Three Packaging Leaders Navigate Industry Challenges and Growth Opportunities

The packaging industry faces multifaceted challenges that are reshaping investment opportunities. As consumer spending cools amid inflationary pressures and supply-chain complexities persist, packaging stocks are navigating significant headwinds. Yet within these challenges lies a compelling narrative: companies executing strategic responses are positioning themselves for sustained growth. Amcor plc (AMCR), Karat Packaging (KRT), and Sonoco Products Company (SON) exemplify how focused execution can drive value even in challenging market conditions.

The Core Industry Challenges Reshaping Packaging Stocks

The Zacks Containers - Paper and Packaging industry comprises manufacturers of paper and plastic packaging solutions that protect products, extend shelf life, and minimize waste across distribution channels. However, the sector currently carries a Zacks Industry Rank of #198—placing it in the bottom 19% of 244 Zacks industries—reflecting near-term headwinds that demand careful attention.

Volume declines have become a defining challenge. Lower consumer spending on goods, driven by elevated inflation and higher interest rates, has significantly dampened demand. The slowdown in housing and industrial activity compounds this pressure, reducing packaging needs for appliances, furniture, and construction-related products. Inventory normalization has further pressured volumes as customers work down previously built-up stock levels.

Cost structure pressures intensify these challenges. Producers face elevated material costs, labor expenses, and transportation fees alongside tariff-related headwinds. These factors have compressed margins industry-wide, forcing manufacturers to announce downtime, production curtailments, and selective mill closures. The challenge extends beyond operational efficiency—it requires fundamental business model adaptation.

Over the past year, the industry has underperformed significantly. The sector declined 7.8% compared to the Industrial Products sector’s 16.7% gain and the S&P 500’s 18% advance. Valuation metrics tell a similar story: the industry trades at a 12.92X trailing 12-month EV/EBITDA multiple, well below the S&P 500’s 19.00X and the Industrial Products sector’s 20.04X. While this discount presents valuation support, it also underscores the depth of near-term challenges.

Strategic Responses to Market Pressures

Industry leaders are implementing pricing strategies and cost-reduction initiatives to counteract these headwinds. Companies are streamlining operations, realigning with high-growth markets, and pursuing selective portfolio optimization. More importantly, they’re positioning their businesses to benefit from secular tailwinds that will offset near-term cyclical challenges.

E-commerce stands as a primary growth catalyst emerging from current challenges. Rising e-commerce activities have heightened packaging’s strategic importance, as it maintains product integrity and durability throughout increasingly complex delivery networks. With Internet penetration broadening and smartphone adoption accelerating globally, e-commerce penetration continues expanding. Digital payment advancements, logistics improvements, and personalization capabilities enhance the online shopping experience, creating sustained packaging demand.

The sustainability imperative offers another powerful offset to current challenges. Environmental consciousness is driving preference for biodegradable, recycled, and eco-friendly packaging materials worldwide. Industry players are incorporating recycled content into production methods and adopting advanced technologies to meet evolving customer expectations. This shift toward sustainable solutions isn’t merely regulatory compliance—it’s becoming a competitive differentiation factor.

The industry maintains substantial exposure—more than 60%—to consumer-oriented end markets such as food and beverages plus healthcare. Demand for packaging applications remains notably resilient across these sectors regardless of economic cycles, ensuring baseline support even when broader challenges intensify.

Three Companies Tackling Challenges with Distinct Approaches

Amcor: Merger Synergies and Scaled Operations

Amcor strengthened its position as a global packaging leader by closing its merger with Berry Global Group, creating a platform positioned to drive significant shareholder value despite current industry challenges. The company expects to realize $260 million in pre-tax synergies during fiscal 2026 alone, driving approximately 12% adjusted EPS accretion.

Looking further ahead, Amcor projects $650 million in total benefits from cost savings, growth opportunities, and financial synergies over fiscal 2026-2028, translating to more than 30% EPS accretion by the end of FY28. With projected annual cash flow exceeding $3 billion by FY28, the company can simultaneously invest in organic growth, pursue strategic M&A, and return capital to shareholders through dividends and share repurchases. Amcor shares gained 12.6% over the past three months. The Zacks Consensus Estimate for fiscal 2026 earnings indicates year-over-year growth of approximately 13%, with a stable estimate trajectory over the past 60 days. The company carries a Zacks Rank of 3 (Hold) with an estimated long-term earnings growth rate of 10.7%.

Karat Packaging: Sustainable Innovation and Market Expansion

Karat Packaging is addressing industry challenges through focused expansion in sustainable foodservice packaging. Last year, the company expanded its product portfolio to include paper bags for one of its largest national chain accounts—a new category projected to generate approximately $20 million in annual revenues with further market share gains expected.

The company’s strategic focus on eco-friendly innovation strengthens competitive advantage as environmental concerns intensify. KRT is simultaneously ramping manufacturing capabilities and implementing initiatives to boost online sales, capitalizing on rising demand for food delivery, take-out, and at-home dining consumption. The company is also diversifying its sourcing footprint while reducing China-sourced materials—mitigating supply-chain risks in a challenging global environment.

Karat shares gained 2.2% over the past three months. The Zacks Consensus Estimate for 2026 earnings shows year-over-year growth of 5.6%, with estimate stability over the past 60 days. The company holds a Zacks Rank of 3 with an estimated long-term earnings growth of 11.2%.

Sonoco: Portfolio Transformation and Strategic Acquisitions

Sonoco completed a comprehensive portfolio transformation by selling its ThermoSafe business unit in November 2025, reshaping the company around two core global business segments focused on metal and paper consumer and industrial packaging. This strategic pivot addresses industry challenges through focused operations and improved cost structures.

The company’s December 2024 acquisition of Eviosys, forming Sonoco Metal Packaging EMEA, is actively driving results. Sonoco expects $100 million in run-rate synergies by the end of 2026. The company is investing to expand pet food and seafood packaging opportunities in Eastern Europe while maintaining an active growth pipeline with high conversion rates. Sonoco is gaining market share in both Metal Packaging US and Industrial Paper Packaging segments.

Sonoco shares outperformed peers, gaining 20.3% over the past three months—the strongest recent performance among the three companies highlighted. The Zacks Consensus Estimate for fiscal 2026 earnings indicates 5.77% year-over-year growth with unchanged estimate trajectory over the past 60 days. The company carries a Zacks Rank of 3 with an estimated long-term earnings growth of 10.7%.

Investment Considerations in a Challenging Market

The packaging industry’s current challenges shouldn’t overshadow emerging opportunities. Companies executing disciplined strategies—whether through merger synergies, sustainable product innovation, or portfolio optimization—demonstrate how operational excellence can create shareholder value amid near-term headwinds.

The valuation discount the industry trades at relative to broader markets suggests the challenges facing the sector are partially priced in. Combined with secular growth drivers from e-commerce expansion and sustainability imperatives, investors may find compelling opportunities in companies demonstrating clear strategic responses to current market pressures. The three companies highlighted—Amcor, Karat Packaging, and Sonoco—each represent distinct approaches to navigating industry challenges while positioning for long-term growth.