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  • Atit Gandhi

Top 5 Reasons for Rising Packaging Prices in Pandemic

1st July 2021 marks the day when the different variants sold under Amul milk will become Rs. 2 costlier per litre. This announcement comes as an additional burden to the economy still reeling under the after-effects of the pandemic and is only an indicator of tough times in the FMCG market. The company is justifying its price rise with rising input costs of transportation charges, logistics among others. Interestingly packaging contributes to 35% of the price rise in the case of Amul milk. This might prove to be a domino effect for the whole sector. Here are the top 5 reasons why the price of packaging has risen sharply during the pandemic.

1. Inflation & Raw Material Price Increase

Simply put, the cost of the raw materials used in the manufacture of flexible packaging (i.e. plastic) are at all-time highs. Several natural and man-made factors have contributed to this, and which are covered in more detail in this article on external threats. With local and national lockdowns, the norms for social distancing and its immediate negative impact on productivity, lesser workforce, the manufacturing of plastic has substantially reduced accelerating costs.

2. Supply & Demand

Lower supply with rising demand has further pushed packaging prices north way. The pandemic saw packaged food category and e-commerce receive a boost like never before. Both are large consumers of flexible packaging which have resulted in high demand for the same. Moreover, compounding challenges experienced by plastic manufacturers, the simple economics of supply and demand have perpetuated an increase in both the raw materials and finished packaging itself.

3. Labour

Labour costs have become an overlooked reason for the increase seen in packaging prices during the pandemic. The additional welfare expenses borne by packaging companies on the well-being of their labour have added to a mountainous unforeseen expense sheet. This, along with inflationary pressures on raw materials, is further taking costs higher which are eventually being passed on to customers.

4. Logistic Costs

An increase in transportation has been a big contributor to escalating costs. Fuel costs are at an all-time high. This has a direct impact on the operational costs of flexible packaging leading to a rise in total expenses. Yet, for flexible packaging, the nature of its weight and volume has kept this factor lowest in comparison to any other form of rigid packaging.

5. Inefficiencies

It may not be directly related to inflation but the increased number of steps in manufacturing processes and additional operations efficiencies have resulted in the direct proportional rise of the packaging cost. With Covid-19 the general overheads have risen. High demand, erratic supply of material, juggling customer requirements, re-prioritization of jobs, changing statutory demands and compliances, more follow-ups, stricter quality controls are just a few reasons for rising wastefulness and thereby rising prices. Inefficient machinery and conversion processes can add a surprising amount of cost to your packaging.

At Montage Group, with 5 manufacturing units and a workforce of thousands, we have critically viewed the situation of packaging prices. While the external factors are definitely beyond us we are keeping a strict check on our internal policies to ensure minimum inefficiencies and maximum manufacturing productivity. The pandemic has given us newer territories to explore challenges and find sustainable solutions for our customers and society as a whole.

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