Luxury packaging is the packaging of premium luxury goods with innovative and creative designs to facilitate the sales of the products. Luxury packaging gives an aesthetic appeal to the product, making it stand out from the traditionally packaged ones. The luxury packaging strategy is leveraged mainly to create a favorable brand image in the minds of the consumers. It also helps integrate brand equity. The luxury packaging market has shown a tremendous inkling trend and is expected to boost further.
Favorable Macroeconomic Factors and Changing Consumer Behavior to Drive Market Growth
Various favorable macroeconomic parameters like rising consumption expenditure, increasing per capita income, and high population across the globe are facilitating the growth of the luxury packaging market. The global per capita income has been steadily increasing since 2016 when it was US$10,286.342 to US$11,433.216 in 2019 as per the World Bank Data Base. With rising incomes, the willingness of consumers to spend on aesthetically appealing products increases pointing at the growing demand for luxury packaged products.
Moreover, the buying behavior of consumers is changing significantly. Initially, the purchasing decision was solely dependent upon the price of the product. Then, quality became a deciding product. Now, coupled with price and quality, consumers tend to base their decision upon the appeal and impact of the products. Additionally, Luxury packaging creates the notion of the product being high quality, elegant and sophisticated. This change in buying behavior is one of the key drivers of the luxury packaging market.
High Potential For the Market in Emerging Economies
With rising urbanization and economic development, the number and presence of companies around the globe are increasing tremendously. This has led to an increase in product launches in almost all sectors. The evolving consumer demand has further hiked the number of products being introduced in the market. This opens room for opportunity for the luxury packaging market. Furthermore, it acts as a differentiating factor for brands in these almost saturated consumer goods markets.
The luxury packaging market has a high potential for growth in emerging countries owing to the growing consumption expenditure and increasing acceptance and adoption of western culture in these developing economies. In these countries, due to the diverse population demographics, there is immense room for innovation.
Increasing Adoption of E-Commerce to Facilitate the Market
The increasing adoption of e-commerce and technological advancement, especially after the pandemic, has increased the market size for the luxury packaging market. Online retailing, gaining importance is making these products widely available. Increasing consumer awareness is propelling the brands to communicate their brand value and packaging acts as the silent salesman here.
Sustainable Packaging – A Growing Trend
Consumers and brands both are concerned about the environment these days. This has incentivized the brands to introduce sustainable, environment-friendly packaging for their product. Companies, across the globe, have started to innovate using different materials used for packagings like Paper and Paperboard, Plastics, Glass, Metal, Wood, and Others to make the packaging sustainable.
In December 2020, PepsiCo announced that it is dedicated to banishing all virgin plastic by 2022 from its Pepsi brand beverage bottles in sales across nine European Union markets. The company will package the entire range of beverages with plastics recycled from post-consumer packaging (recycled polyethylene terephthalate, or ‘rPET’). PepsiCo even claimed to continue the progression to framing reuse and refill systems such as SodaStream. Germany, Poland, Romania, Greece, and Spain plan to switch to 100% rPET in 2021, while France, Great Britain, Belgium, and Luxembourg will shift to 100% rPET in 2022.
The Ferrero Group shares, in its latest updates in January 2021, its commitment for 100% of packaging to be reusable, recyclable, or compostable by 2025. The brand claims to incorporate a series of new activities and collaborations that comprise of Nutella collaborating with Loop and Carrefour in Paris, France to form an innovative 10-store reuse pilot scheme, Ferrero soon to become a member of the Ellen MacArthur Foundation for participating in the New Plastics Economy (NPEC) Initiative, a new recyclable packaging for Kinder Happy Hippo to be introduced and a new alliance with 4evergreen is planned.
Along with sustainable packaging, there is a growing demand and trend for personalized or customized packaging in the luxury packaging market. The brands, to make consumers feel special and create a favorable brand image in their minds are adopting the strategy of customized packaging.
Low Brand Loyalty and High Initial Capital Investment Hinder the Market Growth
Consumers are not extensively brand loyal today; this is appearing to become a challenge for the luxury packaging market. The brands are facing difficulty in differentiating themselves from the competitors. Moreover, consumers are reluctant to use heavy and bulky packaging products further creating hindrance for the growth of the market. This is limiting the scope for innovative packaging that the brands are spending extensively on R&D. Furthermore, the high initial capital investment required for building up the packaging facilities is another significant challenge in the growth of the luxury packaging market.
High Growth Rate in the Asia Pacific
Geographically, the Asia Pacific region luxury packaging market is expected to grow at the highest rate owing to the rapid urbanization and high population in the countries like China and India. The presence of multinational luxury brands in the region is also increasing further facilitating the growth of the market in the region.