U.S. corrugated box industry outlook: Modest growth for near future

The U.S. corrugated box industry will see modest growth through at least the first half of 2019, partially fueled by the popularity of online retailing, two manufacturers say.

Dave Saraney, a regional sales manager for Jamestown Container Companies, based in Jamestown, New York, anticipates sales will grow up to 3 percent over the next 12 months.

“The industry has seen significant consolidation since 2008, and many companies have left the market,” says John Keith, chief operating officer of U.S. Corrugated Inc., headquartered in Washington, Pennsylvania. “With fewer players, there’s more opportunity for growth than there was 15 or 20 years ago.”

Corrugated shipments totaled 386 billion square feet in 2017 – 10 billion square feet more than in 2016. At the industry’s peak in 1999, shipments totaled 405 billion square feet.

The majority of corrugated packaging is used in the food and beverage product segments. The remainder of the market serves segments such as industrial/manufacturing, electronics, automotive and medical/health care.

The largest growth segment, however, is associated with e-commerce, as consumers increasingly shop online rather than at brick-and-mortar stores and longstanding retail giants shrink or close.

The Amazon effect

E-commerce growth is spurring demand for customized boxes that feature high-quality graphics and “frustration-free” packaging that is easy to open and 100 percent recyclable. U.S. online retailing growth accelerated over the last year, with a 16 percent year-over-year increase, according to the U.S. Commerce Department. Amazon is responsible for a large portion of this spike, representing more than 40 percent of online sales, according to several published reports.

“We’re also seeing companies pop up that are offering people the ability to create custom boxes online themselves,” says Lexy Eickelman, corporate marketing manager at Jamestown Container Companies. “They’re eliminating the middleman.”

Packlane, for example, allows customers to get instant quotes and to design and preview their boxes online. Another company, Pakible, also promotes custom packaging and easy, one-stop shopping. Legacy box makers are beginning to feel the pinch and are increasingly being expected to create enticing, shelf-ready products quickly and cost-effectively.

At least one segment of clients, however, still wants no-frills boxes that merely get the job done.

“We have many industrial customers who are only concerned with getting their orders from point A to point B,” Eickelman says. “They’re not interested in graphics or creating their own designs.”

“There’s still a strong need for a traditional brown box,” says Rachel Kenyon, vice president of the Fibre Box Association.

Less is more

Another trend is toward streamlined packaging that performs as well as heavy-duty boxes.

“Cereal used to come in a case, and now it’s in tiered trays that are covered in plastic,” Keith says.

Demand is increasing for lightweight material that gets high marks for performance while protecting products.

“We want to be on the cutting edge of lightweight packaging to be competitive,” Keith says. “We’re taking tons of fiber out while creating the same strength.”

U.S. Corrugated Inc. has two 350,000-square-foot plants that produce lightweight specialty boxes.

“The trend is toward more single-item and frequent shipments than large quantities, thanks to consumer behavior,” Keith says.

Feeling the pressure

Lead times are also shortening. Historically, box manufacturers needed two weeks to fulfill orders. Consumers’ expectation to get products in 24 to 48 hours dictates that box companies work faster than they did in the past. Nelson Container in Germantown, Wisconsin, touts 24-hour turnaround times, thanks to “quick response manufacturing,” which focuses on speedy design and development.

“Efficiency gains on equipment and personnel will be the main drivers for us to achieve our growth targets,” Saraney says.

It’s a challenge to expedite orders with ongoing transportation and employment challenges, Keith says. U.S. Corrugated has had issues finding drivers and trucks.

Sustainability concerns

With boxes going directly to consumers’ homes, recovery of old corrugated will become more of a challenge, Kenyon says. Retail brick-and-mortar stores have been a significant contributor to the 93 percent recovery rate for corrugated packaging, meaning the boxes are recycled to make new boxes and other paper products.

“The average corrugated box made in the U.S. has 48 percent recycled content,” she says. “We’re looking at how we can help households capture more corrugated so that we can maintain high recovery rates.”

Sustainability begins with design, when manufacturers minimize paper weights and streamline product packaging. But corrugated companies are also exploring ways to optimize logistics and transportation to reduce their environmental footprint.

“We continue to look for efficiency gains and redesign opportunities – both in structure and by ‘right-weighting’ paper,” Saraney says. “Right-weighting is a win-win for us, our customers and the environment.”

What changes is your box company making to remain relevant and keep up with e-commerce demand? What challenges do you face? Let us know in the comments below.

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