Event: The Future of Packaging, presented by Smithers Pira and LEK Consulting
Report by: Brad Morrison, Director, Industrials Group; Brandt Carr, Vice President, Industrials Group
Why is this industry on your radar?
Morrison: The packaging industry is a large (over $885 billion of product consumed annually1) and highly diverse industry. In addition, there are a number of substantial, secular tailwinds—such as e-commerce, sustainability and shifting consumer preferences—driving strong, consistent growth globally. As such, it has become an increasingly popular space for M&A activity, as investors seek defensive plays within the broader industrials landscape.
Which trends, companies or business models were top-of-mind at the event?
Carr: This year’s event was specifically focused on the theme of sustainability within the packaging industry. Within this broader topic, a number of specific approaches to sustainability were discussed, including source reduction (materials and energy use); reuse, recycling and recovery processes; carbon and water footprints; and circular economy life cycle analyses.
Morrison: One of the primary drivers of the sustainability initiative is e-commerce, which represents nearly $33 billion of annual packaging consumption globally. Another is healthcare packaging, which represents approximately $34 billion of annual packaging consumption globally.2 Within each of these sectors, there are a number of game-changing innovations emerging to reduce waste and deliver goods in a more environmentally friendly way.
What opportunities are these dynamics creating for strategic buyers and private equity investors?
Morrison: The push for sustainability by consumers has created a number of opportunities for both strategic buyers and private equity investors. For strategic buyers, this paradigm shift in demand has created a renewed focus on (and thus, capital allocation toward) innovation, whether through internal R&D or acquisition.
For private equity investors, sustainability represents a unique opportunity to take advantage of a strong, secular trend that underpins stable growth across economic cycles for potential platforms. In particular, the increasing number of sustainability-focused start-ups combined with the fragmentation of the packaging industry will continue to provide investment opportunities for both buyer sets.
1. Smithers Pira
Published June 2019