The packaging industry is exhibiting mixed results, with certain segments performing well while others face challenges.
This trend was highlighted on July 18, 2025, when Wells Fargo lowered its rating on O-I Glass — a leading producer of glass containers — from “Overweight” to “Equal Weight.”
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In investment terms, that means analysts no longer expect O-I to outperform its competitors.
Instead, they now see the company’s stock as likely to perform about the same as the broader market. While the change reflects company-specific challenges, it raises a broader question:
What does it mean for the packaging sector as a whole?
In short, the downgrade is not a red flag for the entire industry, but it does highlight a growing divide within it.
While companies tied to glass packaging are facing operational and trade-related headwinds, others — particularly those producing aluminium beverage cans or paper-based packaging — are showing more resilience.
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By GlobalDataThe overall message is that the packaging sector is no longer moving in one direction. Sub-sectors are being shaped by different forces, from regional demand shifts and supply chain pressures to changing consumer habits and geopolitical uncertainty.
O-I’s struggles offer a useful lens through which to understand where the weak spots — and strengths — may lie.
A sign of shifting fortunes in packaging
Wells Fargo’s downgrade of O-I Glass was driven by three main concerns: excess capacity in Europe, weak volumes in North America, and uncertainty around tariffs.
In Europe, O-I is producing more than the market demands, pushing the company to reduce inventory levels and temporarily cut back production. These are signs that supply is outpacing demand — a drag on profitability.
In North America, volume growth has remained soft despite a 34% rise in the company’s share price so far this year. Analysts argue that without stronger demand, that stock performance is hard to maintain.
The third pressure comes from tariff risks, particularly in US–Europe trade. While only around 4.5% of O-I’s global sales are currently affected, future tariffs on glass containers could impact competitiveness — especially in a market where glass already costs 25–30% more than aluminium cans.
Packaging winners and losers are emerging
O-I’s challenges are not shared across the board. Wells Fargo emphasised that other packaging firms are faring better.
Makers of aluminium beverage cans — such as Ball, Crown Holdings, and Ardagh Metal Packaging — are benefiting from strong promotional activity and robust demand. Some are even expected to upgrade their financial outlooks.
At the same time, consumer behaviour is changing. Shoppers looking for value could cut back on purchases of more expensive or premium-packaged products, a trend that might impact firms like Graphic Packaging, which rely on volume growth.
This again shows how demand patterns are becoming more complex across packaging types.
How O-I is responding
O-I Glass isn’t ignoring the challenges.
Through its ongoing “Fit to Win” turnaround strategy, the company has already secured US$61 million in savings in the first quarter of 2025 and is forecasting up to US$200 million in free cash flow for the year.
It is also taking structural steps, including closing facilities in France and simplifying its operations in Europe.
These efforts reflect a growing need across the industry for agility and cost efficiency — especially in segments facing slower growth or external pressures.
The takeaway
Wells Fargo’s downgrade of O-I Glass shouldn’t be seen as a judgment on the entire packaging sector. Rather, it highlights the growing gap between companies that are well-positioned for current market conditions and those that are struggling to adapt.
As packaging firms continue to navigate regional differences, shifting consumer habits, and trade uncertainty, the industry’s outlook will become more dependent on sector-specific and even company-specific factors.
Investors, suppliers, and brand owners alike will need to look beyond headlines and assess which types of packaging are best suited to weather the next phase of market change.
