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Both 2021 and 2024 were significant years for the US kraft paper market, with demand reaching unprecedented growth levels. In 2021, growth was fueled by temporary factors related to the Covid-19 pandemic, including increased demand for paper grocery bags at stores, food wrapping for take-out and multiwall sack products for do-it-yourself (DIY) projects. In contrast, the growth in 2024 was mostly driven by structural changes, such as the shift from plastic to paper, which is expected to provide long-term support for the industry.
During the Covid-19 pandemic, there was a surge in demand for both groceries and paper grocery bags as restrictions on reusable bags were implemented to minimize the risk of virus transmission. The popularity of DIY projects contributed to the demand for multiwall sack products. Additionally, there was an uptick in the demand for food wrapping paper products for take-out, as dining in was also affected by pandemic-related restrictions. Stimulus checks created a demand shock that boosted consumer spending, aiding economic recovery after the 2020 recession. Additionally, the rise of e-commerce during lockdowns benefited demand for many types of packaging, including corrugated boxes and plastic mailers. Overall, kraft paper demand grew 10% in 2021, driven largely by temporary macroeconomic conditions that were not sustainable over time.
The panic-buying phenomenon that emerged from the Covid-19 pandemic led to a significant inventory buildup, which disrupted supply chains. In 2022, inflation hit the economy, interest rates rose, and consumer spending shifted toward services after the pandemic ended, with consumers more inclined to spend on experiences like restaurants, travel and entertainment. Consequently, demand for kraft paper fell by 4.5% that year. This downward trend persisted in 2023, with an additional drop of 6.1%.
This pattern of weakness in the kraft paper industry ended in 2024, with figures indicating a gain in demand of about 10% on a year-over-year basis. This is the same rate of growth seen in 2021, which not only indicates a recovery from the low levels in 2022-23, but also reflects a structural change in consumer preferences (i.e., buyers’ preferences) toward sustainability. As large e-commerce companies shift from plastic to paper packaging, new opportunities are being created for some kraft paper segments such as the bag and sack (paper mailers) and converting and other (cushioning) segments. This structural shift will lead to more sustainable growth with long-term effects.
Amazon, the largest e-commerce company in the world, has been moving away from plastic to paper by expanding the use of padded paper mailers and replacing plastic air pillows with 100% recycled paper fillers in North America, eliminating 15 billion plastic air pillows annually. Walmart announced a transition from plastic to recycled paper mailers in 2023 and set a target to eliminate 65 million plastic bag mailers in the US by the end of its fiscal year. We expect that other e-commerce companies will likely follow suit, as these leaders set an example, encouraging others to commit to sustainability. On the other hand, this shift can also inspire consumers to become more environmentally aware, even leading them to expect and demand greater sustainability commitments from other companies.
Although paper is generally more expensive than plastic and has risen twice as much as plastic prices since 2020, the shift from plastic to paper packaging is likely to succeed due to advancements in technology. E-commerce companies are utilizing machine learning to optimize packaging by determining the right size shipping container or sometimes shipping products in their own containers when feasible. These practices help reduce waste by streamlining shipments and lowering costs. While shipping products in their own containers may present challenges for certain kraft paper grades, the overall impact is expected to be minimal since the share of Amazon’s products Shipped in their Own Container (SIOC) in 2023 was only 13%. This is a small portion compared with the 51% share of products shipped in flexible mailers (including both plastic and paper-based materials) and the 36% share shipped in boxes that typically require padding and cushioning materials.
There are even more upsides foreseen for the bag and sack segment. To reduce plastic waste, many states and cities across the US have passed laws banning the use of single-use plastic bags in stores. Even though plastic bags are less expensive than paper, they are less biodegradable and sustainable. The biggest issue with plastic waste is that it creates negative externalities for all of society since much of it ends up in landfills or the ocean, affecting all living beings and resulting in unmeasured health costs.
California was the first state to ban single-use plastic bags in 2014, inspiring other states to follow suit; currently, besides California, there are a total of 11 US states with statewide bans on single-use plastic bags. While thicker reusable bags have replaced disposable ones, critics argue that these bags often have a short lifespan and end up in landfills or oceans quickly. Starting in 2026, California will ban all plastic bags at checkout, including reusable ones. This trend is expected to spread again, offering customers alternatives of opting for paper bags, carrying their purchases without a bag, or bringing their own non-plastic reusable bags to the store.
The bag and sack segment, along with the converting and other segment, accounted for about 68% of total US kraft paper demand in 2024. We anticipate that these segments will experience more sustainable growth due to three key factors: the continued rise in e-commerce, the shift from plastic to paper packaging initiated by major e-commerce companies, a trend that is expected to broaden, and the implementation of regulations in various states and local municipalities banning plastic bags.
The multiwall sack segment, which accounted for 16% of overall demand in 2024, has not yet benefited from the “go green” trend and posted a decline partly due to still high interest rates. In contrast, the food wrapping segment saw an 11% increase in 2024 as it recovered from a significant drop in 2023. However, its market share remains small compared with the other two major segments, and it is expected to continue facing competition with boxboard products.
Given these factors, we anticipate the bag and sack as well as the converting and other segments will maintain more sustainable growth and support the overall expansion of the US kraft paper market in the coming years.
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