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Investors have long shown interest in packaging due to its end-market diversity, ubiquitous applications, and demand closely tied to broad consumer spending patterns. While these sought-after traits help drive the packaging sector’s steady M&A activity, its investor appeal is being further buoyed by two key themes: innovation and technology.

Here, our Industrials Group's packaging sector-focused professionals unpack these much-discussed trends from PACK EXPO 2023 and the opportunities they're creating for packaging companies and M&A investors.

Thinking Outside the Box

Innovation continues to impact the packaging sector, from product performance and protection to cost and sustainability. However, as the conversation around innovation has matured and become more nuanced, leading packaging companies are seeking to improve their products, optimize their manufacturing, and take a holistic approach to sustainability—all at once.

"Although high performance will always be essential for packaging, much of today's drive to innovate is to achieve sustainability goals," says managing director Brad Morrison. "The key for long-term success in the space is striking the right balance between performance, sustainability, and cost."

A sharpening focus on both innovation and sustainability is leading to a wide range of packaging product changes, including new, optimized materials, better packaging design, alternate structures with higher performance, and unique applications for specific inputs.

"In healthcare, for example, there are businesses using recyclable materials as temperature control barriers for highly sensitive and valuable medical products, which achieve similar performance compared to less sustainable materials," notes director Chuck Walter.

However, opportunities to innovate go beyond the packaging itself. "Leading packaging companies are also using more efficient and unique manufacturing processes to build an expanding range of differentiated products," says Morrison. "By innovating within their supply chains and manufacturing operations, businesses can source more sustainably, have an eco-friendlier footprint, and ultimately deliver a better product to the customer. This is establishing new high-growth areas for investors," he continues.

"These trends are pervasive across European businesses, and it's exciting to see similar momentum building in the U.S.," adds Frankfurt-based director Florian Ripperger.

Getting High Tech

The adoption of advanced technology is another way best-in-class packaging companies are generating growth. Walter points to smart packaging as a prime example. "Smart packaging connects and interacts directly with end customers, providing troves of data to drive more meaningful customer relationships and deeper insights into customer product usage," he explains.

The digitization of packaging also adds more value to both consumers and brands. For instance, QR codes on packaging can provide customers with an interactive, informative, and personalized digital experience, creating higher brand engagement. Meanwhile, brands can mine this data to drive better performing and more cost-effective marketing campaigns.

In addition to higher-tech packaging, providers are using cutting-edge tech to automate more aspects of their factories and equipment. "With rising labor costs and shortages continuing to be top challenges for companies around the world, automation is becoming increasingly critical," says Morrison. "By infusing more automation into packaging production, providers can better manage labor uncertainty and improve their ROI."

Ripperger adds that automated packaging machinery often achieves higher output levels at lower scrap rates, helping to increase both efficiency and quality. "In addition, automated packaging lines can be integrated, from filling machinery and pick-and-place systems to primary, secondary, and tertiary packaging machinery," he says.

Ripperger continues: "Sustainability is also driving growth and investment opportunities across packaging automation, as eco-friendly materials have different product characteristics and require specialized machinery. This is driving demand for new, dedicated equipment."

The Whole Package

Innovation and technology are top-of-mind across the packaging sector—a message our Industrials Group heard loud and clear at this year's PACK EXPO. These burgeoning themes, combined with high fragmentation across packaging formats, are creating exciting growth opportunities for a wide range of packaging companies and their potential buyers.

For further discussion on value-creation opportunities in packaging, please contact our senior professionals.