Packaging boss reveals 10% hike in costs for boxes due to inflation pressure
The head of DS Smith said raw materials, wage increases and energy costs have all hit but the business could benefit from another online boom.
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Your support makes all the difference.The costs of packaging have jumped more than 10% due to rising prices for energy, raw materials and supply chains, according to the boss of one of the UK’s biggest box makers.
Miles Roberts, chief executive of DS Smith, told the PA news agency that prices have been passed on to his customers.
But despite retailers and online sellers paying more for packaging, companies are using the structural shifts to more online shopping to improve the quality of packaging used.
Mr Roberts also suggested the latest Covid-19 restrictions introduced in the UK could see a further boost in online sales, while the recent Cop26 climate change summit has seen businesses more focused on turning to environmental packaging.
On improving quality, he said: “Despite price increases we’re actually seeing demand for better quality packaging.
“Increasingly they’re seeing this a communication medium to the final consumer. In the run up to Christmas it’s really quite noticeable
“If you’ve got a high-quality brand, they’re saying to us we don’t want to sit in a brown box, we want to set it in a box that matches the product.
“If you go and buy a Bentley it’s a very, very nice showroom. It’s all to match the product and we’ve seen that increasingly come through, especially at Christmas.
“It’s following a trend we’ve noticed for some time.”
If we look at things like transportation, that's increased heavily, and particularly in the UK where we've had staff shortages, which has been really exacerbated by the immigration restrictions
The costs have hit the entire supply chain at DS Smith, Mr Roberts explained, from energy to materials.
He said: “We are huge users of energy, so the price of gas across Europe – it’s really high. In terms of the spot market just in the UK – it’s up eight-fold.
“If we look at things like transportation, that’s increased heavily, and particularly in the UK where we’ve had staff shortages which has been really exacerbated by the immigration restrictions.
“Our cost of our raw materials has also increased with the cost of fibre doubling.
“It depends exactly which market, but it’s been above 10% across the board, and there’ll be some more increases coming through in the second half of the year.”
But the boom in online shopping during the Covid crisis, alongside the easing of restrictions and customers willing to spend more money, has helped DS Smith boost its profits.
The company revealed that in the six months to October 31, revenues jumped 16% to £3.36 billion and pre-tax profits were up 80% to £175 million.
With new restrictions coming into force in the UK, he said business could improve further with another rise in online sales.
Mr Roberts said: “I wouldn’t be surprised if e-commerce sales start to increase again.
“That’s what we’ve seen in other countries. In places like Belgium where there’s been tight restrictions, and Austria and Germany, we’ve seen e-commerce sales rise, so if the UK follows those countries we could see the same.”