Consumer caution throws global packaging into turmoil

Global packaging turmoil summary

• Global packaging volumes stagnates as consumers cut spending and buy bulk
• Private label in demand across Europe and United States
• Rising price consciousness among consumers limits pricing growth
• Affordability outweighs sustainability concerns shifting packaging change to regulation
• EU PPWR and AI adoption shape future packaging strategy

Global economic conditions have plagued the packaging sector.

According to management consultancy McKinsey and Company, high prices for raw materials and more cautious consumer spending have led to a downturn in the packaging sector.

Meanwhile, sustainability has been outflanked by other concerns in the eyes of consumers, who are prioritising affordability instead.

Low volume growth

Packaging is seeing low volume growth, according to Daniel Nordigaarden, partner at McKinsey and Company.

Consumers are buying less, or they’re buying in bulk – two trends which are pushing volumes down.

People are increasingly concerned about price. Their reluctance to spend has led to flat or even declining volumes in many consumer-facing markets.

Consumers in both Europe and the US are increasingly drawn to private label products. This often means that prices are lower and products are larger, but with less packaging.

The food packaging sector is facing a lot of cost pressures, leading to decreased volumes in a number of segments, explains McKinsey senior partner David Feber.

As volumes stagnate, recent growth has come from price, with larger retailers in particular relying on price for growth. Because of this, there is limited potential for further growth through pricing, especially when consumers are so price-conscious.

With all this as a backdrop, investors are demanding tighter capital discipline.

Price prioritised over sustainability

Because of economic conditions, consumers are prioritising affordability. This has meant a comparative lessened emphasis on sustainable packaging.

Consumers don’t care less about the environment today. In fact, sustainability concerns have remained stable, with recyclability in particular still valued highly.

However, other factors, such as price, predominate in tougher economic conditions. In fact, sustainability as a purchase driver consistently declined between 2020 and 2025, relative to other drivers

This means that consumer demand may no longer be the main driver for the development of sustainable packaging going forward. Instead, it will be regulation.

“We expect that sustainability will be shaped and driven more and more by regulation” says Nordigaarden.

The EU’s Packaging and Packaging Waste Regulation (PPWR) is one such regulation, aiming to make packaging recyclable or reusable by 2030, with most of its provisions becoming mandatory by 2026.

Where to go from here?

With these conditions, how can global packaging succeed?

Companies should be more discerning, suggests McKinsey. They should invest in “winning segments”, and be “disciplined” about where they put their money and attention.

Meanwhile, they should focus on making production more cost-effective and driving down operating costs. A reduction in such costs will allow companies to price more strategically.

The use of AI can also improve performance. AI can help with demand forecasting, improving pricing capabilities, and order management.

Overall, the packaging sector, like many other parts of the food industry, is being impacted by global economic conditions. It must respond.