Big Food’s sustainable packaging goals hit supply and demand reality

In the past two years, several CPGs have announced deadlines to slash their use of virgin plastic in packaging and shift toward more earth-friendly options over the next few decades, including Keurig Dr Pepper, PepsiCo and Mondelēz. Recycled plastic and paper have proven to be two of the more popular alternatives. But as price and supply volatility continue to impact the packaging industry, one question keeps emerging: Is there a clear pathway in the short term to hitting these goals, or are they just pipe dreams? 

A mix of factors threaten to complicate CPGs’ timelines, including the pandemic’s scrambling of consumer buying behavior and material supply chains, the existing recycling framework in the U.S., as well as recent developments such as the war in Ukraine. This is even as pressure continues to mount for the industry to take accountability over the pollution caused by food and beverage packaging

“There have been a lot of commitments in terms of using recycled content and packaging, and the goals that were established were set without really a fundamental base of the means to do that,” said Robin Waters, director of plastics planning and analysis, IHS Markit, in an interview late last year. 

To understand why meeting these commitments may prove difficult, it helps to examine the price and supply swings that have rippled across virgin and reclaimed plastic resin over the past two years.

The story begins with virgin plastic, resins that are newly created from oil or, as is mostly the case in North America, natural gas. Food manufacturers are under pressure to reduce their use of virgin plastic in packaging, and for good reason. A 2018 study cited by the Association of Plastic Recyclers found recycled plastic resin uses anywhere from 79% to 88% less energy to produce as virgin resin, depending on the type. 

At different points over the past two years, virgin plastic resin has been considerably more or less expensive than reclaimed plastic as pandemic forces stressed their respective supply chains. And with each shift in the price trend, the timeline to hit goals for cutting virgin plastic also changes.


“There have been a lot of commitments in terms of using recycled content and packaging, and the goals that were established were set without really a fundamental base of the means to do that.”

Robin Waters

Director of plastics planning and analysis, IHS Markit


As the pandemic swelled in early 2020, supplies of virgin plastics such as polypropylene — a stiff, recyclable plastic used in packaging such as yogurt containers — shifted to medical purposes like face masks and protective gear. “And so, the factories that were producing these chemicals, polymers, shifted capacity from one type to another, also creating shortages, which also increased the prices,” said Richard Freundlich, a senior analyst of plastics supply chains with RaboResearch, who has retired since the interview. 

The Gulf Coast also saw brutal weather events, including Winter Storm Uri and Hurricanes Ida and Nicholas in 2021, that knocked out power and throttled the natural gas industry as well as chemical plants in Texas. The chaos had ripple effects further downstream into plastic packaging manufacturing.

“Suddenly we have shortages, and you just can’t substitute material so easily in the packaging field because of the food law regulation,” Freundlich said, referring to FDA regulations that restrict which substances can come into contact with food. Swapping out one chemical additive in plastic packaging requires a qualification from the FDA — a process that takes about a year, he noted.

Spunbond polypropylene fabric is ready to be made into surgical masks at Polar Shades Sun Control to help Las Vegas-area health care workers and first responders fighting the coronavirus on April 14, 2020.

Ethan Miller via Getty Images

 

 

The infrastructure outages led to packaging plant shutdowns and plastic shortages. Virgin plastic resins saw a historic price increase during the fallout. 

Meanwhile, as the cost of virgin resins rose, so naturally did the cost of food packaging, Freundlich noted. To get ahead of these costs, CPG companies began reducing package sizes. This had a supply impact, requiring packaging manufacturers to retool. 

Reclaimed plastic has faced its own supply stressors. For a time, labor shortages during the pandemic led to packaging plant shutdowns and disrupted recycling operations that fed the market.

“When you look at all these plastics when they are reclaimed, they are done historically in the United States by mechanical sorting, and that takes cheap labor,” Freundlich said. “And those are the first guys that quit their jobs [during the pandemic].” More importantly, it also affected the collection of materials for recycling. The result was material shortages and, of course, price increases.