As packaging enters a new era of opportunity, Karin von Kienlin, Partner, L.E.K. Consulting, explains how European brands are redefining how they invest in packaging.
As packaging priorities shift in 2025, brand owners are navigating complex trade-offs between cost, innovation and sustainability, revealing strategic insights into the industry’s future.
Packaging has entered a new era of complexity and opportunity. Amid heightened consumer expectations, persistent cost pressures, and shifting regulatory frameworks, European brands are redefining how they invest in packaging.
As L.E.K. Consulting revealed in our latest annual European Brand Owner Packaging Survey, the conversation around sustainability is becoming increasingly nuanced, innovation is accelerating, and cost-efficiency is now an unavoidable strategic imperative.
But how are European brand owners responding to these pressures? Let’s examine how rising costs are reshaping strategic priorities, how the definition and execution of sustainability are changing in response to operational realities, and how packaging innovation is becoming essential for competitiveness.
Our survey of 645 brand owners across Germany, France, the UK, Spain, Italy, and Poland provides an authoritative snapshot of industry sentiment and strategic direction as we head into the second half of the decade.
Cost as a structural challenge
Packaging cost pressures, exacerbated by inflation, energy prices, and volatile global supply chains, have taken centre stage.
More than 70% of brand owners expect further packaging cost increases in 2025, driving strategic shifts towards design optimisation and material substitution as key cost-mitigation strategies.
In fact, cost considerations have now become the leading driver of packaging material changes, overtaking sustainability and pushing innovation towards solutions that reduce expense without sacrificing performance or consumer appeal.
Brands are actively redesigning their packaging – making it lighter, simpler, and easier to source from diverse suppliers to counteract market volatility.
Yet, brands are not merely reacting defensively. Instead, many are seizing cost pressures as opportunities to rethink their entire packaging approach, integrating sustainability goals into cost-effective innovations.
This proactive stance underscores a broader strategic shift towards resilience and adaptability in packaging strategy.
Sustainability in transition
Sustainability remains a critical item on brand agendas, but the landscape is changing significantly. The share of packaging spend allocated to sustainable materials rose from 28% four years ago to 42% today, with brand owners expecting this to reach 59% by 2028.
France currently leads the way, dedicating 45% of its packaging budgets to sustainable solutions, while Poland lags slightly at 39%, reflecting varied local market maturity and supply chain capabilities.
Yet, sustainability’s relative priority is changing. Once a dominant driver, it has now dropped to sixth place behind cost, aesthetics, and functional considerations. This shift highlights a pragmatic recalibration, as brands balance ambitious sustainability goals with operational realism and affordability.
Interestingly, the definition of ‘sustainable packaging’ itself is evolving. Brand owners now prioritise supplier commitments to environmental initiatives (37%), reduced greenhouse gas emissions in packaging production (34%), and renewable energy sources (30%) above traditional notions of recyclable or compostable materials.
This points towards a broader view of sustainability, focusing on carbon reduction and systemic supply-chain improvements rather than solely material circularity.
Facing persistent material shortages, around 80% of affected brand owners are actively considering investments in their own mechanical recycling and collection capabilities. Examples include coffee pod recycling schemes and personal care packaging return programmes to secure stable supplies of sustainable materials.
Accelerating innovation with smart packaging
Innovation, particularly around smart packaging, is rapidly gaining momentum. Investment in smart labels, temperature indicators, freshness sensors, and QR codes is increasingly mainstream and used strategically to enhance consumer engagement, operational efficiency, and margin performance.
For instance, beauty and personal care brands leveraging smart technology, such as temperature sensor patches, have reported up to a 10-15% uplift in margins.
Healthcare brands have introduced smart packaging features like electronic medication reminders, improving patient adherence and market positioning.
Food brands deploy QR codes and freshness indicators to enhance customer loyalty and optimise inventory, showing that innovation is now integral to packaging strategy rather than optional or niche.
This strategic deployment of smart packaging reflects broader trends towards agility and personalisation in packaging strategy.
Nearly half (45%) of brands described their current innovation approach as ‘flexible’, underlining the industry’s shift from rigid packaging models to responsive frameworks driven by consumer data and real-time feedback.
This flexibility allows brands to respond swiftly to evolving consumer expectations, regulatory changes, and supply chain disruptions.
Striking a strategic balance
Looking ahead, the path to success for brand owners involves navigating trade-offs intelligently.
Strategic packaging decisions must now reconcile cost pressures, evolving sustainability definitions, and innovation opportunities, creating packaging that is not only cost-effective and compliant but also appealing and genuinely sustainable.
In this challenging landscape, winners will be defined by their ability to adapt swiftly, focusing investments on initiatives that deliver measurable impacts while maintaining flexibility to respond to evolving consumer demands and regulatory developments.
At L.E.K., we believe that the packaging industry’s future belongs to brands that embrace this complexity – those who turn challenges into strategic advantages by clearly aligning cost management, sustainability, and innovation within a coherent strategy.
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