About 6 million tonnes of packaging is produced in Poland annually. The sector's share in the entire industrial processing reaches 3.4% and is almost two times higher than the EU average. We can say that packaging has become one of the Polish flagships.
In Poland, the industry generates a similar number of jobs as in meat processing and much larger than in e.g. automotive or household appliances production. As indicated in a report Packaging Revolution. Polish Producers in the Face of Regulatory and Consumer Preference Changes by Santander Bank Polska and Spot Data, despite numerous challenges, this sector has positive development prospects and the revenues are expected to grow in the following years at an average rate of 6.8% Y-o-Y.
Packaging production is the most dynamic element of the entire packaged goods supply chain. International orders are one of the main drivers for demand growth. The average annual weight increase of packaging exports in the previous 8 years amounted to about 11%. To a large extent, this is due to the presence of foreign investors in Poland and a rapid expansion of domestic manufacturers to foreign markets. Food production industry is the main recipient of packaging in Poland, and is now responsible for around 60% of consumption. The next ones are i.a. pharmaceutical and cosmetic industry with approx. 7% and 6% share, respectively. According to the information of the Polish Chamber of Packaging, household chemistry and other industrial goods manufacturers (including construction materials, home appliances, furniture, etc.) also stimulate the demand, as they jointly consume 22% of this type of products.
In terms of material used for production, about 40% of consumption is attributable to plastic packaging, half of which flexible (e.g. bags or films) and the other half rigid (e.g. bottles and boxes). Paper packaging accounts for around 37%, light metals for around 12%, and glass for around 10% of consumption.
Effectively used time
Thanks to high cost competitiveness and resistance to global financial system turmoil, producers from the Central and Eastern Europe, including Poland, have been able to successfully develop their packaging business in the recent years which makes them now the regional hub in this industry. This achievement is among others the result of a high bankruptcy rate in the countries affected by the recent financial crisis and increase in demand for cheaper goods from consumers in countries with growing unemployment. The development of German supply chains in the CEE also significantly influenced the dynamics of growth of the Polish industry.
- These phenomena generated a strong demand for packaging produced in Poland. On the one hand, foreign producers were more keen on moving their operations to Poland or buying Polish goods. On the other, packaging producers benefited from rapid growth of exports of food (7% annual average), medicines (13%), cosmetics (7%), household chemistry (10%) and other goods - as indicated by Maciej Nałęcz, industry sector analyst at Santander Bank Polska.
The authors of Packaging Revolution. Polish Producers in the Face of Regulatory and Consumer Preference Changes also point out that the development of the Central European industrial hub will be slowing down in the coming years, as the industry has already reached the production level where the previous dynamic growth will be harder to maintain. Additional suppressions may come from economic downturn in Germany which is the most important partner for sectors that use packaging.
Where is the market heading?
The authors of the report admit that the packaging production in Poland in the coming years should grow dynamically, although not as fast as before. Revenues are expected to increase by an average of around 6.8% annually up to 2025. The sales of paper packaging will grow the most dynamically in comparison to other types of materials.
- The industrial sector in Poland is one of the most dynamic in the European Union and the packaging manufacturers, supplying their goods to many other industries, benefit greatly from this. Importantly, we see a lot of investments in this sector. In fact, per employee, it is one of the most investing industries in the country. In Poland we have currently an intense debate on how to encourage companies to spend more on expanding their production potential. It is worth taking a look at packaging manufacturers who are leaders in this respect and learn certain things from them - comments Ignacy Morawski, head of SpotData analysis centre.
New regulations on the consumption of disposable plastic products and increasingly stringent recycling requirements will also be a major challenge for the industry. Restrictions on disposable products consumption will affect approx. 10% of gross production volume, mainly in small and medium-sized enterprises. However, this forecast does not take into account the substitution effect (e.g. plastic cups may be partly replaced with paper ones) which may mitigate the impact of new regulations on packaging industry in Poland, as expected by the authors of the report.
One of the major challenges for the industry will be recycling fees hike, and in some cases also fees covering public spaces cleaning, i.e. extended producer responsibility (EPR). EPR is expected to reduce the demand for hard-to-recycle packaging, which may cause issues for the producers of plastic packaging.
The adaptation to the regulations will require an ability to cooperate from entities engaged in the entire supply chain. Extended producer responsibility costs may be reduced with more easily recyclable packaging types. The industry in cooperation with business partners should develop good practices that will minimise the regulatory costs. They would have to reconcile business requirements with recycling options, e.g. in terms of colour and used materials. What is more, the packaging industry will face major educational challenges related to e.g. providing information on the specific environmental costs of products throughout their life cycle.