As online merchants have gained sharp increases in sales during the pandemic, manufacturers that supply them with packaging materials and envelopes are also reaping benefits amid their own market pressures caused by the coronavirus.
Packaging supplies manufacturer Interstate Polymer Group Inc., based in Montreal and Sarasota, Florida, yesterday reported a 9.4% drop in revenue to $267.8 million for the second quarter ended June 30. It attributed the drop to a decline in overall order volume and lower prices, “primarily due to the next impact of COVID-19 on demand.”
But the news wasn’t all bad.
“Demand held up stronger than anticipated in our industrial and retail end markets towards the back half of the second quarter,” Greg Yull, president and CEO, said in a prepared statement issued with Intertape’s Q2 financial statement. “This result, together with the continued strong momentum in the ecommerce market, enabled the business to deliver revenue 10% above” what the company had projected, he added.
Montreal-based Supremex Inc., a manufacturer of business envelopes labels and packages with sales throughout North America, also cited the demand from its business customers involved in ecommerce.
Growth ‘primarily’ from ecommerce businesses
“During the second quarter, organic growth came primarily from new ecommerce packaging customer relationships we have been developing over the past several months,” said Stewart Emerson, president and CEO.
“Despite having several lines of business and customers that were materially affected,” he added, “we delivered improved profitability, higher cash-flows and reimbursed debt.”
Supremex said second-quarter revenue from its Packaging and Specialty Products segment increased by 8.9% to $14.9 million from $13.7 “as a result of growth in ecommerce packaging.”
“Our main growth driver in the second quarter of 2020 was our Packaging and Specialty Products segment,” Emerson said. “Growth came primarily from new subscription-based ecommerce packaging customer relationships that we’ve been developing and nurturing since mid-last year.”
Sales to large online merchants
“These customers are large etailers, with whom we work to optimize their packaging by designing and developing solutions that enable them to significantly save on shipping costs, while providing a more dynamic opening experience that better allows them to showcase their brand,” Emerson said. “We also experienced modest growth in pharmaceutical packaging sales, which did not compensate for lower revenue from other packaging sales, primarily cosmetic and food customers.”
Emerson added that sales to ecommerce businesses play a critical role in helping Supremex avoid a year-over-year drop in Q2 revenue, as sales were flat at $47.7 million.
“Fortunately, between the combination of continued onboarding of ecommerce wins and a general improvement in market conditions starting in mid-May and into June, we were able to finish the quarter at essentially flat for the corresponding quarter in 2019,” he said.
Ecommerce as a long-term market driver
Intertape’s Yull said he expects the demand from ecommerce customers to continue to play an important role.
“The strength in ecommerce demand, which some reports estimate has pulled forward two or more years of growth into the ecommerce channel, and the sustainability of this increased demand should be key drivers for organic growth in our carton-sealing and protective packaging applications,” Yull said, adding, “The pandemic may result in a permanent shift in the composition of our end markets in the event ecommerce growth is sustained at current levels.”
Interstate operates an online B2B Customer Center where it processes online orders, but the company didn’t immediately return a request for information about the volume of sales it conducts through its own ecommerce channels. Supremex also didn’t reply to a request for information on whether it sells its products online.
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