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CPG packaging supply problems sees Lidl buy paper mill

Schwarz Produktion – owner of supermarket Lidl and German chain store Kaufland – buys paper mill for $50mn as strikes and inflation hit packaging supplies

Schwarz Produktion – owner of the supermarket chain Lidl and German department store, Kaufland, has bought a paper mill for US$50mn in a bid to safeguard packaging supplies in the face of inflation around energy and raw materials, industrial action and other supply disruptions.

Across Europe, lead times for paper-based labels have increased to three months or more, with label printers and raw-materials suppliers forced to prioritise deliveries among customers.

Self-adhesive labels and letter-box friendly e-commerce packaging is a key part of the consumer packaged goods (CPG) supply chain, and demand for CPG packaging soared during the pandemic, and demand for labels and packaging materials continues to grow, according to labels trade organisation, FINAT.

The organisation predicts that the lack of availability of labels and packaging is likely to hit a wide range of final consumer industry sectors such as food and beverages, health and personal care, medical and pharmaceutical products, chemicals, logistics and retail, consumer electronics, automotive and other sectors.

The Maxau paper production site in Germany is owned by packaging producer and Finnish forestry group, Stora Enso. The plant, in Karlsruhe, in southwestern Germany, produces 530,000 tonnes of supercalendered paper and 270,000 tonnes of de-inked pulp a year.

Supercalendered paper is shiny in form and will be used by Schwarz for packaging food products, and in the use of promotional material. Lidl operates 11,000 stores across Europe and the United States, while Kaufland has 1,400 stores in Germany, the Czech Republic, Slovakia, Poland, Romania, Bulgaria, Croatia and Moldova.

CPG packaging supplies hit by strikes and soaring costs

Schwarz Produktion’s move comes as organisations face disruptions to packaging supplies, following strikes at a number of the leading European paper mills, compounded by the soaring cost of energy and raw materials.

A Schwarz Produktion spokesperson said that the buyout will ensure “a reliable supply of environmentally acceptable and ecologically sustainable paper for packaging used by Lidl and Kaufland”.

The deal is part of Stora Enso’s plan to divest four of its five remaining paper production sites, as it shifts its focus to packaging. It aims to generate more than 60% of group sales from renewable packaging by the end of the decade.

The company expects to close the deal in Q1 2023, and added that the site in Germany has an enterprise value of around 210 million euros.

“Schwarz’s plan is to continue paper production at the site, and the 440 employees belonging to the mill organisation at Maxau will be part of the transaction,” Stora Enso said in a statement.

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