It is good to make headlines but certainly not for the wrong reasons. Interestingly, throughout 2018 packaging made headlines all over the world with impacts on aspects that make the very packaging spectrum. The good news is that the packaging industry, in general, is steadily growing and research agencies have indicated that by 2022 the global packaging demand will grow to worth US$ 980 Billion while for the Middle East and North Africa (MENA) region the figure would be approximately US$ 72 Billion by 2022. But if we look at the CAGR, MENA region leads with 5.1%, which is certainly better than the world average. The economic ebb and flow go on as usual.
The region welcomed the new year 2018 with value-added tax (VAT) implementation in Saudi Arabia and the UAE, the two biggest economies of the region and there was the obvious impact on the manufacturing industry including Packaging, in the first quarter of 2018. Completing its first year of the implementation, experts believe that the imposition was very smooth, transparent and successful. Inflation is expected to drop as the impact of VAT implementation in Saudi Arabia and the UAE disappears and price pressures in Egypt decline as the effect of subsidy reforms fade. In 2019, the forecast for regional inflation is 6.7%, which is expected to further decline to 5.4% in 2020. Though, it would be interesting to see the impact of VAT when other Gulf nations, including Bahrain, Kuwait and Oman would be introducing that in 2019. In spite of the VAT implementation and other regional geopolitical challenges including the expats’ levy in Saudi Arabia and the Qatar disconnect with other neighbouring countries, the good news is that the packaging industry, in general, is steadily growing.
The MENA market has its own typical requirements of packaging, which is highly centric with consumer requirements and connected to the local traditions. 2018 was a challenging year for the manufacturers as well as for the brand owners since the market macro trends of uncertainty and people on the move had a great impact on the business. Some micro trends and their drivers like single person household, smaller pack sizes and digital retailing also impacted the market dynamics and the packaging industry in general. Buzzwords that had and will continue to have an impact Some of the topics which were discussed most in 2018 among the packaging fraternity world-wide including MENA were Sustainability, Circular Economy, Mono-Polymer, Smart Packaging, Plain packaging, Portion packs, Plastic Ban, E-commerce, Artificial Intelligence, Industry 4.0, automation & Robotics and most importantly the Cost-effective solutions to cater to the end-consumer and every other member of the cost-conscious value chain.
Well, let’s look at 2019. The oil sector continues to play a key role in shaping the overall macroeconomic outlook in the Middle East, spite major efforts to diversify the economies and reduce the reliance on oil. Oil production in the GCC in the first five months of 2018 was in line with levels seen in 2017. Since the Packaging industry gets impacted by the price fluctuation of oil, no drastic change is expected in 2019. MENA packaging sector looks set for steady growth in 2019. Issues related to transformative technologies and regulatory compliance will remain hot topics for discussion in 2019 because these have the potential to impact the growth and operational efficiency of the manufacturing industry, profit margins and financial performance of the retail industry, making it imperative to match expectations of ever demanding and impatient consumers through convenience and satisfaction.
Continued Growth despite Challenges
In spite of prevalent challenges, the MENA packaging sector looks set for steady growth in years to come as the regional demographics is youthful and trendy. Higher economic activities and development of infrastructure including retail in a couple of MENA countries increase business opportunities for the packaging industry in the region across all its segments like food and beverage, personal care, cosmetics, healthcare, luxury, or industrial are promising indeed. Finding solutions to challenges in a collaborative way would be the key to stay ahead in the growth curve. Packaging trends to watch in 2019. Below are some important trends to watch for in the industry this year. They could turn out to be business opportunities.
Sustainability will continue to be a key agenda of the Packaging Industry in the MENA. Brand owners and packaging manufacturers have implemented the sustainability drive with a focus on waste reduction, resource reduction and process improvements. Use of recycled materials and lightweight packaging would be another important concern among the regional players not only because it’s part of the sustainability drive but also because it provides an opportunity to make the packaging format cost effective for the producers and the Brand Owners.
Flexible packaging is also growing due to recyclability, affordability, lightweight and growth in packaged foods overall. This increase is especially evident in regions such as the Middle East and Africa, Asia Pacific and Western Europe. “The increased focus on sustainability drives the growing demand for more energy efficient machines. With the growth of flexible packaging, we are seeing additional demand for filling and closing machines able to handle his type of packaging material,” said Charles D. Yuska, president and CEO, PMMI, The Association of Packaging and Processing Technologies.
Portion packs or smaller pack sizes are also expected to grow in the region as this provides the convenience of on-the-go, young Arab digital generation and portion control safe food option to the health-conscious consumers.
A large chunk of regional consumers are considered to have higher buying power and they always look for premium products. Brand Owners would like to keep on capitalizing on that by offering new products with premium and innovative packaging in various categories to increase their market shares.
Consumer convenience and the ease of opening and use of packaging would remain the most important elements of any packaging format. Integration of augmented reality and intelligent packaging will also be expected to grow for niche segments. In spite of an economic downturn, Packaging manufacturers and brand owners of MENA are expected to continue to invest in innovative packaging in terms of machine, materials and designs. A bright future of the packaging industry lies ahead for sure.
Editor in chief, Packaging MEA Publications
This feature was originally appeared on Packaging MEA Magazine (www.packagingmea.com)