Paper sack industry well positioned despite ongoing crisis

With an increase of 3.3 per cent in the number of bags delivered compared to the previous year, the German paper bag industry will again be in second place in a European comparison in 2021. In its second largest market segment, chemicals, it recorded growth of +11.8 per cent, and in building materials (excluding cement) it was +2 per cent. There was also moderate growth in paper sacks for animal feed (+3.3 per cent) and foodstuffs excluding milk powder (+2.1 per cent).¹

Looking back on a year full of challenges

Lack of paper supply, sharp price increases for raw materials and supplies, and a significant shortage of staff due to illness and quarantine - last year, GemPSI members proved that they knew how to handle the effects of the Corona pandemic with aplomb. They countered the poor supply situation with close coordination with customers and suppliers and forward planning. The pandemic-related shift cancellations were largely compensated for by the willingness of healthy employees and extra shifts. Industry representatives indicate that the desire for sustainable packaging has gained further momentum among customers. In addition to brown bag paper and material reductions, recyclability of packaging has become increasingly important to paper bag customers. For the recycling of kraft paper sacks, GemPSI introduced the established REPASACK take-back system 30 years ago, through which more than 20,000 tonnes of kraft paper sacks from industry and commerce are recycled annually.

Only sufficient supply at the beginning of the year

The starting situation for the German paper sack industry remains tense in 2022: The representatives surveyed state that the availability of operating and auxiliary materials has deteriorated further since the beginning of the war. Among other things, the industry is affected by the import ban on kraft paper from Russia. In particular, the supply of sack kraft paper and freights was insufficient. The situation was only slightly better for packaging material and plastic films. Delivery times are unpredictably long due to insufficient freight space and prices for materials, energy and gas continue to rise. Thus, according to GemPSI members, delivery dates as well as prices cannot be confirmed bindingly when orders are accepted. In order to nevertheless ensure the highest possible security of supply, they make long-term forward-looking agreements in close consultation with customers. Despite the circumstances, the German paper sack industry was able to meet a 4.8 percent increase in demand in the first quarter compared to the previous year².

Forecast for 2022 basically good

This results in the assessment of the business outlook for 2022 as satisfactory with a tendency towards good (2.7 points)³. The German paper sack industry sees itself well positioned in the market (1.7 points)⁴, as the paper sack is an environmentally friendly, easy-to-use packaging with safe product and hygiene protection. The majority of members expect increasing sales and a stable development in the individual customer segments. For the coming autumn, however, they see more pandemic-related shift cancellations ahead. "Our goal continues to be to act flexibly and to develop pragmatic solutions together with all stakeholders to ensure a supply of paper bags that meets demand and deadlines," says Alfred Rockenfeller, Chairman of GemPSI.

In focus: paper sacks for food and feedstuffs

Paper sacks for food, including powdered milk, form the third-largest market segment in the German paper sack industry. In 2021, around 118 million paper sacks for food were delivered throughout Germany. In the first quarter of 2022, demand for paper sacks for food (excluding milk powder) remained at the previous year's level (+0.4 percent), while it increased significantly for milk powder sacks (+30.2 percent). In the coming half of the year, the majority of respondents expect a stable development. There was also growth in 2021 compared to the previous year for paper bags for animal feed. A total of 58 million paper bags were delivered, which means that the segment accounted for seven percent of the German market. Here, too, the positive trend continued in the first quarter of 2022: Compared to the same period last year, 3 percent more sacks were delivered.⁵

Market segments with a lot of potential

Due to the high demands placed on paper bags by food and feed producers as well as increasing legal requirements, manufacturers are prompted to keep working on optimisations. As a result, according to the interviewees, these segments are increasingly taking on a pioneering role in the industry, as the innovations bring advantages for other markets. What is most important to customers is good hygiene protection, ensuring food safety (both 1) and traceability (1.3). Likewise, they attach particular importance to purpose-specific barrier layers (2.3), grade purity (2.7) and dust-free (2.8) when choosing packaging.⁶ In the future, GemPSI members expect requirements and certifications to continue to increase, which could result in good growth opportunities for the segments over the next five to ten years. "We offer a comprehensive range of hygienic packaging with high product protection," says Rockenfeller. "With excellent service and education about our service portfolio, we see good opportunities to sustainably inspire our customers."

1. Figures from EUROSAC Statistics 2021, May 2022
2. Figures from EUROSAC Statistics 2021, May 2022
3. Rating on a point scale from 1 "very good" to 5 "very poor".
4. Rating on a point scale from 1 "very good" to 5 "very poor
5. Figures from EUROSAC Statistics 2021, May 2022
6. Rating on a point scale from 1 "extremely important" to 10 "extremely unimportant".