CATEGORY
Contract Packaging
The global contract packaging market is expected to reach $126 billion by 2027. The food and beverage industry growing with a CAGR of 5–6 percent until 2027 and is expected to continue being the largest end-use segment of the contract packaging market for the next five years
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Schedule a DemoContract Packaging market report transcript
Contract Packaging Global Market Outlook
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Global co-packing market size $80.3 Billion (2023E)
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Expected to grow at a CAGR of 11–13 percent to $126 Billion by 2027
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APAC and LATAM are the fastest emerging co-packing market globally and expects over 12–13 percent and 13–14 percent CAGR growth, respectively, in the next five years
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The global contract packaging market is expected to reach $126 billion by 2027. The food and beverage industry growing with a CAGR of 5–6 percent until 2027 and is expected to continue being the largest end-use segment of the contract packaging market for the next five years
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North America is the largest market for contract packaging demand, this is ably met by a fragmented base of service providers. Asia-Pacific is emerging as a strong region of growth for contract packaging services. Suppliers are expanding their bases and capabilities in these regions to cater the growing demand
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The entry of third-party logistics companies in the contract packaging market and an increase in the number of e-commerce companies demanding contract packaging fuel the growth of the contract packaging market across the globe
Drivers and Constraints: Contract Packaging
Drivers
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End-use Demand: Increasing outsourcing of non-core activities across the industry in the manufacturing field is expected to fuel contract packaging demand for the next five years
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Reduction in Operation Cost: Engaging contract packagers reduces the manufacturing company’s operational costs by 7–9 percent, due to reduced machinery maintenance and labor costs
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Technological Advancement: Advancement in packaging technologies also lead manufacturers to engage with contract packagers for packing the products
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Seasonal Demand: Product with seasonal demand accommodates high packaging requirement from contract packagers
Constraints
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In-house Packaging Facility: Brand owners with well-established in-house packaging facilities act as a constraint to the contract packaging market
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Increasing Logistics Cost: The outsourcing packaging activity toa third party leads to increased spend on logistics cost
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Increased Lead Time: Contract packaging service also leads to increased lead time compared to the in-house packed product
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Energy Price Rise: Sanctions against Russia have increased energy prices across the globe, increasing the contract packaging cost. Contract packaging suppliers tend to surpass the price rise to end-use buyers
Cost Structure Analysis: Contract Packaging: Cost Drivers
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Most of the large contract packaging service providers operate with multiple lines of medium to high throughputs, catering to different end uses and package types. Hence, high capital costs are quite inevitable.
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Average labor costs for manufacturing in the US are as high as 37 $/hour. Most of the operations, like kitting, case packaging, unscrambling, etc., require significant human interventions
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Most of the contract filling service providers do not have highly advanced robotic end of line case packaging or pick and place systems, which increases the dependency on human labor
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The administrative costs include the maintenance of machines, down time, due to changeovers, and the frequent cleaning operations. The specific quality requirements that are installed in the facility to meet the brand owners’ standards are also charged as a part of administrative cost
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