Packaging industry: Between opportunities and challenges

Many in the industry refer to the removal of the minimum euro exchange rate by the Swiss National Bank in January 2015 as a "franc shock". The smoke and mirrors of this measure have now cleared, but even three years later, parts of the economy are still struggling with the consequences, one example being the packaging industry. Its players are in competition with European rivals - and the strong franc exchange rate is not the only problem. Even before the "franc shock", foreign competitors were already offering lower quality products at dumping prices, which have now become established in certain market segments. The industry is also struggling with a shortage of skilled workers. That's why we keep hearing the question: What's next? This much in advance: insiders are divided in their opinions.

"Largely stable situation"

Few people in Switzerland have such a profound insight into the Swiss packaging market as Philippe Dubois. The President of the Swiss Packaging Institute (SVI) in Bern knows the stakeholders in the industry, as almost all of them, from SMEs to large companies, are associated with the SVI. The president of the institute is pragmatic when asked about the status quo in "his" industry: The situation is "largely stable", which in the aftermath of the 2015 currency crisis is mainly due to the high adaptability and innovative capacity of many companies.In this context, those companies that specialize in high-quality products - and represent them confidently - have been particularly successful. "We have found that packaging with low added value is increasingly being produced abroad," says Dubois, "and Swiss packaging must therefore offer added value in the medium to higher price segment. For example, in the areas of design and sustainability, but also in technical developments and sophisticated constructions.

"Swissness" as a tool in B2B marketing

"Swissness" is still (at least indirectly) an asset that you can use to your advantage. Although the fact that a product packaging was manufactured in Switzerland does not reach the end consumer, Swiss packaging producers have an excellent reputation with B2B contacts. Philippe Dubois comments again: "You could say that the Swissness of the Swiss packaging industry goes hand in hand with the characteristics that are attributed to the Swiss abroad: high quality standards, inventiveness, precision and reliability as well as excellent support for business partners."

Higher prices, higher value for money

In a nutshell, the SVI President's position can be summarized as follows: Yes, Switzerland may sometimes be more expensive when it comes to the packaging trade - but the end product is also of a higher quality.However, Dubois concludes, there is one thing he would like to see: more cooperation between the individual players in order to pull together in international competition. "More solidarity between partners along the value chain," he says, "is crucial to guaranteeing the medium and long-term success of the packaging industry."

Higher prices, higher value for money

In a nutshell, the SVI President's position can be summarized as follows: Yes, Switzerland may sometimes be more expensive when it comes to the packaging trade. However, Dubois concludes that there is one thing he would like to see: more cooperation between the individual players in order to pull together in international competition. "More solidarity between partners along the value chain," he says, "is crucial to guaranteeing the medium and long-term success of the packaging industry."

Cautious optimism?

When she looks at the packaging industry in Switzerland, Elisabeth Model is "cautiously optimistic". She is Vice Chairman and COO Switzerland of the Model Group, which produces high-quality packaging solutions from solid and corrugated cardboard. With 15 production plants in five national subsidiaries, the company employs more than 4,000 people. "The majority of our plants are well utilized. However, the fact that manufacturers were unable to fully pass on the massive rise in raw material prices - especially for paper - in their packaging prices last year remains a problem," says the expert, who sees the "franc shock" of 2015 retrospectively as a kind of wake-up call: "The situation at the time was extremely challenging for the Swiss industry. As a result, we worked even harder and at the same time put a lot of energy into optimization projects. Today, we are fitter and more automated than many of our competitors abroad and can also benefit somewhat from the stronger euro," explains Elisabeth Model. So is her forecast entirely positive?

Displacement market and shortage of skilled workers

No, because the COO continues to urge caution: despite all the cautious optimism, the situation remains complex. Cheap money and EU subsidy policies have led to supply on the packaging market far exceeding demand. "As a result, a cut-throat market has emerged, leading to ruinous prices. More and more small manufacturers are having to give up, while large ones are getting bigger and bigger - a classic concentration process is taking place," says Model, adding that growing e-commerce is also having an impact on the product range that companies are offering: "It can be seen across Europe that corrugated cardboard packaging is booming due to growing e-commerce, while sales in the folding carton sector have been falling for years." In general, e-commerce and digitalization: these trends are changing daily work and traditional B2C structures. "We therefore not only want to invest in technology, but also work intensively on our service culture, which is an important part of our corporate culture.the more digital the world becomes, the greater the need for good personal service will be. We are focusing on empathetic, empathetic employees and a better quality of encounter," says Elisabeth Model.

Recruitment is becoming more difficult

For the latter point in particular, it is important that the recruitment of skilled workers is becoming increasingly difficult. "The packaging industry is very capital-intensive," explains the COO, "and in order to generate a reasonable level of profitability, you have to work in shifts." Fewer and fewer employees are willing to do this. The Model Group is therefore increasingly forced to hire people from outside the industry and train them itself.

Technological lead is shrinking

Roberto Polizzi, board member of the Association of Swiss Packaging and Logistics Professionals (VLI), believes the industry is well positioned technologically. However, the lead over foreign competitors is increasingly shrinking. "It is becoming increasingly difficult to maintain a leading position," says Polizzi, adding that Switzerland has the advantage of having a high standard of education and skilled workers who are therefore able to implement innovations quickly. But: "Today, this is no longer a unique selling point," he points out.

Quo vadis, packaging industry?

The comments made by the various industry insiders show: There is no consensus in the packaging industry as to what the future holds. Managers are maneuvering their companies through a period of upheaval characterized by strong international competition, and they can now act pro- or anti-cyclically - engage in the price war with competitors from the EU, simplify their own production processes and lower their product quality standards. Or they can - and this is what it looks like at the moment - focus on what Swiss producers can do better than their international competitors, and ultimately what the packaging industry's customers (and end consumers) want will also play a role here. When SVI President Dubois emphasizes that consumers cannot tell whether packaging comes from Switzerland, he is right. But they sense quality and pay attention to design and sustainability. If Swiss packaging companies can emphasize this in B2B contact and make it credible that it is also reflected in end consumer sales, then a first step seems to have been taken.