimately the focus was put on Operating Benefit and the international packaging companies were able to benchmark the approaches and lessons taken in the early affected countries (Italy, Spain, China...) to roll them out in the rest of the World.

Industry Strategic Value:

Coming from B2C industry one of the first things that impacted me when I joined the Packaging industry for the first time 13 years ago is how distorted its image is. It is eventually our responsibility to develop the industry image and enhance it, through combined efforts in all areas, from Operations to Sales, involving Marketing and other services. Well, this strategic importance has been underpinned in this crisis where our industry has been revealed as an essential and necessary sector to keep on going basic activities such as Food & Hygiene supplies in FMCG or Pharma medicines. The industry also had to make efforts to earn its visibility in general media to secure the supplies our sector needs, so our capacity wouldn’t be affected. In this sense we stepped-up our relationships with our main suppliers: paper, inks, tools, logistics, etc. so we were all aligned to better serve our final clients and their consumers.

Brand Image & Corporate Responsibility:

We have seen some actors engaging CSR actions either at local levels and at international forums, mostly communicated externally in these different markets. In a win-win approach the industry has collaborated with NGOs, with clients, with the National Health System, with private initiatives, etc. with positive effects on society wellness and enabling the sector to have better visibility. In international players it was interesting to see this double coordination and validation process of the communication messages brought at a local level, with their different situations and at a global level. In this sense we can highlight some interesting initiatives where the Industry associations coordinated multidisciplinary approaches to validate the management and communication of the pandemic initiatives, so the action lines where homogeneous.

Particularly I expect that these actions have helped mitigating the pain this situation has created in our societies and if our industry has been able to help a bit this will remain a success forever. I also expect that this situation has become an opportunity for our industry to enhance its image and perception in the business world; we are an important player and though some people can see us as just “brown box makers” our approach goes far beyond that, as our aim is to better serve our clients and make their lives easier so they can fully concentrate in their business....and this crisis has made it evident. The World has never learned as fast about anything, ever....and our Packaging industry is not an exception.