Rise in raw material prices

From January 1, 2023, the mandatory packaging labeling enters into force, affecting not only producers but also distributors, importers, and retailers of products. Packaging labeling: mandatory since January 1, 2023. Environmental labeling consists of applying a specific label to all packaging placed on the Italian market, to facilitate its collection, reuse, recovery, and recycling, while providing information both on the packaging composition and on its correct disposal by the consumer.   Find out more: “The environmental label in packaging: what the Italian regulation says”   How the new packaging labeling works The new regulation on packaging labels was introduced to ensure a uniform level of consumer protection throughout the European Union (EU). Indeed, product labeling will provide consumers with more precise and comprehensive product information, ensuring greater transparency in the supply chain. Therefore, with the onset of the new year, from January 1, 2023, it is mandatory for all companies to label their products in compliance with the new European regulation on product safety.   Specifically, the decree establishes that «all packaging must be appropriately labeled, according to the procedures established by the applicable UNI standards, to facilitate the collection, reuse, recovery, and recycling of packaging, as well as to give correct information to consumers regarding the final destination of packaging».   The guidelines were adopted by Ministerial Decree no. 360 of September 28, 2022. From January 1, 2023, however, it is no longer possible to place packaging on the market that lacks environmental labeling. Conversely, packaging already on the market or labeled as of January 1, 2023, can be marketed until stocks are exhausted. Failure to comply with the eco-label will be penalized with a fine ranging from 5,000 to 25,000 euros. This document is the result of the work carried out by the Ministry together with the technical group of CONAI, the National Packaging Consortium.   What the new packaging regulation covers The new labeling requirement stipulates that all packaging on the national market must feature the alphanumeric code identifying the material used. If intended for household use, packaging must indicate, in addition to the type of material it consists of, the instructions for correctly disposing of it in separate waste collection. Specifically, the mandatory information to be applied on packaging aimed at the final consumer is as follows: the alphanumeric coding of the material; collection instructions, along with an invitation to check the provisions of one's own Municipality. To these, further optional but highly recommended information can be added: the type of packaging: bottle, flask, tray, label, and so forth; information to improve collection quality, such as flattening or rinsing the package before throwing it away, or removing the label.   Regarding multi-component packaging, components that cannot be separated manually must be distinguished from those that can be separated, indicating for each the composition material code and separate collection methods. For packaging related to the industrial or commercial sector, such as for display, logistics, and transport activities, packaging may omit collection information but must mandatorily report the alphanumeric code of the material in use. Producers and distributors can also choose to communicate information regarding product composition and disposal via digital media, for example: scanning QR codes; via apps; visiting websites.   Furthermore, each label has its own color: blue for paper, brown for organic waste, yellow for plastic, turquoise for metals, green for glass, and gray for unsorted waste.   In conclusion, product labeling must be clear, legible, and understandable to all consumers. The mandatory labeling of products represents an important step in consumer protection throughout the UE, as it will provide consumers with clear and precise information about the products they purchase, ensuring greater transparency in the supply chain and protecting their health and safety.   Read also: “Recycled and recyclable paper: the differences between the two processes”

Who are the pilots and what is their mission? The pilots are a team of innovation’s representatives of each alliance’s member (see below for more detailed information). They define themselves as: “We are a bunch of pragmatic and entrepreneurial colleagues on a mission to discover sustainable, corrugated based packaging solutions that will bring value to our most respected global customers.” For them, identifying the precise issue to be solved and co-design tomorrow’s solution is one of the best ways to serve our customers. How do they do it? By offering exclusive working sessions together with clients and cross-functional profiles (marketing, R&D, designer, production manager) and one of the partners of the European innovation eco-system. Based a design thinking method facilitated by Board Of Innovation with Michiel Mol and Robin Vermeulen, the objective is to quickly prototype and to accelerate projects that are already identified or that will be soon in the pipeline. In November 2022, the Innovation Academy was hosted at H.B. Fuller’s location in close partnership with Elizabeth Staab and Martin Riswick. Even with the COVID situation, it was decided to maintain the session, on a hybrid version that was really appreciated by our clients: "Even if this was done remotely, this was interactive, really appreciate their enthusiasm to work on the topic”European Packaging Engineer With an average success rate of 8.34/10, the Innovation Pilots have decided to continue this very valuable and customer-centric event and to set-up four Innovation Academies for 2022. Please save the dates! March 2022 (date to be confirmed) – topic: how to design alternative to single use plastic in the beverage industry? – France - already full 5th to 7th April 2022 – topic: how to tackle e-commerce supply chain impacts? – location to be defined 13th to 15th September 2022 – topic: how to identify paper-based options for your business? – location to be defined 15th to 17th November 2022 – topic: how can we imagine the future of e-commerce? – location to be defined Do you want to know more about the program and the topic? Please have a look at the document! 2022_BBP_HbFuller_Innovation-Academies_Teaser-1Download Do you want to have an entire team dedicated to your issue? Please contact us! daphne.deledicq@vpkgroup.com Origin of the European Pilots team Since January 2021, our Chief Innovation Officer, Daphne Deledicq decided to create a dedicated team in order to answer global customers’ requests and to work together on key strategic packaging topics, sustainability and e-commerce . This team gathers packaging design experts from the alliance with complementary profiles: VPK: Arnaud Bertelli and Nikolaas Verhelst Klingele: Christian Hoessle Hinojosa: Norman Masia Cart-One: Daniele Plazzi and Fiorentino Pirone Most of them were already the ones trained in 2019 for FFP certification #Ecommerce / #Sustainability

The upward trend in prices shows no signs of slowing down, now reaching 70% for cellulose; and while we have been witnessing unprecedented increases in raw materials (such as steel, wood, and gas) for six months, we are forced once again to question the future of production supply chains, put to a severe test by prices that are now skyrocketing. Italian companies are further burdened by increases regarding energy costs, making it necessary to find solutions to avoid halting entire production chains. In particular, the companies facing the greatest difficulties are micro, small, and medium-sized enterprises, upon which falls a double sword of Damocles represented by the cost of raw materials and energy. Data from Confartigianato shows that the most "expensive" effect is evident in the North-East of our country, home to numerous companies and businesses, including family-run ones. In this area, the rise in raw material prices weighs on micro and small enterprises by 3.3% of GDP.  The impact has also swept through the North-West, affecting it by 2.8%, while for micro and small enterprises in Central Italy, the impact drops to 2.3%; the lowest impact is recorded in the Mezzogiorno, standing at 1.8%. The issue of the unavailability of raw materials puts the very existence of companies to a severe test, forcing them to turn down orders both due to the difficulty of sourcing raw materials and the impossibility of honoring quotes made months ago.  Confartigianato announced that the percentage of companies operating in the construction sector reporting materials shortages as an obstacle to production rose to 9.5% in September 2021. Raw materials: how they affect economic recovery The high cost of raw materials and their unavailability represent an obstacle to recovery. Despite increasing orders, we are witnessing a slowdown in investments as well as innovation processes, and the demand for labor is falling. Some are even attempting to access social safety nets.  There is a growing need to monitor speculative maneuvers; therefore, the introduction of price control mechanisms, as in the case of the energy sector, would be appropriate. How the packaging sector is facing the crisis  The restart within the packaging sector brought about an increase in requests, but successive lockdowns and restrictions had previously forced businesses to slow down. In doing so, a gap was created between market demands and actual response capacity. Currently, the packaging sector is weighed down by price increases in cellulose, in addition to the costs of waste paper and gas costs, which have now skyrocketed. Some paper mills are thinking of countering the situation by temporarily suspending operations, all to avoid producing below cost. The overall picture of increases puts production to a severe test: for instance, long-fiber NBSK has seen increases of 60%, while it amounts to 70% for short-fiber eucalyptus. These increases translate into a price per ton of 1,350 dollars for long-fiber and 1,150 dollars for short-fiber, according to Assocarta data. Paper and cardboard for recycling have risen by 138% and 143% respectively, marking prices from 155 up to 170 euros per ton. Therefore, anyone wishing to purchase raw materials for recycling pays much more for them. What are the reasons for the price increases in paper and cardboard for recycling? The advent of the pandemic changed our purchasing habits. On one hand, there was a greater demand for packaging due to the explosion of e-commerce and the creation of packaging destined for takeout. Furthermore, the increased demand for sustainable containers led to paper and cardboard being identified as the primary candidate for replacing single-use packaging. It must also be considered that the paper sector is among the most energy-intensive. The increase in the cost of gas, as also reported by Assocarta, has been rising since the summer of 2020 and unfortunately tends to grow without showing signs of slowing down. This has significantly impacted the finished product. At times, price increases are equal to 5%, and even up to 10%. For this reason, according to some paper mills, it will be necessary to halt production, at least until more affordable gas costs can be accessed. How much does the cost of energy impact the cost of packaging? According to estimates reported by Il Sole 24Ore, energy represents 30% of the total costs incurred, and therefore, even if turnover tends to increase precisely because of a greater demand for paper and cardboard packaging, profit margins tend to narrow due to high energy costs. Among the most affected sectors is tissue: we are talking about sanitary and household paper, because this segment, due to its type of production, needs to secure agreements lasting at least six months, a timeframe too long to allow for the forecasting of final prices. How much do the new EU regulations on packaging influence price increases? As we have repeatedly explained in previous articles, packaging is at the center of a revolution. The need to reduce or eliminate plastic volumes within packaging has caused the demand for cardboard to soar. Faced with a stable production capacity, an increase in cardboard demand was generated, which in turn, in this delicate situation, caused a general price hike: Linerboard with corrugated medium → +65% Graphic paper → +15-20% Tube paper → +55% Paper and cardboard are among the most recyclable materials. In our country, we have achieved a good level of circularity regarding paper collection and recycling, giving life to a more sustainable production cycle. At the moment, a large volume of orders is being recorded, but it is impossible to fulfill them. As pointed out at the beginning, the e-commerce boom made manufacturers aware of the need to provide a massive amount of packaging.  How should packaging production be rethought? The crisis in the paper sector also asks us to rethink our relationship with packaging which, especially regarding primary packaging, carries aesthetic value, product recognition, and so on. At present, efforts are being made to review the concept of packaging, particularly based on functionality, so as to align production and optimize it solely and exclusively to meet specific needs. While we have already talked in the past about packaging design in terms of resource savings and waste reduction, this requirement has now become a true diktat to be followed.