Luxury packaging market forecast to grow by 4.4% to 2019

Globally, the luxury packaging market continues to grow, driven by exciting trends - the surge of personalised packaging, attention to sustainability issues, economic and demographic drivers.

The luxury packaging sector is growing by 4.4% per annum according to Smithers Pira, the worldwide authority on packaging industry supply chains. Luxury packaging is one of the most lucrative opportunities in the industry, with prestigious brands looking for new packaging innovations to enable their products to shine in highly competitive shelf spaces.

When defining luxury packaging the product must be taken largely into account, as well as a combination of different factors; these include high quality materials, finishes, decoration and innovative shapes, in addition to primary and secondary packaging such as caps and closures. A definition of luxury packaging is given in a recent white paper published by packaging expert Dominic Cakebread, which also examines the trends and technology developments that are influencing the shape of this market.

The luxury packaging industry

Global luxury packaging was affected by the global recession and Eurozone crisis, but it grew in 2013 and reached a value of $13.6 billion, up 2.2% on 2012 levels, with volumes reaching 8.25 million tonnes, up 2.6%. It is an attractive market for packaging manufacturers, as it is a growing market and is potentially profitable. This is because luxury packaging margins tend to be higher than mass market packaging due to the higher added value that goes into the design and development and the higher cost of materials and processes used in production. Over the next five years the market is forecast to grow, on average, by 4.4% in value terms and by 3.1% in terms of volume.

The broad luxury goods industry, which includes cosmetics and fragrances, watches and jewellery, drinks, fashion, luggage and handbags, was valued at almost $300 billion in 2013; it is set to grow over the next five years, which will positively impact luxury packaging. There are a number of global luxury houses that own various brands across different luxury markets as a result of industry consolidation. Examples of such houses include Moët Hennessy Louis Vuitton (LVMH), Richemont, PPR and Kering; LVMH is the most valuable luxury goods group in the world.

Luxury markets

The luxury markets under review are cosmetics and fragrances; tobacco; confectionery; premium alcoholic drinks; gourmet food and drinks; and watches and jewellery. Cosmetics and fragrances is the largest luxury packaging market in value terms, accounting for a projected 43.3% share of luxury packaging market value in 2014. This is followed by premium alcoholic drinks and tobacco, which have market shares of 21.9% and 16.5% respectively. In terms of volume, the premium alcoholic drinks sector accounts for the largest share at 46.0%, followed by cosmetics and fragrances, which has a share of 31.0%.

FIGURE 1 Global luxury packaging sales by end-use sector, 2014 (% share by value)

Source: Smithers Pira

Across the luxury markets under review, the cosmetics and fragrances sector and the watches and jewellery sector are forecast to be the fastest growing sectors for value and volume over the forecast period. This growth in both sectors is driven by increased demand in emerging markets. Demand from the tobacco industry is set to grow only slowly by comparison over the next five years, with a decline in the developed regions of Western Europe and North America.

Luxury packaging materials 

The main materials used in luxury packaging are paperboard, glass, metal, plastic, textiles, leather and wood. Paperboard is the most popular material used in luxury packaging, accounting for a projected 41.9% share of luxury packaging market value in 2014. The second most used material in value terms is glass, followed by plastic, with market shares of 30.1% and 15.4% respectively. In terms of market volume, glass accounts for the largest share at 58.3%, followed by paperboard, which has a share of 25.9%. This discrepancy can be explained by the relatively lower cost of glass per tonne, compared to both luxury paperboard and plastic, as well as the higher unit weight and density of glass – particularly in the case of premium alcoholic drinks.

FIGURE 2 Global luxury packaging sales by material type, 2014 (% share by value)

Source: Smithers Pira

Across luxury packaging materials, plastic and glass are forecast to show the highest growth rates in value terms during the period 2014-19, and plastic is also set to be the fastest growing material in terms of volume. Demand for both glass and plastic is being driven by the recovery and stronger growth evident in the main luxury markets, particularly cosmetics and fragrances. Glass remains popular among brand owners and consumers, due in part to its strong sustainability associations but more importantly for its high quality appearance. Meanwhile, rising demand for plastic packaging is being driven by its lower cost and lighter weight. Glass on the whole is losing share in packaging, but is more difficult to replace in luxury applications.

Leading luxury packaging manufacturers

The luxury packaging industry consists of a large number of diverse businesses in terms of their size, scope and product offerings. There are a number of multi-material companies that have a particular speciality in luxury packaging; for example the Verpack Group is a leading European manufacturer, specialising in luxury packaging made from both cardboard and plastic. There are also a number of large international packaging groups that specialise in one particular material and supply to the luxury market. For example, specifically for luxury packaging, Mayr-Melnhof is one of the leading paperboard manufacturers, Ardagh Glass is one of the leading glass manufacturers and Crown Specialty Packaging is a leading metal packaging supplier. These manufacturers are only a small selection of the leading luxury packaging manufacturers.

A recent market study published by Smithers Pira – The Future of Luxury Packaging to 2019 – presents an analysis of luxury packaging trends in value and volume terms for luxury packaging during the period 2009–14 and market forecasts to 2019, including analysis by end-use sectors, material types and geographic markets. The study outlines the trends that drive the luxury packaging market and also explores exciting developments in technology that are predicted to shape the future of the industry, including developments in brand protection, digital printing and digital interaction with print. The report is available now for £3,750. For more information, please contact Bill Allen at +44 (0)1372 802086, or via e-mail at ballen@smithers.com, or visit www.smitherspira.com