By Chandranath Chakraborty, Founder & Managing Partner · [email protected]
Around nine tenths of a packaging invoice sits in metal, board, energy, freight and conversion. The converter's own margin is roughly the remaining tenth, yet that smaller piece is often where the annual tender focuses.
The EU Packaging and Packaging Waste Regulation took effect on 12 August. Most coverage focused on compliance requirements, including declarations of conformity and PFAS limits for food-contact packaging. The commercial impact goes further. Packaging attributes such as recyclability and recycled content can now affect recurring fees, so design choices made before the tender can influence cost every year.
This matters to Asian exporters as well. Packaging designed in Singapore, Bangkok or Shenzhen for products sold in the EU carries the same compliance and fee requirements.
MomentumX takes this from specification review and cost modelling through supplier negotiation, implementation and confirmed savings.
For the worked model behind this analysis, or to discuss the category: [email protected]
Containerboard has moved sharply this year. Fastmarkets RISI recorded a $20-per-ton fall in February, then increases of $40 in March, $30 in April and $50 in June, for a net $100-per-ton rise through June. Mill backlogs also lengthened after capacity closures during 2025. August was flat for a second month, and another round of increases started on 1 September with announced rises ranging from $80 to $140 per ton. If fully recognised, linerboard would be up about $240 per ton over seven months.
Even that index does not tell every buyer what their box should cost. Matt Reddington of Procure Analytics noted that the index covers less than a tenth of the North American containerboard market, because most volume sits under long-term contracts. Two buyers can therefore buy the same box in the same month at very different prices. His description is useful: the index is a compass, not a price list.
Ball's results show the same issue from the supplier side. Second-quarter sales in North and Central America rose to $2.01 billion from $1.61 billion on low single-digit volume growth. Ball said price and mix mainly reflected higher aluminium prices and the timing of metal pass-through. Comparable operating earnings fell from $212 million to $207 million over the same period.
The new regulation adds another cost that neither the raw-material index nor a traditional supply contract fully captures. Under the PPWR, producer fees can vary with recyclability, recycled content, reusability and substances of concern. Two packs with the same weight and material price can therefore carry different annual fees. The criteria are set. The detailed recycled-content methodology and the exact member-state charges are still developing.
Packaging is relatively easy to break into its main cost parts: material, conversion, energy, freight and the converter's margin. Across corrugated, folding cartons, rigid plastics and metal packaging, the part directly negotiated with the converter is usually the smaller part of the bill.
Ball's numbers give a useful sense of scale. About $2.0 billion of segment sales produced $207 million of comparable operating earnings, a little over 10%. Most of the rest reflects metal, energy, freight and conversion costs. An annual tender aimed mainly at supplier margin is therefore working on a relatively small part of the invoice.
The bigger levers are often hidden in the specification. Gauge means the thickness of the metal or board. Board grade determines how much fibre goes into a box and how strong it is. Case count determines how many units go into each box, and pallet pattern how many boxes fit on a pallet. These choices drive material use and transport requirements, and they are often fixed when the product is first designed.
In the portfolio work across 729 companies held by 47 Asian private-equity firms, packaging is often bought plant by plant against specifications set at product launch, while suppliers are retendered every year. In some cases the drawing is ten years old. Each tender then starts by treating the largest cost drivers as fixed and negotiates the smaller piece instead.
The biggest packaging savings I saw at Disney, Nike, Unilever and P&G came from the specification. The levers were gauge, board grade, case count and pallet pattern. These changes need engineering trials and quality approval, so they rarely fit neatly into the procurement calendar. The opportunity can sit there for years simply because nobody has created time to test it.
The PPWR makes those specification choices even more important. Recyclability and recycled-content decisions that once sat mainly in a technical drawing can now create a recurring annual fee on every unit sold into the EU.
Ball's segment sales rose 24.4%, from $1,613 million to $2,006 million. If volume contributed roughly three percentage points, the remaining increase was about 21 points of price and mix, which Ball mainly linked to aluminium and pass-through timing. A buyer could therefore see its can price rise by about a fifth while buying almost the same volume, even as Ball's segment earnings fell 2.4%.
The opportunity is therefore not simply to squeeze the converter's margin. It sits in two places. First, reduce the amount of indexed material through choices such as gauge, diameter, neck design and spoilage. Second, improve the pass-through formula itself. Which index is used, how long the lag is, who pays the regional premium. And whether falling prices flow through as quickly as rising ones. Fixing an asymmetric formula can be worth more than another price concession.
A common problem is that price increases flow through automatically, while price reductions have to be spotted and claimed by the buyer. Over a three-year indexed contract those missed reductions can build quietly, because normal monthly reporting is not designed to look for a credit that was never requested.
The Four-Lever Framework™ separates value into price, specification, demand and cadence so the same saving is not counted twice. Rate-Anchored Should-Cost™ then rebuilds the pack from its main cost drivers against independent references. Those drivers are tonnes of metal or square metres of board, energy, conversion and freight. The result can be compared with the supplier price rather than simply with last year's invoice.
The new regulatory fee cannot yet be sized precisely. The criteria are known, and the recycled-content methodology and member-state charges are still being finalised. That uncertainty is a reason to identify exposed products now. Changing a packaging drawing can take longer than the gap between a new rule being finalised and the fee starting to apply.
The worked file behind this piece is available on request: [email protected].
For the largest packaging categories, start with the specification and the pass-through formula before negotiating the unit price. The PPWR fee attributes should be reviewed at the same time, because the same product design decisions drive both. Combining the work avoids running two separate engineering cycles.
There are practical limits. Specification changes take time, require quality approval and may need consumer testing. A production trial also has a real cost, and suppliers may be reluctant to interrupt a run when capacity is tight. Companies already working through PPWR compliance may not want to put a second set of changes through the same quality team.
The answer is sequencing. When supply is tight, secure availability and fix the pass-through mechanism first. Then work through specification changes during the year for the next contract cycle. PPWR compliance can also help prioritise the work, because it already identifies the packs that need attention.
MomentumX can take this from the specification review and cost build through implementation, supplier negotiation and verification of the saving in the accounts.
For companies, the annual packaging tender often focuses on a converter margin of roughly 10%. The specification drives much of the remaining cost, has not been reviewed since launch, and may now also affect regulatory fees.
For consulting teams, packaging needs a cost model that can be built quickly. It also has to separate metal, board, energy, conversion and freight well enough to support a real supplier discussion.
For private-equity sponsors, packaging sits directly in gross margin across consumer, food and industrial businesses. A contract that passes increases through quickly but delays reductions can leak value for years without showing up clearly in diligence.
The question for management is simple. What does the current specification require, and what could be changed without the customer noticing?
For the worked model behind this article, a Confidential Spend Review of a specific category or contract, or a discussion on an APAC cost programme: [email protected]
MomentumX works from opportunity identification through commercial strategy, negotiation, implementation and verified value delivery.
A Confidential Spend Review — a senior look at a single category or contract, on client data under a non-disclosure agreement or on an illustrative basis.
Or the Spend Exposure Index, a confidential self-assessment completed privately, with no data shared.
Written by Chandranath Chakraborty, Founder & Managing Partner, MomentumX Consulting. Two decades running procurement for The Walt Disney Company, Nike, Unilever and Procter & Gamble, with structural cost reductions above 12 per cent across a US$1B+ regional spend base in his most recent role. LinkedIn · [email protected]