Luxury Packaging Market

Market Overview

The global luxury packaging market size was valued at USD 19,448 million in 2021 and is expected to generate USD 30,525 million by 2030. The market is projected to grow at a CAGR of 5% during the forecast period (2022–2030). 

The brands in the luxury industry are known to keep up the premium quality of materials used, including packaging. As the demand for luxury brands expands, the packaging industries for premium brands are anticipated to boom. Additionally, luxury brands are keen to maintain their brand name and strengthen their brand identity wherever possible globally.

Furthermore, the growth of the cosmetic and fragrance industries would create scope for the market. China is witnessing tremendous growth in the cosmetics market. Increased demand, driven by the growing wealth among the world’s biggest female workforce and the rise of e-commerce, has transformed the Chinese market, allowing foreign luxury brands to penetrate more than 500 Chinese cities. Also, the rapid rise of e-commerce is allowing brands to reach customers outside the most developed Chinese cities. Luxury players like Estee Lauder have benefited from the e-commerce boom in China.

The growing demand for travel and retail chains that offer luxury and premium brands of various products is augmenting the growth of the market. Owing to the rising popularity of the travel and tourism industry, service providers are looking to enhance the experience while providing low-budget deals that enable consumers to buy premium and luxury goods at discounted prices. In 2019, cosmetics company NARS revealed that it’s the first-ever travel retail exclusive collection for cosmetic products and jet setter collections.

Market Dynamics

Drivers: Use of Sustainable and Bio-Degradable Packaging

Consumers across the globe are looking for more sustainable packaging solutions and are becoming environmentally aware, forcing the luxury brand owner to adopt sustainable and biodegradable packaging solutions that can reduce the environmental impacts.

According to LMVH, the amount of waste produced by the group in 2019 accounted for 95620 metric tons from 80787 metric tons in 2016. Thus, with increasing packaging waste, luxury brands are looking for a sustainable material that can be recycled, minimizing the impact on the environment.

The paperboard material is significantly used in luxury goods packaging as it has a high recycling rate. According to the European Paper Recycling Council (EPRC) July 2020 press release, the paper recycling rate in the region maintained its high recycling numbers in 2019, increasing from 71.7% in 2018 to 72%. This rate was attained because of the European paper industry's consistent use of Paper for Recycling (PfR).

Drivers: Growing Demand for Customized Packaging from End-user Industries

With the increasing trend for personalization, the demand for customized packaging in the luxury packaging market is witnessing significant growth. Various end-user such as fashion & apparel, premium beverage, watches, and jewelry are offering customized packaging solutions to fulfill the need of the consumers.

Moreover, the premium brands are also focusing on bringing the brand quality to the mind of the consumer, thereby offering customized packaging for some of their limited-edition products. For instance, Jägermeister, a premium alcohol brand, offers gift box packaging made for its limited-edition liquor. The gift box included special tasting glasses and other limited, exclusive paraphernalia.

Overall, with the growing preference of consumers across the luxury goods industry and end-user industry, offering a personalized gift in customized packaging is expected to proliferate the market growth over the forecast period.

Restraints: Reluctance in Packaging Heavy and Bulk Products

The packaging of heavy and bulk products involves a lot of cost constraint factors for the manufacturers, such as machinery cost, cost of material, and high printing cost, among others which is another reason why luxury goods manufacturers are restricted from packing heavy and bulk luxury goods.

Moreover, most luxury goods such as premium wine bottles, fragrances, and others come in glass, which is a fragile material and often bulky. Thus, the manufacturer faces a lot of problems in packaging these products starting from using the correct material to transportation.

What Are Future Key Opportunities in the Global Luxury Packaging Market?

Growing Adoption from Plastic Industry

The use of plastic material in luxury packaging is witnessing significant growth. Films, tubes, containers, and bottles are some of the predominantly used products that are used by luxury product manufacturers in the market.

Moreover, the end-user industry, such as cosmetics and fragrances, watches, and jewelry, among others, uses plastic bottles, containers, films, and pouches to package the products, which is driving the growth of the studied segment. According to LVMH, it has used 13080 metric tons of 2.64 2.68 plastic material in the packaging in 2019.

Also, many start-ups are innovating and developing new packaging alternatives in the studied market that are made up of recycled plastic and are reusable. For instance, in January 2021, French start-up Hipli’s solution launched a shipping package for the luxury goods industry, especially for fashion and apparel, with the growing online sales of these goods. The shipping pack is made of non-woven PP and equipped with zipper closure.

Regional Analysis

Fastest Growth in Asia-Pacific

The global luxury packaging market share is segmented into four regions: North America, Europe, Asia-Pacific, Central and South America, and Middle East & Africa. The North American luxury packaging market is expected to generate USD  8,754  million by 2030, at a CAGR of 3%.

The United States has been one of the most significant markets for luxury goods. According to Statista, in 2020, the US luxury goods industry accounted for USD 72 billion. The luxury fashion segment accounted for the highest share, garnering USD 24 billion.

According to positiveluxury.com, the packaging alone influenced the purchasing decisions of 72% of American consumers, as it's not only about simply protecting the products, but it must also exhibit a unique unboxing experience that communicates the brand's core message. Therefore, the market is witnessing innovative solutions from different vendors in the region.

Further, the Europe market is witnessing the increasing demand for personalization and customization of gift products. Many leading brands are offering personalized printed products, with consumption peaking during gifting occasions, like Christmas and Valentine's Day. According to Salience Search Marketing, the U.K. market for personalized online search growth for Valentine's Day gifts was 170%, whereas the personalized online search growth for Christmas ornaments gifts was 75% as of January 2021. This is expected to drive the luxury packaging market growth in the country.

The Asia-Pacific luxury packaging market is expecting lucrative growth in the coming future. The Asia-Pacific luxury packaging market is expected to generate a value of USD 4,570 million by 2030 at a CAGR of 5% during the forecast period.

Many international companies are eyeing the Asia-Pacific market as the countries like China, Japan, and India are estimated to turn into one of the largest consumers of luxury goods across the world. Therefore, vendors in the market are establishing wholly-owned subsidiaries in China to cater to the huge demand for packaging. For instance, in the recent past, James Cropper Specialty Papers, based in the UK established a subsidiary in China to cater to the high-end luxury packaging market. In 2019, the company produced approximately 40,000 types of colored cardboards ranging from pure white to black for packaging luxury goods such as cosmetics, tobacco, confectionery, and premium alcohol.

The increasing per capita income of the urban population in major cities like Mexico, Brazil, Argentina, and Chile has increased the demand for luxury goods and, in turn, the need for luxury packaging across the region.

Segmental Analysis

The global luxury packaging market share is classified into the material and end-user

Based on material, the luxury packaging market is segmented into paperboard, glass, metal, plastics, and others. The paperboard segment is dominant over other product types of luxury packaging and is expected to generate USD 8,622 million by 2030. It is expected to grow at a CAGR of 4% during the forecast period.

Among various materials used for packaging, paperboard holds one of the highest shares of the market as most of the end-user industry such as confectionery, watches and jewelry, and premium beverage, among others, uses rigid boxes, bags, cartons, etc. made up of paperboard material for packaging.

Moreover, using paperboard material for packaging luxury products provides various printing option to the brand's owner and offers pristine graphics and eye-catching embellishments that gives a premium packaging look.

Further, with the growing consumer preference for sustainable packaging and brand owners opting for sustainable packaging, paperboard material is witnessing significant adoption in the packaging of luxury products. According to LVMH Rapport de responsibility environmental June 2020, paper and cardboard used for packaging material of the group accounted for 37,810 metric tons in 2019.

By end-user, the market is classified into cosmetics and fragrances, confectionery, watches and jewelry, premium beverages, and others. The cosmetics and fragrances segment is anticipated to generate USD million by 10,902 million in 2030 at a CAGR of 5%.

The luxury cosmetic and fragrance industry increasingly requires packaging with a strong aesthetic impact, capable of providing personality to the final product. Most customers are attracted to a product because of the packaging style and material used for packaging. Luxury goods manufacturers focus on brand, aesthetics, quality materials, superior craftsmanship, and pricing to transform ordinary objects into status symbols to meet consumer demand with luxury packaging.

Luxury cosmetics comprise products manufactured using organic and premium quality ingredients, sold at a higher price than their counterpart drugstore products. The increase in disposable income among the urban population of developing economies and the rise in health concerns have led to an upsurge in demand for luxury products manufactured using organic and premium quality ingredients, owing to the demand for luxury packaging. According to the US Bureau of Labor Statistics, the annual expenditure spent on cosmetics, perfume, and bath preparation products per consumer unit in 2019 was USD 197.01.

Impact of covid-19

According to various government sources, the beauty and personal care industry players have experienced a net sales decline of 15% and above during the first quarter of 2020, while the net profit and operating profit fell by 80%-90%, respectively. For instance, Shiseido, a Japanese beauty vendor, saw a 15.8% decline in its first quarter of the year, and net profit fell by 95.8% due to the outbreak of COVID-19. The declining growth in the beauty and personal care market also impacts the studied market growth.

Moreover, the vendors are innovating and developing products for the studied market. For instance, Fedrigoni Group developed a virostatic paper that restricts Covid-19 transmission that can be applied from luxury packaging to protective face masks.

Further, the post-pandemic period will witness the luxury industry having significant demand with digital trends and retailers becoming more purposeful in delivering what the consumer really wants personalization and advanced technology. All this will drive the luxury packaging market growth.

Moreover, many luxury perfumery glassmakers in France have faced the significant impact of the pandemic. According to Waltersperger, its 2020 sales fall by less than 10%, and its larger competitors registered decreases ranging from -15% to -35% for the hardest hit. Verescence also shut down its smallest capacity furnace at its Mers-Les-Bain site and had to cut Seventy jobs (at its Mers site and at its headquarters) as a result of the crisis.

Recent Developments

• March 2020 – DS Smith PLC announced the opening of its state-of-the-art 550,000 sqft manufacturing facility in Lebanon. This expansion represents the company's most recent technology, keeping up with customers' and retailers' increased need for totally recyclable boxes and "fit-to-product" packaging that lowers prices, waste, and "packing air" of irregularly shaped objects. The plant has the capacity to generate 30,000 boxes per hour and 2 billion square feet of recyclable packaging per year.
•  January 2020 - DS Smith PLC DS Smith announced the opening of its first recycling facility in the United States, the company’s latest expansion of its business operations in North America. The Reading factory is unique in the region because it is located next to the company's paper mill and a mile away from its packaging plant, resulting in a closed-loop manufacturing approach. This could enhance its customers’ sustainable packaging credentials, making it a circular economy trifecta. The new plant can recycle over 36,000 metric tons of old corrugated cardboard each year, creating new, fully recyclable packaging for the customers.