Packaging MEA Business Editor Kaunain Shahidi shares his views on the Middle East and Africa regional industry trends and what the future holds, with Covid-19 as a backdrop.
Though the adage “Change is the only constant” might be true for many as per their perception and life experiences, there are many in the Middle East who have started believing that the “change has changed”. Consumer and human behaviours have changed amid the pandemic, directly impacting marketplace dynamics. It has been reported that the Middle East packaging materials industry enjoyed an increase in demand of more than 10% in 2020, very much influenced by the pandemic-induced large-scale switch in consumption patterns and a steep rise in e-commerce sales.
Visibly obvious MEA trends
- Consumers’ buying attention shifted to essentials
- Growth of digital and omnichannel
- Preference in choice of value and availability of the products
- High respect for caring brands
- Buyers’ adaptability to the new normal and new possibilities
- Buyers’ adaptability to the new normal and new possibilities
Value and convenience are key drivers for consumers as they are trying new places to shop and are always on the lookout for better prices/promotions, better shipping/delivery costs, and better value for money. More than cost, convenience is always at the top of the mind of consumers and has become an even greater priority in recent times. Shoppers are always looking for stores that offer good delivery/pickup options, which are more easily accessible from home (for example, online shopping options), which make all their items available in one place, and physical stores which are less crowded and offer shorter queues at the checkout. Unsurprisingly as health concerns remain at the front of everyone’s minds, there as been an increase in consumer awareness of types of packaging and which brands are more conscious and concerned about presenting the products in their best packaging formats in terms of safety.
Buying decisions are found to be increasingly based on pr ducts’ healthy and hygienic packaging, sustainable eco-friendly ingredients or components, and retailers’ promotion of sustainable solutions. Since larger supermarkets are found to be more saturated, consumers are turning to smaller and more convenient stores. As far as brand owners are concerned, most are struggling to meet stringent compliance and regulation requirements, while at the same time finding ways to manage high production and logistics costs and simultaneously looking to enhance customer and consumer confidence and trust.
Attempts to achieve this are made through various promotional methods including improved packaging formats best suited for new distribution and retail models. Some of them have also initiated online services to reach consumers in their homes. Many retail chains have created apps for this purpose. Across the value chain, the use of mobile and various applications has gained importance while the internet of things (IoT) and digital infrastructure have impacted manufacturing the most. Interestingly, there is a global consensus on this, with barely any difference across the regions – including the Middle East, which has seen a very sharp rise in the usage of e-commerce technology to impact brand owners, retailers and consumers. As far as packaging materials manufacturers are concerned, they are struggling on many fronts, but at the same time they are looking forward to enhancing their capabilities to meet the futuristic challenges. Most packaging converters in the Middle East region are in the Gulf States. About half of the nearly 1,000 plastics converters of noteworthy size in the Gulf region are based in Saudi Arabia, with another 25–30% located in the United Arab Emirates (numerous very small companies also exist). For plastic packaging converters, especially for flexible packaging, the recent polymer crisis had given them a tough time and along with challenges thrown by the pandemic and logistics, they are struggling on many fronts.
Challenges:
- Guaranteeing the safety of workers and revenues
- Managing the best of working capital and ensuring access to cash
- Maintaining supply chain risk mitigation, its assessment, and required interventions
- Ensuring continuous support for key customers to fulfill demands and sustain relationships.
Though the previous year and a half have been quite challenging for the regional industry, to say the least. the future seems bright as the following trends in the Middle East Packaging Industry are in high gear, with the regional packaging industry forecast to keep growing manyfold.
TECHNOLOGY: Automation, high-speed lines, increase in the usage of shrink and stretch films and pouches, lightweight packaging, high-barrier packaging.
COST: Downgauging to continue efficiency improvement, virgin vs recycled (oil price), PCR cost vs hygiene, flexible packaging formats, paperboard alternatives, metal packaging.
HEALTH & SAFETY: Antimicrobial packaging solutions, disposable options, high traceability, declaration of composition, clean labels.
DEMOGRAPHIC: Grab-and-go, thumb open, convenience, based on- demand moments, easier grip, lightweight, ready to cook/ heat/eat, user-friendly, portion packs, personalised packaging.
MATERIAL SCIENCE: Mono materials, laminate to recyclable, metallised to transparent, smart ink, coatings and additives, bio-based, thinner but tougher, biomimicry. The Middle East packaging industry is also getting ready to meet the challenging requirements of sustainability and recyclability as significant opportunities exist to grow the region’s waste management market, and various stakeholders have started collaborating to have a more structured approach and conducive environment to contribute. Also, it is good to note that joint participation by the private sector and governments/ municipalities and environment protection agencies has started happening. Various regional initiatives have already started, with the focus on:
- Collaboration with value chain
- Engagement with the regulators
- Packaging design for recycling and reuse
- Ecosystem for circular innovation and technology
Other than the factors which have a direct impact on the packaging industry through related stakeholders, two majors game-changers of the Middle East – NEOM and Dubai Expo 2020 – have given a great boost to the overall outlook and are impacting the industries in a big way. The ongoing NEOM project in Saudi Arabia is the futuristic $500billion megacity development to be built in the north of the Kingdom, intending to create 380,000 jobs and contribute $38bn to domestic GDP by 2030. NEOM is the brainchild of Saudi Crown Prince Mohammed bin Salman and a crucial part of Saudi Vision 2030, which aims to diversify the Kingdom’s economy and play a leading role in global development.
Meanwhile, Dubai Expo is almost ready to welcome the world to a global mega-event that aims to reconnect people, cultures and society following the pandemic. Featuring a spectacular calendar of daily events and programming, a rich variety of global cuisine and a showcase of arts, architecture, entertainment, culture, and technology, Expo 2020 will pay tribute to the resilience of humanity, its ability to innovate and its pursuit of optimism in the face of adversity. According to analysts, Dubai Expo 2020 is likely to generate approximately US$23bn (24.4% of Dubai’s current GDP) and to boost Dubai’s economic growth to an average of 6.4% a year. We all know the past cannot be changed and there is no point in mourning over negativities. Rather, the focus should be to meet these challenges head-on with the belief that the future is yet in our power to shape. That is what is happening in the Middle East packaging industry and I am sure that will continue to be the case for a long time to come. However, thankfully as e-commerce packaging is expected to grow leaps and bounds this year and perhaps over the years to come, the supply versus demand balance can help brands, converters and suppliers to absorb the cost increase and consolidate their position through higher volumes resulting in higher returns.