The packaging supply market has been shaped by five years of successive cost shocks. Procurement teams are feeling the impacts of an energy crisis, increasing material prices, fluctuating financing rates, and growing compliance burdens. In a volatile economy, simply switching to the cheapest product does not provide the protection businesses need from supply chain disruption. Instead, the strongest procurement strategies are those that evaluate the total cost across the whole supply arrangement.
Executive Summary
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Five years of economic disruption continue to drive packaging inflation.
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Chasing the lowest unit price can risk hidden downstream overheads.
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Efficient packaging strategies require evaluating the Total Cost of Ownership.
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Supplier consolidation and range audits eliminate portfolio complexity.
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Smarter sourcing partnership choices protect operations and long-term profitability.
Why are packaging costs rising for UK food businesses?
Packaging costs are rising because buyers are absorbing a myriad of overlapping pressures across manufacturing, distribution and regulation. The headline drivers behind packaging inflation, and their impact on packaging procurement, break down as follows.
Material costs
ONS data shows that the cost of paper and cardboard materials climbed by 37% between 2020 and 2026. The cost of plastic has surged too, climbing 38% - and with crude oil driving costs, prices are continuing to rise year-on-year. Higher material prices mean procurement teams must spend more on the same packaging while facing greater pressure to control budgets.
Energy costs
For business and commercial premises, average electricity prices increased by 75% between 2021 (14.81p per kWh) and 2024 (25.97p). A business paying £1,000 for electricity in early 2021 would have paid roughly £1,750 for the same amount of energy by late 2024. Packaging production and distribution are energy-intensive, so when energy prices go up, it directly impacts packaging supply.
Freight and distribution
Despite vessel overcapacity, ocean freight remains vulnerable to geopolitical disruption. In 2024, the Red Sea crisis forced container lines to reroute, adding up to 14 days to transit schedules and introducing war surcharges. Similar surcharges continue to be announced in response to the ongoing Middle East conflict. These longer lead times and higher freight costs raise packaging spend and increase stock-out risks.
Domestic haulage
Aside from overseas shipping, the cost of moving packaging around has climbed post-pandemic alongside UK fuel prices, which have increased by 17% in the past year. Higher delivery costs increase total packaging spend, particularly when orders are divided between several suppliers and require separate deliveries with their own delivery fees.
Tax and compliance
The Plastic Packaging Tax came into force in 2022 and has steadily increased to £228.82 per tonne as of April 2026. Additionally, as of 2025, the Extended Producer Responsibility (EPR) introduced material-specific charges, aimed at shifting the cost of waste management to manufacturers. Ultimately, these costs and the additional pressure of material choice are felt by procurement teams.
Financing
Borrowing has become more expensive, with the Bank of England base rate jumping from 0.10% in 2020 to 3.75% as of April 2026. Packaging is usually bought and paid for well before it is used, but higher interest rates make that tied-up cash far more expensive to hold, raising the cost of carrying stock and funding buffer inventory.
For UK food packaging buyers and distributors, these overlapping pressures mean that relying on traditional unit prices alone is a high-risk costing strategy. To limit the impact of packaging inflation and protect profit margins in the long run, procurement teams must evaluate the total cost of ownership.
Total cost of ownership (TCO) vs unit price
The lowest unit price does not necessarily produce the most cost-effective procurement strategy. A meaningful strategy must compare every cost created by buying, holding, using and replacing the product at the required service level.
What is included in the total cost of packaging procurement?
A practical total cost of ownership model should cover five ‘cost blocks’:
- Landed cost: Unit price, freight, duties, fuel surcharges, handling and delivery.
- Stockholding: Warehousing, insurance, handling, capital tied up in inventory.
- Administration: Supplier onboarding, purchase orders, invoicing, compliance reporting.
- Waste: Damaged stock, picking errors, packaging failure and unsuitable substitutions.
- Risk: Stockouts, production delays, product testing, tax exposure and corrective work.
These blocks expose costs that may sit outside the packaging budget but still affect the wider operation.
Lowest unit price does not mean lowest total cost.
A cheaper product can become less cost-effective if it requires larger minimum volume orders, longer lead times or requires more warehouse space. If the trade-off for lower unit prices is reduced package quality, then the costs of this can also be felt downstream through product failure and recalls.
Fragmented buying has the same effect. Small savings across individual suppliers may be outweighed by excessive admin responsibility. Multiple suppliers mean multiple deliveries to track and invoices to manage. It’s also harder to get a bird's-eye view of your spending and packaging demands, which makes forecasting and future cost control harder to achieve.
Packaging cost reduction should therefore be measured against an agreed service requirement. The question procurement teams should be asking is not “What is the unit price?” It should be: “What does this packaging cost to source, hold and use without disrupting the operation?”
Reviewing true packaging costs using Total Cost of Ownership
Packaging cost review should begin where complexity and disruption are most likely to hide spend. The following assessment points highlight key areas where margins may be eroded.
The Total Cost of Ownership (TCO) Baseline Review
- How fragmented is your supplier base, and how much administration does that generate?
- How many slow-moving or near-duplicate SKUs are carried across sites or depots?
- How often do you fall back on last-minute orders or substitutions to cover gaps?
- How much cash and warehouse space are tied up in packaging inventory?
- Do your packaging materials or formats create EPR and Plastic Packaging Tax exposure?
- Is stock cover linked to real demand signals, or to historic averages and rigid reorder rules?
- Are supplier savings measured alongside fulfilment, quality and delivery performance?
This assessment provides a solid foundation for comparing products and suppliers, and prevents chasing quick discounts that trigger much larger expenses down the line.
How procurement teams can reduce food packaging costs
One of the most reliable ways procurement teams can reduce food packaging costs is by eliminating complexity from their buying strategy. In particular, a disciplined procurement strategy built around two key approaches, consolidation and rationalisation, can protect margins without compromising on packaging quality or supply reliability.
Consolidating packaging supplies
Supplier consolidation groups suitable packaging categories with a single resilient packaging supply partner. The benefits of consolidating core, repeat, and high-volume packaging supplies include:
- Increased purchasing power through aggregated spend with one supplier.
- Reduced supplier admin, such as purchase orders, deliveries and invoices.
- Improved demand visibility and forecasting across packaging lines.
- Clearer service standards and one route for escalation.
- Reduced emergency buying caused by fragmented stock management.
To prevent creating a single point of failure, buyers must assess the resilience of prospective supply chain partners. This includes assessing domestic buffer stock depth, source diversity and performance data demonstrating whether core service standards are being consistently achieved.
Rationalise ranges and volume.
Packaging rationalisation removes duplicate, slow-moving or unnecessarily bespoke SKUs where a common specification can perform the same role. However, in some cases, functionality-driven bespoke packaging delivers measurable ROI by reducing labour and handling costs. To understand what packaging lines to keep and what to standardise, take a look at the rationalisation review below.
SKU Rationalisation Review
1. Assess each SKU: Assess demand, margin contribution, service criticality and technical function. Identify lines with weak demand or limited business value.
2. Standardise where practical: Replace overlapping products with a shared specification, reduce complexity, control costs and simplify the packaging range.
3. Model the total cost: Calculate whether bulk-buying savings outweigh stockholding costs, including warehousing and financing.
4. Move stock upstream: Where larger committed volumes improve pricing, use supplier-held stock and forecast-led deliveries to avoid increasing your own stockholding costs.
Utilising resilient suppliers and intelligent forecasting allows stock to be held upstream and released as needed. This protects availability while freeing the cash and warehouse space that bulk buying would otherwise tie up.
Balancing packaging cost with quality and supply resilience
Cost reduction is only defensible if it holds up under pressure. Protecting margins is essential, but rushing into supplier switches or cheaper materials can increase quality issues, supply disruption and downstream operational costs. Before making changes to your packaging supply, make sure you take the following risk-assessment steps.
1. Verify food-contact compliance
Packaging safety should not be assumed. Before switching suppliers, confirm packaging materials are authorised for food use under the UK Government and Food Standards Agency (FSA) standards, supported by documentation and testing. This prevents costly corrective action in the long run.
2. Calculate new packaging taxes
A cheaper tray can easily cost you more in hidden tax penalties. Before switching or consolidating lines, always assess your full exposure, including packaging EPR fees, recyclability ratings, and the Plastic Packaging Tax, which charges £228.82 per tonne for materials with under 30% recycled content.
3. Vet supply chain resilience
Always audit a prospective partner's commercial stability and operational capabilities before awarding contracts. Avoid creating a single point of failure, and vet suppliers' sourcing, strategic and contingency plans. Choosing a resilient partner protects buyers from stockouts and costly emergency purchasing.
4. Test new packaging before rollout
Run real-world production trials so new packaging formats or materials prove themselves in actual operating conditions. Trialling before committing to any permanent change ensures initial savings are not outweighed by product recalls or wastage costs.
Protect profit margins today with smarter packaging sourcing
Rising packaging costs are putting the distributor industry under greater pressure to protect margins. The most effective procurement strategies look beyond unit price at the total cost of supply. Operational resilience and sourcing diversity have emerged as critical supplier advantages. Choosing a supply chain partner with the capabilities to absorb global disruptions minimises procurement expenditures and protects distribution and wholesale operations.
Reducing packaging costs: Frequently asked questions
How can businesses reduce packaging costs without increasing supply risk?
Businesses can reduce packaging costs through supplier consolidation, range rationalisation and intelligent forecasting. Consolidating spend with a single, highly resilient supplier provides cost leverage while preserving supply continuity.
How does supplier consolidation reduce packaging costs?
Rather than maintaining a complex multi-supplier network that increases complexity, consolidating to one supply chain partner simplifies administration, ordering and delivery. Clearer demand visibility can also improve forecasting, availability and packaging cost control.
What should procurement teams consider before switching or consolidating suppliers? Procurement teams must vet a prospective partner’s sourcing and operational capabilities. Consider source diversity, local stockholding depth, forecasting capabilities and compliance. A reliable supply chain partner should also provide clear performance data.
What is supplier-held stock, and how can it reduce packaging spend?
Supplier-held stock is packaging reserved for your business but stored by the supplier until needed. This arrangement protects availability while reducing on-site storage, excess inventory and working capital tied up in packaging.
Does bulk buying reduce total packaging procurement costs?
Bulk buying only cuts total spend if volume savings outweigh inventory carrying charges. Partnering with a distributor for forecast-led, flexible delivery balances pricing advantages against storage pressure and working capital.
How does a range rationalisation audit lower packaging spend?
A structured packaging range rationalisation audit identifies duplicate or slow-moving lines. Eliminating product complexity and standardising specifications lets buyers leverage purchasing scale and reduce costly warehouse footprints.
Which SKUs should be prioritised for packaging range rationalisation?
Procurement teams should target high-volume, repeat-purchase items that carry overlapping technical specifications across multiple sites. Consolidating these near-identical lines into a single format quickly unlocks major inventory efficiencies.
How can bespoke packaging lines lower business overheads?
Bespoke packaging engineered precisely around kitchen or factory workflows eliminates extra handling, assembly, and preparation steps. Speeding up repeated tasks, especially during peak service, creates compounding, national-scale labour savings and protects food quality.
