Paper

&Packaging

Report

2026Adaptingtoday,shapingtomorrowBAI

N&

COMPANYPaper&Packaging

Report2026ContentsIntroduction

letter.

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.2Resilience

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Efficiency.

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3Don’t

UnderestimatetheCostofOvercapacity.

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4Transforming

MaintenancewithArtificial

Intelligence....

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.10It’sTimeto

Rethink

Every

Link

inYourSupplyChain.

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.15Customer-Led

Growth

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.20Luxury

Packaging:Resolving

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Tension

Between

Creativity

and

Impact

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.21To

Make

Money,

Followthe

Money.

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26M&A

in

Paperand

Packaging:

Bigger

but

Fewer

Deals

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.31Battle

ofthe

Substrates

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.36Sustainability:

LessTalkand

MoreAction.

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.42Chemical

Recycling:

Plastics

Firms

Must

Move

Nowor

MissOut

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.47BAIN

&

COMPANY1Paper&Packaging

Report2026IntroductionletterPaper

and

packaging

executives

today

face

a

complex

set

of

challenges,including

low

profitability,

overcapacity,andsubdueddemandlevels.Stiff

pricecompetitionisthenorm,andmarketshavediverged.

NorthAmericancompanieshavefaredslightlybetterintermsof

operatingratesandassetutilizationcomparedwithEuropeandotherregions.Paperandpackagingcompaniesarespendinglesstimemarketingtheirsustainabilityeffortsanddoingmoreof

thehardworktomeetsustainabilitytargetsand

evolvingregulations.Bain’ssecondPaper&PackagingReportdeliversinsightsintohowleadingcompaniesareadapting

to

thesechallenges,cuttingcosts,andtakingactiontogrowgoingforward.Thereportlooks

atmanagingovercapacity,thesupplychain,andmaintenanceaskeywaystobuildorganizationalresilienceandefficiency.AIisstartingtohelpacceleratebothinternalefficiencyimprovementsandtop-linegrowththroughcustomerandconsumerinsights,impactingareasrangingfromcommercialexcellencetosustainability.Finally,M&Acontinuestobeactiveandisanincreasinglyimportantstrategy

forpaperandpackagingcompaniestofindscalebenefitsandgrowthoutsidetheircorebusinesses.IlkkaLepp?vuoriLeaderof

Bain’sGlobalPackagingsectorBAIN

&

COMPANY2Resilience

andEfficiencyDon’tUnderestimatetheCostofOvercapacity.

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4Transforming

Maintenance

with

Artificial

Intelligence..

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10It’sTimeto

Rethink

Every

LinkinYourSupplyChain.

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.15RESILIENCE

AND

EFFICIENCYDon’t

Underestimate

the

CostofOvercapacityOvercapacityisendemictothepaperandpackagingindustry,buttheseactions

canhelpyoumaintainmargins.ByIlkkaLepp?vuori,JoshuaHinkel,andMichaelTonelliAtaGlance

Mostcompaniesaimtogrowtheirprofitsatfourtimestherateofthemarket,butonly

7%of

industrial

companies

achieve

this

goal.

Tomanageovercapacity,leadingpaperandpackagingcompaniesfocuson

improvingtheir

costadvantage.

AIcanhelpbytransformingsalesandoperationsplanningintoacontinuous

process,with

insightsconstantlyupdated,reprioritized,andalignedacrossfunctions.Managingovercapacityandthelowprofitmarginsthatfollowisawell-knownheadacheforpaperandpackagingexecutives.AnewmultiyearstudybyBain&Companyshowswhyovercapacitypersistsacross

industries:Executivesareoverlyoptimisticwhentheymaketheirstrategicplan.Mostcompaniesaimtogrowtheirrevenuesattwicetherateof

theunderlyingmarketandprofitsatfour

timestherateof

themarket.Inreality,only7%of

industrialcompaniesachievethisgoal.Furthermore,in

capital-intenseindustrieslikepaperandpackaging,theseoptimisticplansoftenleadtosignificantcapital

spendingandpersistentovercapacity.Recentgeopoliticaluncertaintyandtariffshaveonlyaddedfurther

complexitytotheovercapacityconundrum.4Paper&Packaging

Report2026Inpaperandpackaging,leadingcompaniesdonotbetoncompetitorsscalingdownordisappearing;instead,theyfocusonimprovingtheirowncostadvantage,asovercapacitycouldreoccur.Thismightmeanproactivelyclosingcapacitywhennecessaryandavoidingthescenarioinwhichsupplysooutstrips

demandthatplayerskeepundercuttingeachotheronprice,untilonlyafewcanmakemoney.Forexample,leadingproducersof

graphicpaperlikeUPM,Domtar(formerlyPaperExcellenceGroup),Stora

Enso,andNipponPaperhaveallclosedmeaningfulcapacityinrecentyearsasdemanddeclined.Three

steps

to

manage

overcapacity1.Understand

yourriskandexposure.Successfulcompaniesbeginbyanalyzingtheircurrentand

expectedsupplyanddemandbalanceinthegradestheyproduce,bothintheshorttermandthelong

term.Theyalsolookattheircompetitivepositionintermsof

theirfullylandedcashcostpertontodetermine:Dowehaveacompetitiveadvantage,andarewealsoabletomakemoneyacrossmarket

cycles?Howsustainableisthatadvantage?Whatareourbreakevenpointsbymillandgrade,interms

of

volumeandprice?Theyevaluatewhereagivenmillorthecompanyitself

standsinthemarket(seeFigure1).Specifically,understandingthetrueend-to-endprofitabilityof

differentproducts—

andnotjustthecontributionmargin—iscritical.Figure1:The

questions

to

ask

depend

on

each

mill’s

position

in

theoverall

marketIsthereenoughlong-termmarket

growthtowarrant

aninvestment

in

new,world-class

capacity?Cash

costper

tonMarketpriceHowarethesemarginalplayerssurvivingtoday?

Whenarethey

forcedtoexit?What

happens

topriceswhen

theydo?Forhow

long

canwe

acceptlow

returns?Whatcouldweconvertto?Whatwouldwebenefitfromclosing?Howmuch

canwe

changeourcostposition,withand

withoutcapex?Howmuchwould

it

help,

relativetocompetition?BAIN

&

COMPANYShare

of

market

by

millSource:Fastmarkets100%50Intimesof

overcapacity,companieshavearangeof

strategicoptionstoweigh(seeFigure

2).Investingincapacity,efficiency,andconvertingtonew

grades.Companiesthatarecapableof

makinginvestmentsoftendosoincompetitivenewcapacity,suchasinvestinginnewmillsornewtechnologies.

Newassetsperformsignificantlybetterthanagingassets,andit’susuallynotpossibletoclosethatgap

evenbyspendingsubstantiallytomaintainolderassets.LatinAmericanpulpproducerSuzano,forexample,hasinvestedinnewassetsduringtimesof

pulpovercapacityandlowprices,trustingthatits

superiorcashcostpositionwillenableprofitsregardlessof

cycle.Successfulcompaniesalsoimprovetheircostpositionbyinvestinginefficiency.Theydonotnecessarily

addcapacitybutcontinuouslypushtoproduceeverytonatalowerprice.Theydosobyimprovingenergy

andvariablecostefficiencyorbyusingautomationtolowerlaborcosts.Finally,theyoftenconverttoanothergradewherethereismoreroomtogrowthanintheexistinggrade.

Theytakeintoaccountthetechnicallimitationsof

currentassetsaswellaswhichproductstheycould

producewithreasonableinvestments.Closingcapacityandoptimizingexistingmills.Alongwiththehigh-performingmillsinitsportfolio,every

paperandpackagingcompanylikelyalsohasmillsthatarestruggling.Forthesemills,thebestoptionmaybetocloseuncompetitivecapacity.Closingmillsusuallycomeswithhighcostsandstrongsocial

considerations,makingitoneof

thehardestdecisionsforpaperandpackagingexecutives.Paper&Packaging

Report20262.Map

your

strategic

options,offensive

and

defensive.

While

growing

scale

can

improve

one’s

positionincertainindustries,it’susuallynoteffectiveincreatinglong-termdurabilityinpaperandpackaging.Instead,thecashcostposition(i.e.,thecosttoproduceatonof

boardorpaper)istypicallywhatmatters

most.Understandingyourtruecostpositionrelativetopeersishardworkandrequiresmorethanrelying

onexternalsecondarysources.Acompany’srelativecostposition,forexample,canchangedependingon

thegeographywhereitsells,astransportcostswillvary,andtherelativepositionof

anindividualmillis

noteasilyunderstood.Leadingcompaniesdonotbetoncompetitorsscalingdownordisappearing;instead,theyfocusonimproving

theirowncostadvantage,asovercapacitycouldreoccur.BAIN

&

COMPANY6InvestineficiencyInvestinequipmenttoimprovecostpositionofexistingproductionsitesWhat

you

need

to

believe

Investment

need?Yourcurrentlossesareunbearable,andthesituationis

unlikelytoimprove?Youcanthroughmodestinvestmentsconvertmachines

intogradeswhereyouhave:–The“righttowin”–Healthysupply/demandbalanceevenafteryourinvestmentStoplossesthroughclosingcapacityClosecapacitytosupportsupply/demandbalanceWhatyouneedtobelievePaper&Packaging

Report2026Figure

2:Therearemanystrategicoptionstoconsiderina

market

overcapacitysituation?Yourcurrentlossesareunbearable,andthesituationis

unlikelytoimprove?Youdon’tseeapaybackinconversion?Closingcapacitywillhelptherestofyourbusiness

(e.g.,woodcosts,marketsupply/demandbalance)?Marketovercapacityistemporary?Yourwillingnesstoinvestcapitalislow?Youroperationalteamisstrongenoughtomakea

stepchange?Youarequicktoreactifthemarket

picks

up

againRunforcashInvestincapabilitiestoimprovecostpositionofexistingproductionsites?Yoursiteswillhavealong-termfutureinthegradesproduced?Costpositionofyoursitescanbeimproved

meaningfully,

throughmoderateinvestmentsStoplossesthroughconversionConverttoamorefavorablegradeWhatyouneedtobelieve?Marketovercapacityistemporary?Youhaveastrongbalancesheetandabilitytotake

risk?OtherswillexitorstopinvestingGo

big

or

go

homeInvestincompetitivenewcapacityWhatyouneedtobelieveWhatyouneedtobelieveBAIN

&

COMPANYInvestmentneedInvestmentneedInvestmentneedInvestmentneedSource:Bain&CompanyVERYLOWMEDIUMMEDIUMHIGHLOW7Paper&Packaging

Report2026Whataboutmothballing,orshuttingdownfacilitiesforaperiodtosaveonoperationalcostswhilemaintainingequipment,soit’spossibletoreopencapacitybetterandfasterthanpeerswhenconditions

change?Whilemothballingcapacityforlongerperiodsof

timecanbeeffectiveinotherindustries,itisrelativelyrareinpaperandpackaging.Incertainsegments,however,suchasgraphicpaperandnonintegratedmills,turningproductiononandoff

iscommon,asithelpscompaniesadjusttodemand

fluctuationsandcanbeusedtooptimizeelectricitycosts,forexample.Leadingcompaniesalsofocusonday-to-dayoperationsandmaketheirexistingmilloperationsascost

efficientaspossiblewithoutmajoradditionalinvestments.Still,withoutexpendingsignificantcapital

tomodernizeoperations,evenaverysystematicoperationalexcellenceprogramwilllikelyyieldonlya7%-10%costreductionperton,accordingtoBainstudiesoverseveralyears.Suchcostreductionsare

meaningfulbutnotgame-changingconsideringthat,acrossmoregrades,top-quartileproducershave

20%-40%lower

costs

than

bottom-quartile

ones.Finally,M&Acanbeausefuladditionaltooltoprovidescaleandtocreatenetworksof

mills.Withalarger

footprint,closingcapacitywillbelesschallenging,astheproportionatehitof

closingonemillisabsorbed

moreeasily.Latelywehaveseensignificantconsolidationintheindustry,suchasInternationalPaper’sacquisitionof

DSSmithandSmurfitKappa’smergerwithWestRock.3.Improve

youroperational

flexibility

withscenarioplanning.Leadingcompaniesaremovingaway

fromthinkingaboutsalesandoperationsplanning(S&OP)asatraditionaldeterministicprocessforallocatingdemandtoparticularmills.Instead,theyconsiderthedifferentscenariosthatcouldplayout

intheirmarketsandtheirrelevantendcustomermarketsandaskwhatsignpostscouldalertthemto

thosescenarios.Thiscaninformhowandwhentheyactandhowtheyrespondtocompetitors.AIcanalsobeapowerfultoolintheS&OPprocess.Specifically,itcanhelptransformplanningintoacontinuousprocess—whereinsightsareconstantlyupdated,reprioritized,andalignedacrossfunctions.GenerativeAI,meanwhile,candeliverricherinsights,increasingforecastaccuracyandenablingfaster,

smarterdecisions.Inoneexample,aglobalpackagingcompanyenhanceditsforecastingsystembyintegratingbothtraditionalstructureddata—likeorderbookinformationandhistoricalsales—andunstructuredorexternalinputs,whichwerepreviouslytoomessyortime-consumingtouse.Thisdataincludedeconomic

indicators,competitorbehavior,anddomain-specificsignalssuchasindustrytrendsandevencommodity

movements.GenAIwasabletoparseandcontextualizetheunstructuredinputs,transformingtheminto

predictivefeaturesthemodelcoulduse.Asaresult,themodelimproveditsabilitytodetectearlyinflectionpoints—especiallyinvolatilesectors—beforetheywerevisibleintheinternaldata.TheAI-enabledforecastmodelenhancedpredictiveaccuracy,reducingtheerrorratebyover10%.That

kindof

precisionhasadirect,measurableimpactonthebusiness;itdecreasesoverproduction,tightens

inventorycontrol,andresultsinfewerstockoutsandbetteralignmentwithupstreamsuppliers.BAIN

&

COMPANY8Paper&Packaging

Report2026Moreimportant,theteammovedfrombeingreactivetoproactive.Plannerswerenolongerspendingtheir

timedebatingthevalidityof

thebaselineforecast—theywerescenariotesting,stresstestingkeyvariables,

andcollaboratingwithsalesandopsteamstoalignonrisk-adjusteddecisions.Whilethisexamplefocusesondemand,thearchitectureappliesjustaseasilytosupplyplanningandcapacitymodelinginthepaperandpackagingindustry.Withtherightdatafoundation,thesemodelscan

simulateleadtimevolatility,factorythroughput,orcomponentavailability—empoweringplannerswithan

end-to-endprobabilisticview.Historywouldsuggestthatovercapacityisnotgoinganywheresoon.Tothrivedespiteovercapacity,well-

runcompaniesallocatemorevolumetothemostprofitablecustomers,products,andgeographies.They

considerM&Aasanoptiontoexpandnetworkcoverageandimprovetheefficiencyof

theirassetbase.Theymaptheoptionsforeachproductionsite,accountingforthesystem-wideimplicationsof

possible

closuresandconversions.Inadditiontounderstandingtheirownbusinessinlaserdetail,leadingcompaniesunderstandhowthey

fitintothelargercompetitivelandscape.Successfulpaperandpackagingexecutivesemployachess-like

mentalityastheyplotouttheirownstrategy,forecastdifferentmovesthatcompetitorsmaymake,andplantheirresponsesinthosesituationsasscenarioscontinuetoevolve.BAIN

&

COMPANY9RESILIENCE

AND

EFFICIENCYTransformingMaintenance

withArtificialIntelligenceWithlittletonocapex,companiescanturnmaintenanceintoanengineof

cashflow.ByMarcosRutiglianoandBenGrantAtaGlance

Companiesthatfocusonmaintenancetypicallyincreasetool-in-handtimeby15percentagepoints,leading

to

an

overall

reduction

in

maintenance

cost

per

ton

of17%to23%.

In-housedevelopmentofnewmaintenancesolutionsusinggenerativeAIcantakeas

littleas

a

quarter

of

a

year,with

a

small

budget.

Assetssuchasrotatingsetsandengineshavebeencandidatesfor

moreadvanced

solutions

combiningsensorsandalgorithmsthatlearnonthego.Maintenanceinthepaperandpackagingindustryisanarearipeforbothtraditionalandcutting-edgeAIapplications.Someof

maintenance’squantitativeandmathematicalcharacteristicsarebestsuitedfortraditionalmachinelearningmodels,suchaspredictivemaintenancealgorithms.Inaddition,thehuman-machineinteractionsof

maintenancearewellsuitedforLLM-poweredgenerativeAI,suchasmaintenancecopilotsthatprovidereal-timeinstructionstoemployeesbydrawingonmanuals,ledgers,andsensorprescriptions.Moreover,thecostof

installingthesensorsthatcollectthedatatheseadvanced

modelsrequirehasfallenprecipitously,removingwhatwasonceasignificantcapitalbarrier.10Paper&Packaging

Report2026Asaresult,equipmentmaintenancecangeneraterealvalueforpaperandpackagingcompanies.Reducingdowntimecandrivehigherthroughputandthereforerevenue.Moreproductivemaintenance

reduceslaborcosts.Lowersparepartsinventoriespushworkingcapitaldown.Finally,well-maintained

machineslastlonger,andcapitalexpendituredrops.Leadingcompanieshavealreadyseenrealreturnsfromfocusingonmaintenance.Specifically,theyareabletoimproveoverallequipmenteffectiveness(OEE)intherangeof1to2percentagepointsbyreducingfailuresanddowntime.Thismayseemsmall,butthecorrespondingvolumeincrease,valued

atcontributionmargin,hasasignificantimpactonacompany’sEBITDA.Whenitcomestoworkproductivity,byfocusingonmaintenance,companiescanreducethemeantimetorepairasystemby5%to15%,while

tool-in-hand

time

will

typically

increase

by15percentage

points,leading

to

an

overallreductioninmaintenancecostpertonof17%to23%.Andfinally,sparepartsinventoriescanbereduced

byasmuchas20%to40%incaseswheretheyhaven’tbeenoptimizedintherecentpast.Three

ways

to

create

valueTherearethreeleverscompaniescanpulltocreatevalueusingmaintenance(seeFigure1).Asset

strategyandmanagement.

Uptoadecadeago,maintenancecouldbecategorizedaseither

correctiveorpreventive.Morerecently,predictiveandprescriptivemaintenancehavecomeintoplay

atthecommercialscale,thankstosensorsthatcanflagassetsthatareabouttobreak,allowingforan

immediateresponse.Assetsthataremorecommonacrossindustrialsectors,suchasrotatingsetsandengines,havebeen

candidatesforthemostadvancedsolutions.Thesetechnologicalsolutionsstartwithcheaper,basicFigure1:SmartmaintenanceiscomposedofthreepillarsandunderlyingenablersValueleversAssetstrategyandmanagementFocusingondowntimeWorkproductivityFocusingoncostSparepartsoptimizationFocusingoninventoriesEnablersTechnologyanddataOrgandoperatingmodelChangemanagementandscalabilityBAIN

&

COMPANYSource:Bain&Company11Paper&Packaging

Report2026predictive

sensorsthatshootalertswheneveragivenvariable(e.g.,temperature)goesaboveorbelow

predefinedthresholds.Theissueisthattheygeneratemanyfalsepositives.Totacklethisissue,onthe

moresophisticatedend,AI-poweredprescriptivemaintenancecombineshardware(i.e.,sensors)with

software(i.e.,code/algorithm)thatlearnsonthego.Forexample,falsepositivesarefedbackintothe

algorithmsothatitlearnsfromitsmistakesandadapts.Workproductivity.Reducingmaintenancecostsdependsheavilyonimprovingproductivity.Tool-in-hand

time(orwrenchtime)isthekeyproductivitymetric.Whileit’spossibletomeasuretool-in-handtime

automatically,mostcompaniesstillshadowasampleofemployeeswithachronometertounderstand

wheretheyspendtheirhours.Companiesthathavenevermeasuredtool-in-handbeforewilltypicallyfindthataboutone-thirdofmaintenancetimeiseffectivelyspentdoingmaintenance.Theothertwo-thirdsisspentonadministrative

work(e.g.,fillingoutformsandsafetydocumentation,collectingspareparts,registeringnotes)aswellas

onmeals,transit,etc.Mostpulpcompanies,andindustrialcompaniesbroadlyspeaking,facethisreality.

Typically,whentheydiscovertheirtool-in-handtimeisonlyaboutone-thirdof

maintenancetime,theyfocusoneliminatingunproductivetimewhilemakingtheproductivetimemoreefficient.Toincrease

tool-in-handtime,leadingcompaniesdeploysolutionsthatrangefrommoretraditionalproceduresenforcementandprocessredesignmeasurestocutting-edgetechnology,suchasvoicedocumentation

basedongenerativeAI.Sparepartsoptimization.Managingsparepartsisprobablythetopvalue-creationleverthathasbenefitedleastfromrecenttechnologies(e.g.,sensors)andgenAI.Companiescan,however,leverage

machinelearningandtraditionalartificialintelligencetohelpidentifylowsparepartsinventoryand

reliablyprovidereplacementpartsasquicklyaspossiblewhenmaintenancedemands.Goodsparepartsmanagementcanalsoenablehigherproductivity.Onepulpcompany,forinstance,

redesignedprocessesinsuchawaythatthestoreroomwoulddeliversparepartstotheclientareas

insteadof

gettingthemaintainerstopickthemup,boostingproductivitysignificantly.Enablers:technology,operating

model,and

change

managementTechnologyanddata.Inordertoimplementsuchsolutions,companiesneedtoanswersomekeyquestions,including:HowdoweconnectapplicationsseamlesslytotheunderlyingenterpriseresourceCompanies

that

have

never

measured

tool-in-hand

beforewill

typically

find

that

about

one-third

of

maintenance

timeis

effectively

spent

doing

maintenance.BAIN

&

COMPANY12Paper&Packaging

Report2026planning(ERP),cloud,andothersystems?Whatdatawillberequired?Isthisdataavailable,ordowe

needtostartcollectingitnow?Whatisthedata-lakearchitecture?Masterdataconsistencyisalsoimportant.It’snotuncommon,forexample,thatthedataledgerinthemaintenancemoduleof

theERP

systemdoesnotmatchthatof

thesparepartsreplenishmentmodule,andcompaniescanspendafew

monthscleansingdatatoensureconsistencybeforeimplementingtheirusecases.Organdoperatingmodel.Noprogramwillbesuccessfulif

peopleontheshopfloordon’tadoptthenew

processesandtools.Thefirststepistoadjusttheoperatingmodeltosupportthenewmaintenancemodel.

Thisincludesdocumentingchangesinprocesses,responsibilities,andtheorganizationalstructure.Changemanagementandscalability.It’salsocriticaltogetpeopletrainedandincentthemtoadoptnewtoolsandprocesses.Tofosterthisadherence,companiestendtomonitoradoptionrates,followinguponnoncompliantgroupsandultimatelyshuttingdownoldprocesses.Recognizingindividualsontheshopfloor

withspecificfinancialrewardsif

theyadoptearlyandcorrectlyisalsoapath,

albeitless

common.Thefourstagesofa“smartmaintenance”programThejourneytosetupanddeploysensorsandAIaspartof

amaintenanceprogramtypicallyconsists

of

fourphases(seeFigure

2).1.Diagnostic

and

planning(3–4months):The

initial

period

should

focus

on

assessing

the

company’s

pointof

departure,identifyingopportunities,quantifyingthem,andbuildingthestrategyandroadmapahead.Athoroughunderstandingof

thecurrentandhistoricalstatusof

allthreepillars—assetstrategies,

workproductivity,andsparepartsmanagement—isimportantandwillhelpdeterminewherevaluecanbecreated.Figure

2:A“smartmaintenance”transformationincludesfourstages3Rampingup

On-sitedeployment

Changemanagement4Sustainingandscaling

Monitoring

Deploymenttoothersites

Launchof

newwaves2Developmentandpiloting

Makevs.

buy

Vendorselection

Development

Piloting1Diagnosticandplanning

Pointofdeparture

Maturityassessment

Value-creationthesis

Initiativesprioritization

Businesscaseand

roadmapBAIN

&

COMPANYSource:Bain&Company13Paper&Packaging

Report2026Prioritizingwhichof

thesepillars(andwhichinitiativesbeneaththem)tofocusoniskeyandvariescompanytocompany.Aglasscompany,forinstance,focusedonworkproductivityandsparepartsmanagement,butnotonassetstrategies.Thecompanyhadgivendispr