The Competitiveness of European Paper Packaging: Strategic Responses To Navigate the New European Energy Normal

The new European energy normal is putting the competitiveness of European paper packaging producers under pressure – with structurally higher energy costs and decarbonization high on the agenda of regulators and other stakeholders along the supply chain. In this article, we discuss Europe’s challenging energy landscape and outline the strategies leading companies are taking to remain competitive now and into the future.

As a result of rapidly changing energy challenges, Europe went from being one of the lowest-cost regions to one of the highest-cost regions for producers. Due to its reduced global competitiveness, in the short- to medium term, Europe might become a more regional market. In the near future, energy will stay a major competitive differentiator for European producers, not only globally but also within the continent.

Mitigating reduced competitiveness and complying with increasing regulations in the short- and medium term will require paper packaging producers to accelerate the adoption of proven technologies – especially those aimed at reducing energy consumption, improving heat supply efficiency, decarbonizing steam supply, and adopting renewable energy sources for general use. At the same time, paper packaging producers are preparing for the major technological shifts expected in paper production and renewable energy production and infrastructure after 2030. Many companies along the supply chain are partnering with each other and research institutions to accelerate these technological shifts.

With the right decarbonization approach, it is possible for the industry to keep its competitive position. Energy challenges can even offer strategic opportunities. Companies can build on Europe’s intrinsic strengths and play offense in building new, sustainable, low-carbon business opportunities, while optimizing their operations (exiting non-competitive assets and investing in energy cost reductions and low-carbon growth), and pursuing consolidation, collaboration, and functional energy excellence. The next few years will be challenging, but most companies will continue their operations in Europe.

The ability to respond effectively and stay competitive in the new European energy normal differs per company. The chance of success is higher for integrated companies with pan-European coverage. There will, however, be companies for which pursuing all the strategies described above might be too challenging or prove insufficient to continue operating profitably and remain competitive. These companies might decide to exit the market and sell, while others will seize the opportunity and seek to buy and expand.