The global contract packaging market size was valued at USD 72.59 billion in 2021. It is expected to reach USD 191.02 billion by 2030, growing at a CAGR of 11.35% during the forecast period (2022–2030). Contract packaging refers to the process in which one business contracts with another (the contract packager) to create the packaging, assemble, kit, store, and distribute the goods. Most of the time, businesses employ a contract packaging company with the capabilities and ability to manage their packaging supply chain because they lack the funds, time, or resources to develop their manufacturing and packaging facilities or invest in expensive machinery.
Contract packagers, usually called co-packers, can frequently provide
Many contract packagers focus on one specific packaging, such as corrugated (cardboard), shrink wrapping, or bottling. Others concentrate on packaging for niche markets like food, electronics, automobiles, or pharmaceuticals. Additionally, the expansion of the e-commerce sector is probably fueling market growth over the projection period. Contract packaging is becoming more prevalent due to the strict laws and regulations that many governments enact on the labeling and packaging food and medicinal products.
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Companies Outsourcing Non-Core Operations to Attain a Competitive Advantage
Industries have been modernizing and adapting to the constantly evolving wants of consumers while also modifying their processes, which has allowed them to stay competitive. Outsourcing their non-core operations is frequently the wisest course of action. Furthermore, staying on the cutting edge of the business in competitive, evolving marketplaces can be challenging due to the intricacy of learning ancillary specialties, and the scope of practices required to sustain efficient operations frequently goes beyond manageability. Consequently, outsourcing is more popular than ever, particularly in the packaging sector, where forward-thinking producers seek the assistance of contract experts for help with overall packaging requirements.
Growing Demand for the E-commerce Industry
Modern technology is widely adopted and driven by e-commerce packaging businesses. The demand for packaging solutions by the sector to better meet client expectations has also been fueled by the growing number of e-commerce businesses operating globally. Contract packaging drives innovation for significant CPGs and offers end-to-end services for startups selling through the e-commerce distribution channel. This growth can be seen over the past ten years. In the e-commerce sector, co-packers serve as a procurement arm, a storage arm, and a packaging production arm to expedite the supply chain. The e-commerce sector depends on supply chain speed to provide the quickest client experience.
Strict Government Regulations
The food & beverage, pharmaceutical, and cosmetic product industries are the main end customers of contract packaging. These products are typically packaged in various materials, including paper, metal, and plastic. Incorrect concentrations or quality degradation in these materials may cause the packaged items to be damaged, which will impact the final product. Due to this, several governmental organizations, including the EU food, contact materials regulations for importing, exporting, or manufacturing food packaging materials. Europe has established numerous state and national regulations to reduce the use and disposal of particular packaging materials and mandate the least amount of recycling requirements. Therefore, strict government pushes the contract packing market backward.
The global contract packaging market is segmented by packaging, end-user, and region.
Packaging-wise, the global contract packaging market is classified into Primary, Secondary, and Tertiary.
The Primary Packaging segment holds the largest market share and is expected to grow at a CAGR of 10.48% during the forecast period. The user can safeguard and maintain the product from external contamination, damage, and spoilage by using primary packaging, which comes into direct contact with the product or is the first packing layer in which the product is wrapped. Primary packaging is essential to many businesses, including the food and beverage sector, to retain fresh items. Primary contract packaging is used for the industry to concentrate on producing the highest-quality product that meets consumer standards.
Secondary Packaging has become more widely used due to the rising demands for safety, physical and barrier protection, secondary containment, compliance with regulations, and protection. Cardboard cartons, cardboard boxes, cardboard/plastic crates, small inflatable air pillows, bubble wrap, loose-fill, and labels are common secondary packing goods. Secondary packs are the consumer's first experience with the brand. For their products to be recognized on aisles, brands have partnered with a standard packing style.
Tertiary Packaging helps to safeguard secondary packing. Tertiary packaging speeds up the transit process and ensures the secure handling of commodities or grouped packaging. Tertiary packaging's primary uses are for transportation and product protection. Secondary packing protects against mishandling and physical damage that happens during transportation.
End-user-wise, the global contract packaging market is bifurcated into Food, Beverage, Pharmaceutical, Household & Personal Care, and Others.
The Food industry holds the largest market share and is anticipated to grow at a CAGR of 10.63% during the forecast period. Food companies have outsourced their packaging services activities to third-party contract food packagers in response to the rising demand and shifting preferences of food production firms toward contract packagers. Various vendors provide a variety of services, some of which include vertical contract form fill seal (VFFS), food bagging, food pouch filling, food shrink wrapping, food fin seal wrapping, food variety packaging, food carton loading, food date, and lot coding, food labeling, food case packing, food and beverage pallet display, composite can, dry packaging and more.
Food companies are also increasingly focusing on cost optimization and their core businesses. In Addition, incorporating nanotechnology into the production of convenience foods has significantly improved vital processes, such as the preservation process, package design, and finished goods processing. This technology is predicted to significantly increase businesses' need to outsource their goods' packaging to organizations offering contract packaging services.
Contract packaging for Beverages has become popular due to vendors providing the necessary technical expertise and prompt and cost-effective solutions while keeping hygienic processing standards in mind. As a result of the growing demand for essential infrastructure to process beverages and juices, beverage and juice manufacturers began concentrating more on core activities. The suppliers will source natural components, blend and fill juice or beverage products, code-date and label the bottles, HPP the finished goods, case pack and manage inventories, and handle distribution to end users. Consequently, vendors can streamline the production of juice and beverages, allowing manufacturers to concentrate on brand promotion. The suppliers are involved in co-packing numerous beverage varieties, including ready-to-drink beverages, fruit drinks, carbonated drinks, energy drinks, low-calorie drinks, nectar-based drinks, functional drinks, herbal drinks, and zero-sugar beverages, among others.
Contract packing for Household & Personal Care includes packaging for lip balms, body balms, lotion, deodorant, etc. To retain cost-effectiveness and lower maintenance and operational costs, several manufacturing companies also contract out the packaging of their products to third-party packaging providers while focusing on their primary business.
North America Surpasses Rest of the World
Region-wise, the global contract packaging market is analyzed across North America, Asia-Pacific, Europe, South America, and the Middle East and Africa.
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North America commands the market and is estimated to grow at 10.43% CAGR during the forecast period. The region's contract packaging industry is expanding quickly due to the rising need for packaging in food and beverage, pharmaceuticals, personal care, and other industries. Numerous contract packaging businesses in the US have adapted to the challenging business climate. They are becoming more aware of the fierce global competition, cost challenges, and highly fluctuating OEM demand. The rising demand positively impacts the demand for contract packaging in the area, the shifting preferences of manufacturing companies toward contract packagers, and the US government's implementation of various laws and regulations on the labeling and packaging of food, beverages, and pharmaceutical drugs. Moreover, the cannabis industry anticipates expansion in the food and beverage, health and wellness, cosmetics, skincare and topicals, pet supplements, and pharmaceutical sectors, demonstrating the potential for contract packaging.
Europe holds the second-largest market share and is estimated to account for USD 36.52 billion by 2030, growing at a CAGR of 10.26%. The most populous nation in the region is Germany. The country now holds the largest market share in the area for products used in healthcare and home care. To improve aesthetics and ensure sustainability, businesses in Germany are implementing new packaging strategies. Due to hospitals focusing increasingly on sterile and disinfected packing of medical devices due to an increase in viral infections and many strict government safety standards, the packaging of healthcare devices is growing in Germany. Additionally, the UK's retail sector is expanding steadily, providing plenty of opportunities for the packaging business to expand.
The beverage, food, pharmaceutical, and other industries are all growing in China, one of the key economies in the Asia-Pacific region. In the market for contract packaging, it also occupies an important place. One of the most appealing nations for outsourcing is now China. As a result of more and more suppliers entering the market, co-packing services are growing domestically. In Addition, the nation is emphasizing green packaging due to growing interest in sustainable packaging. Industries like beverages, home and fabric care, personal care and toiletries, pharmaceuticals, and pet care are India's primary focus and drivers of the contract packaging industry.