How Australia’s Packaging Industry is Dealing with the Pandemic
We all know lockdowns have challenged hospitality over the past 18 months. But the pandemic has taught us that Australians love ordering takeaway, perhaps now even more than ever. So, with takeaway containers seemingly in high demand, how is the packaging sector faring?
The packaging industry is a diverse group of businesses, with national and state suppliers and manufacturers relying on importing raw materials, such as paper, from overseas. Has the pandemic led to a packaging boom and, if so, is it likely to last?
It’s a mixed bag, says Joel Kahn, National Sales Manager for Anchor Packaging, an importer of food service packaging with distributors around Australia. While the pandemic boosted early sales for some products, such as toilet paper, things quickly took a turn for the worse.
“Shipping has been an absolute nightmare,” says Kahn. “The price of a container out of China, for example, used to be, say, $3,000. It’s now about $9,000 or $10,000. So, it’s tripled the price of shipping.” The cost of vinyl gloves, exclusively made in China, has increased tenfold.
Kahn says the increase is due to a combination of factors, including reduced competition after a major shipping line went into liquidation, an excess build-up of containers in Australia due to our reduced exports and supply and demand issues for certain products around the world.
“When the world went into lockdown, [everything] shut down and no one was able to get supplies,” says Kahn. “But then suddenly everyone was bidding against each other to get allotments on ships. That’s just continued. And it’s just getting worse and worse, really. We saw a little bit of pressure relieved about a month or so ago, but it’s now back up and the prices are exorbitant.”
Customer habits influencing the packaging industry
Interestingly, Kahn says the pandemic reversed established retail behaviours. “Prior to the pandemic, everyone was very focused on sustainability,” he explains. “As soon as the pandemic hit, it was more about getting anything cheap and affordable into the cafes and restaurants to service that takeaway demand. Sustainability went completely out the window, and it was more about price.”
As the pandemic continued in 2021, he says, sustainability is now “back on the table”. Customers are starting to be concerned about using ecologically responsible products.
That’s good news for Cynthia Xin, Managing Director of Pac Trading in Sydney, an importer and wholesaler with a focus on sustainable packaging products. Xin says that, although it’s difficult to estimate, the pandemic resulted in about a 20 per cent rise in takeaway food-packaging sales.
“I think [the demand] will stay,” says Xin, “but I don’t think it will keep increasing 20 per cent year-on-year. People will get used to home delivery, even after the pandemic. And I have to say, the trend will definitely stay for the next few years.”
Taking a slightly different view is Claude Lombard, Owner and Managing Director of Lombard The Paper People – an Australian-owned, family-run business and “the largest independent” food-packaging supplier in Australia. While an increase in home delivery might appear to be a boom for packaging, it was by no means “a saviour” of the sector, he says, due to lost business from lockdowns at sit-down restaurants, cafes and other venues.
“The only ones who did really well were drive-thru cafes,” says Lombard. “We’ve got a lot of those customers, and they did exceptionally well [selling] a lot of disposable coffee cups.”
Lombard says general sales in Victoria were down 60 per cent last year, which was significant compared to the national average of 30 per cent, making the business eligible for JobKeeper (at least for a few months). “From January onwards, we were OK,” he explains. “We had a very good October, November, December. Well, we weren’t 30 per cent down, let’s put it that way.”
Lombard also saw interest in sustainable packaging take a backseat at the beginning of the pandemic, but things are starting to improve again now, and not just on that front. He is “bullish” about the future and is forecasting significant improvements on his 2019 revenue figures.
“We expect to have a really, really good year,” says Lombard. “From July to June next year, we expect 25 per cent growth.”
Buying local could be a key advantage
The changed economic conditions haven’t just affected importers and distributors. John Haddad owns one of Australia’s largest paper cup manufacturers, The Paper Cup Company, in Tullamarine, Victoria. He says the pandemic has led to flourishing orders from businesses wanting to buy locally and avoid the increasing costs of imported products.
The only downside for Haddad has been getting overseas machinery parts and specialty maintenance crews to service his plant and train-up local engineers. “Unfortunately, the people over there don’t want to come here and isolate for two weeks when they’re negative, because [companies] can’t afford to have them here for that long,” says Haddad.
In the past eight months, Haddad has seen orders jump by between 15 and 20 per cent and staffing has grown from 24 to 28 employees. He plans to expand his factory and manufacture a new biodegradable coffee cup product, but that’s stymied for the moment due to a planning issue. Nevertheless, he says the future looks bright.
“I expect much more demand, especially with this biodegradable stuff, and the fact that it’s locally made,” he says. “I’m going to be swamped.” The issue now for Haddad is whether he will get the go-ahead to build a new facility.
So, could this be the dawn of a new age for the Australian packaging manufacturing sector? It depends on a suite of factors, not least of which is government support. But a key question remains for manufacturers and distributors alike: how and when will the vaccine rollout affect decisions on reopening our international borders? As they say, watch this space.