U.S. protective packaging demand to grow nearly 5% per year through 2019

Demand for protective packaging will benefit from strengthening Internet sales, using environmentally friendly materials like air pillows, paper fill products and custom boxes.

These are among the findings of a recent study by The Freedonia Group. The study suggests that as consumer purchase more products online, demand will increase for packaging which can protect these goods from shock, vibration, abrasion, and other damaging effects of shipping and handling. According to analyst Katie Wieser, the growth rates from 2009-2014 were about 6.3% per year, mostly affected by the fast recovery from the economic downturn. For reference, the average annual growth rate from 2001-2007 was about 5.5%.

“Even though our forecast is pretty positive,” she said, “there’s just no way it was going to reach the levels seen with that huge recovery period from 2010-2014.”

The fulfillment of e-commerce sales will be the main driver of growth for protective packaging, supporting gains for products such as air pillows and protective mailers. Recently, dimensional shipping rates have also impacted the protective packaging market as manufacturers and shippers tread the fine line between reducing empty space and securing product.

“There are definitely challenges that have come with this transition,” Wieser said. “For delicate items or those that really do need a great deal of protection, things haven’t changed much. However, there are a lot of products that were just packaged with bulky void fill to avoid having to stock a larger assortment of shipping boxes. In this case, we’ve seen companies adopting customized shipping containers or stocking a wider variety of sizes because they’ve found it to be more cost effective than using the same box for all their products.”

There are also protective options, like paper fill, that don’t need as much space and can be more cost effective than inflatable void fill which isn’t always as flexible, she said. This is especially common among products like books that don’t need much protection and can be wrapped in corrugated cardboard or a mailer without any additional cushioning or bracing. Still, Wieser expected inflatable void fill materials would still be showing healthy gains.

Large online retailers often use automated packaging machines to integrate inflated air pillows as a void fill material, the study concluded, while small businesses or entrepreneurs without access to major distribution and shipping facilities often use protective mailers, as these products are usually less costly to purchase and ship than rigid boxes. The burgeoning Internet-based grocery and meal-kit delivery market will support gains for products made from environmentally sustainable insulating products, such as reusable vacuum insulated panels and jute, as firms try to make their business as environmentally friendly as possible.

As a result of its perceived environmental unfriendliness, the long-established market for foam has been in steady decline. “Foam’s share has declined as a percentage of the total protective packaging industry and is expected to continue to do so,” said Wieser, who added that from 2010 to 2014 it declined from 37.1% to 36.8%. “I was surprised to see that foam wasn’t declining more, especially as environmentally friendly alternatives are much more widely available than they were five years ago. However, it hasn’t been a steep decline due to a number of factors.”

One is the rising demand for insulated shipping solutions, which are largely foam-based, and the other is the high cost to transition to another packaging solution.

“For manufacturers, the design, testing, and tooling costs to switch a product from molded foam to molded pulp or another alternative are considerable,” Wieser said. “More often firms introduce new parts and components integrating green materials. This has led to a slower shift away from foam than one would expect. On the other hand, we have seen foam loose-fill demand declining pretty steadily as a result of concerns from consumers regarding the environmental impact of the material.”

Wieser said there are a number of green materials that are still in the early stages of development and could be used to replace foam in insulated shipping applications. In the meantime, environmental concerns will bring about a number of changes for protective packaging, primarily for goods delivered directly to consumers. For example, foam loose fill is being supplanted by air pillows and paper fill products in part due to concerns that foam is harmful to the environment.

Likewise, the desire to reduce packaging weight and bulk has led to the introduction of packaging that is customized to the specific product. Custom boxes not only cut down on shipping costs, but can also serve as a marketing tool as firms look for ways to make shipping containers as aesthetically pleasing as display packaging.

Flexible packaging products, including protective mailers, bubble packaging, air pillows, paper fill products, and dunnage bags, are expected to continue to dominate due to their cost efficiency and their ability to package a wide variety of goods. Foam protective packaging will comprise the second largest share of total demand. Foam products include insulated shipping containers, molded foams, foam-in-place polyurethane, rolled foam, and loose fill. Rigid protective packaging products account for the smallest portion of total demand. However, these products are expected to post healthy gains as molded pulp and paperboard protectors both benefit from a less variable pricing structure and trends toward sustainability.

This Freedonia industry study analyzes the $5.4 billion US protective packaging industry. It presents historical demand data (2004, 2009 and 2014) and forecasts (2019 and 2024) by function (cushioning, blocking and bracing, insulation, void fill, wrapping), market (manufacturing, non-manufacturing) and product (protective mailers, bubble packaging, air pillows, paper fill, dunnage bags, insulated shipping containers, molded foam, foam-in-place polyurethane, polyolefin rolled foam, loose fill, paperboard protectors, molded pulp). The study also considers market environment factors, details industry structure, evaluates company market share and profiles 44 industry players, including Sealed Air, Sonoco Products, and Pregis.