Return to normal should ease packaging prices

A return to “normal” conditions in the foodservice industry could lead to lower demand for single-use plastics and relaxed packaging pricing next year.

That is one observation of Matt Dusi, sector manager for food and agribusiness industry advisors for Wells Fargo Commercial Banking.

Responding to The Packer’s survey on packaging trends, Dusi said 2021 packaging costs have five-year highs across all materials, including aluminum, tin, plastic resin and corrugated.

“Maybe even more pressing than the increasing price, however, is the availability of the product. I’ve spoken with several operators where suppliers simply don’t have access to raw materials,” he said.

Pallets, he said, are a great example. 

“Pallet builders saw prices ramp up into the stratosphere, but had difficulty getting raw materials to make the pallets,” Dusi said. “Subsequently, we saw a huge surge in demand for used pallets, and even saw large retail chains loosening their receiving standards to get product into stores.”

The past year has shown how “complicated and precarious” the logistics system is, he said.

“When it’s working, it’s a thing of beauty. When a wrench gets thrown into the gears, on the other hand, it becomes glaringly apparent how fragile the system is,” Dusi said.

2022 pricing outlook

2022 pricing for packaging will fall back to the higher end of a more normal range, Fusi expects. 

“COVID had interesting effects on both supply and demand that were outside of normal bounds,” he said. 

“As we move back into a more ‘normal’ environment with consumers purchasing on-site, and as we get back into more normal levels of packaging, including food on plates and drinks in glasses versus single-use plastic ‘to go’ containers and cups, we may see prices revert back to the mean.”

He said pricing at current elevated levels is simply not sustainable. 

“Producers will look at alternatives if prices remain too high.”
He said it is important to remember that shipping packaging products is a component of their cost. 

“We have seen ocean and truck freight rates increase dramatically over the last 12 months,” Dusi said. “As the freight issues calm down – hopefully by early 2022 — that will help bring prices back in line.”