EU Ban on Bisphenol a Forces Food Packaging Material Transition
The end of the main European Union transition period forces buyers to adopt alternatives to bisphenol A in food packaging.
Packaging Raw Materials
Input Resource
The primary inputs such as paperboard, plastic resins, aluminum, and glass used to manufacture protective boxes, bottles, and wraps represent a critical cost category for consumer-packaged-goods companies. These materials must meet specific standards for strength, moisture resistance, and food safety before they can be processed into finished packaging. The availability and price of packaging raw materials dictate the final cost of distributing almost every physical product sold today.
This category of inputs is heavily traded on global commodity markets where prices fluctuate based on resource availability and industrial demand.
Cost Volatility
Increases in the prices of wood pulp or crude oil quickly translate into higher manufacturing costs for cardboard boxes and plastic containers. When packaging raw materials become more expensive, consumer goods companies must either absorb the cost and accept lower profit margins or pass the increases along to retail buyers. This pressure is particularly acute for low-margin products where the package represents a significant portion of the total production cost.
To hedge against these price hikes, large distributors often sign long-term supply contracts with fixed price agreements.
Supply Sourcing
Securing a diverse supplier base for these input resources is essential to prevent production delays at packaging plants. Having alternative sources for paper and plastic prevents a shutdown if one supplier experiences a fire or a strike.
New United Kingdom Plastic Duty Probe Alters US Polyethylene Sourcing
Buyers of US linear low-density polyethylene face supply risks as the UK initiates a major plastic dumping probe.