Follow us: Luxe Packaging Insight – news & innovations on the luxury packaging market

Forecasting the impact of coronavirus on luxury

Alissa Demorest

Related topics :

Be the first to react

Comment

Forecasting the impact of coronavirus on luxury

Covering the economic impact of coronavirus is proving challenging. The situation is evolving rapidly and figures looking to forecast the eventual fall-out from the crisis are being published daily. According to press reports, a study by Italian luxury association Altagamma, BCG and Bernstein is predicting losses of up to $40bn for the luxury industry as a result of coronavirus, but this was late February, before the Italian economy came to a virtual standstill.

This week, McKinsey & Company published a document entitled Coronavirus Covid-A9 Facts and Insights in a bid to help companies navigate the crisis. It includes three possible outcomes for coronavirus’ economic impact; the “Quick Recovery” scenario (as opposed to the less optimistic Global Slowdown and Global Pandemic & Recession possibilities) would be “localized and restricted in duration” with the situation in China recovering by the end of the second quarter and global GDP for the year contracting by 2%, “largely driven by supply chain disruptions”.

While the Covid-19 crisis is resulting in a near paralysis of the Italian market—at least when it comes to consumption—the situation in China does indeed appear to be improving. “In terms of manufacturing, after Chinese New Year, our main (production) partner reopened with a two-week delay, and some of our other partners were operating after three weeks. But we’re now back to normal and working overtime to catch up for lost time,” Toby Cattermole, managing director of packaging supplier TNT Global Manufacturing told Luxe Packaging Insight on March 11. Other manufacturers note that while the presence of production staff had fallen by between 40 and 50% during the peak of the crisis, the numbers were slowly recovering.  

One luxury fragrance packaging development executive confirms: “What we can say is that the impact on our supply chains has been relatively limited up to now; our Chinese partners are running just two or three weeks behind.” 

For the shipping industry, however, turbulence is in full swing. "Luxury goods, in addition to food and pharmaceuticals produced in Italy are entirely on hold, which will cause stocks around the world to be compressed. If France is next, this could have a huge impact on spirits as well. Cargo shipping prices are in full auction mode: the highest bidder gets the equipment and space," one shipping executive active in the luxury space explained to Luxe Packaging Insight on March 12th.

An analysis from GAM Investments, meanwhile, pointed to the resilience of luxury brands in the long term. “The luxury sector benefits from high margins, strong cash generation and underleveraged balance sheets. (...) While we acknowledge earnings estimates are likely to suffer further cuts, the sector is not in any cash flow/liquidity crisis whatsoever and shows a strong latent ability to bounce back once market conditions return close to something resembling normality,” affirms GAM investment manager luxury equities Swetha Ramachandran.

But of course key to the sector’s performance is the end-consumer. “Our main concern today is customer consumption as paranoia seems to travel faster than the virus itself,” concludes TNT Global Manufacturing’s Cattermole. Watch this space.

 

Editor's picks

LUXE PACK Monaco cancels 2020 show, readies for digital platform

LUXE PACK Monaco cancels 2020 show, readies for digital platform

Luxury packaging trade show LUXE PACK Monaco has announced that its 2020 event will not go ahead in light of the latest government measures limiting group gatherings and travel restrictions imposed as a result of the pandemic. The health crisis[…]

09/30/2020 | Coronavirus
Asquan’s makeup brushes offer coronavirus protection thanks to Pylote technology

Asquan’s makeup brushes offer coronavirus protection thanks to Pylote technology

Luxury market could contract by 35% in 2020

Luxury market could contract by 35% in 2020

How Covid-19 is set to change beauty packaging: part 2

How Covid-19 is set to change beauty packaging: part 2

More articles