How the Cost of Raw Materials Will Impact Packaging and The Supply Chain in 2022

Dec. 28, 2021
According to this expert, less plastic, more aluminum, and continuing supply chain issues will dominate.

2021 was a telling year. Lifestyles went from locked down to semi-normal within a 12-month period. Consumers were faced with new challenges as Covid continually loomed over all aspects of the supply chain. Behind the scenes, raw materials, especially resin, corrugation and timber, reached historic highs in acquisition cost. As a result, plastic containers specifically HDPE, PET and Co-PET rose to new price heights, which ultimately were passed on to the consumer.

The abundance of plastic use and the ever-growing environmental responsibility to minimize its carbon footprint has prompted retailers to seek alternative beverage containers. 2022 will see retailers devoting more shelf space to bag-in-box and aluminum beverage containers. By the end of 2022, bag-in-box will become the dominant alternative delivery system for both private label and branded water in all sizes above 3 liters. Aluminum cans will be the single serve alternative to plastic bottles.

Predicated upon the high demand for corrugation, prices have risen to an unsettling level with no end in sight. This too has been passed on to the consumer. This becomes an issue of cost versus function. Manufacturers will look for alternatives.

One of the major water companies in the country has minimized its corrugated use in shipping gallon water. They utilize an effective shrink wrap that maintains the integrity of every case they ship. Consequently, they have eliminated a major cost component and are able to keep their pricing at fair retail value. This will become a trend in 2022, prompting heavy corrugated users to look for alternative shipping capabilities.

Pallets since January 2021 have risen from a low of $5.25 for a No. 1 pallet to as high as $22.50 in some areas of the country for that same pallet. Harvest seasons throughout the country further drive up the cost because of the reduced amount of pallets available in any one area of the country. Once again, the costs are passed through to the consumer.

The fact there are limited choices regarding pallets has sparked innovation. Orbis, a maker of pallets, is investing in plastic pallets. The company sites a recent Virginia Tech lifecycle test that indicates plastic pallets can handle 10-20 times the number of trips wooden pallets can manage. 2022 will see plastic pallets enter the distribution cycle in greater numbers as the year progresses.

The cost of normal shipping has risen substantially, with rates doubling in some parts of the country. Manufacturers that depend upon independent carriers have gotten slammed with high transportation costs. The shortage of drivers and driver time restrictions have accelerated the uncertainty of even securing a carrier on a timely basis.

This too is a cost passed on through to the consumers. I believe shipping will get worse before it gets better. Fuel cost will rise throughout the second half of 2022 with manufacturers suffering higher freight costs and lower profit margins.

In 2021, the consumer shopping experience was not pleasant. One reason was the meteoric rise in prices, much of which came from the food and beverage industry. Consumers also witnessed critical shortages of toilet tissue, paper towels and other weekly staples. When they roam their grocery store, they are faced with reduced to no inventory on some products. The products they do purchase are at higher prices than they have been in a year.

We need to get back to fair pricing on raw materials and pass those considerations back to the consumer. High cost and inadequate inventory drive consumers from brick-and-mortar stores to alternative shopping methods. Otherwise, consumers will buy less, growing more of their own food – a trend already growing in the 20-40 age group – and shopping at local and independent markets before paying premium cost anywhere else. High cost of raw materials cripples manufacturers and kills the desire of the consumer.

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