Consumer-goods companies are increasingly substituting paper for plastic packaging due to regulatory pressure and scrutiny from consumers. Meanwhile, laws banning single-use plastic implements and foam food containers continue to gain traction worldwide. Additionally, a sharper tilt towards online shopping is driving strong demand for corrugated packaging as e-commerce shipping volumes surge. These trends are bullish for paper packaging companies and for the timber and forestry industry in general.

Related ETFs & Stocks: Invesco MSCI Global Timber ETF (NYSE: CUT), International Paper Company (NYSE: IP), WestRock Company (NYSE: WRK), Smurfit Kappa Group Plc (London: SKG

War on Petroleum-Based Packaging Gains Traction

Over 300 million metric tons of plastic are produced annually, and packaging is the largest segment, accounting for 40% of plastic usage. Much of that is made up of single-use items that end up in a landfill or the environment. Researchers have concluded that less than 10% of plastics get recycled globally versus a 58% recycling rate for paper.

Accordingly, attempts to switch from plastic to paper-based packaging solutions are picking up pace, particularly in Europe, which is implementing new regulation to curb plastic waste. Laws banning the use of polystyrene, also known as stryrofoam, for food and drink packaging are also being enacted. In America, Maryland became the first state to implement such a ban this month, with Maine, New York and Vermont soon to follow.

These trends brighten the outlook for paper packaging. The biggest challenge, of course, is that paper does not have the water-resistant, grease-resistant, sealing properties that help keep products fresh, sanitary and stable. Unlike plastic, which can provide a high oxygen and moisture barrier, paper is inherently porous and hydrophilic (attracts moisture). As such, it provides only a limited barrier for perishable or sensitive products like food, baby formula, or over-the-counter drugs, for example.

To get around the limitations of paper for perishable products, companies are experimenting with material properties to try to narrow the gap between plastic and paper when it comes to product protection.

Consumer Goods Giants Pivot to Paper Packaging

The world’s biggest packaged-foods makers realize at this point that much of their carbon footprint is produced early on in the supply chain, including from raw materials and in packaging. Many are investing in initiatives that will lessen their reliance on plastic. In most cases, it involves a greater use of paper for packaging.

Diageo, PepsiCo and other beverage industry conglomerates are scheduled to roll out paper-based bottles for some of their products in the coming year. Diageo’s first launch will be for its Johnnie Walker whisky brand in 2021, and the bottle will be made from sustainably-sourced wood pulp. Pernod Ricard is set to trial a paper-based bottle for Absolut Vodka…

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