Is Packaging Becoming More Important Than Content?

Trends in beverage packaging have a significant impact on the whole supply chain. This is not confined to the production line or the store shelf. Current packaging changes can impact all aspects including storage density, automated handling and even manual handling. A surprising variety of drivers is responsible for that.

Marketing

Generations of marketing prowess have produced some great iconic brands. Many of these are easy to identify and relate to. The beverage industry offers some great. Harley Davidson does an outstanding job. Mercedes comes with its 3 pointed star on the grill and BMW has the kidney style grille. The Porsche 911 is easy to identify even after 50 years of evolution. Nivea Cream has retained the same brand coloring since 1924. The Coca-Cola bottle still has its distinctive shape. As technology has evolved it comes now in cans and PET bottles. Coca-Cola, the world’s most recognized brand, has been in existence for over 125 years. It is so deeply ingrained in consumers’ minds that the brand’s visual identity can offset the loss of uniqueness associated with its bottle packaging.

Marketing and brand power to identify and differentiate is one force driving packaging. But there are also others.

Recycling

Is Packaging Becoming More Important Than Content? - Image 1Within the beverage industry historically the drinks came in glass bottles, delivered in crates. These days we have all sorts of containers. It can be glass, cans, tetra packs or plastic. This opens opportunities for marketing, but variety usually increases cost. A global producer will have to consider local demands. As an example, Germany has a highly developed recycling chain where you pay deposits on cans, glass and PET bottles whilst in other countries it is personal discretion if packaging goes to rubbish or recycling. All modern beverage packaging is now suitable for recycling – be it due to cost considerations or companies’ wish to build a sustainability image.

Cost

Manufacturers are being forced to reduce cost to meet competitive and consumer driven pressure. Packaging becomes an important subject for fast moving goods. The sheer volume of goods can mean a small change in packing cost of just one or two cents per case can save millions per year. With the growing trend towards smaller pack sizes the base cost of packaging per retail unit is potentially increasing. This will drive more cost reduction as we are seeing in the beverage industry moving more to wrapped cases rather than traditional cardboard. Maintaining brand identity and adding new products and pack sizes to increase market share are challenges for the producers. But inventing a new good looking, low cost, pack might impact the handling in the supply chain. With the trend to more SKU and smaller package sizes, more units need to be handled in the Supply Chain which will increase overall cost.

Presentation

Retailers want to maximise their shelf space for product presentation and not for storage. That means, in the retailer’s ideal world, the products come in just in time, they magically find their way to the shelf or display where they sit and attract consumer attention. When sold at the checkout it triggers replenishment and all the retailers have to do is to provide the shelf space and sell the prime spots to the suppliers. Products compete for attention in the store and product placement and packaging becomes a powerful marketing instrument.

As a product needs to be easy identifiable for its brand, the packaging has to convey the message to the consumer. Shelf ready packaging is designed to make it fast and easy to place the products onto the shelf in a manner that supports the brand and ultimately draws the sale. This has made the case an integral part of the brand.

Handling

Saving money in packaging can lead to issues with carton quality or no carton at all. From carton to tray & shrink to shrink only. This challenges case-based transport systems. Without a flat base for conveyor transport, the cost effective systems may become unreliable. In some cases the trend in packaging can even impact manual operations where weaker packaging may fail under the handling conditions in a productivity pressurized DC environment. Ever increasing requirements for labor protection are also driving down case sizes to reduce weight and mitigate physical problems for pickers handling many tons of product per shift.

Materials Handling companies have developed solutions for direct case handling. However, these kind of systems need a higher level of investment than conventional conveyor solutions. They provide more flexibility but also require more specialized knowledge.

Saving money at one end might become costly on the other. This is where Supply Chain and Production/Marketing have to check the impact on their network and evaluate the impact before a problem occurs. Perhaps, there is a need to evaluate packaging on its whole supply chain cost including the DC and transport.

As an example, the crushable PET bottles use up to 30% less plastic and weigh less, but it has consequences when it comes to storage and case handling. Stored as pallets, they cannot carry the same weight as the thicker PET bottles and as a result the DC will have to restrict stacking heights in Block Stack. This can potentially reduce the utilization of Block Stack to below 60% of the available storage space and therefore increase space requirements.

All-clear for wine connoisseurs, but what about the rest?

I believe there is still potential for savings in the FMCG industry between the palletizing in production and shelf space in the store. To identify the potential it requires a look at the overall product cycle and avoidance of silo thinking. With the complexity and dependency in today’s supply chains, it is imperative you consider the whole process from production to consumer when you try to save money.

Is Packaging Becoming More Important Than Content? - Image 2Fine wines will still be sold in glass bottles in the foreseeable future. For everything else, however, be prepared to see your favorite beverage packaged in various shapes and materials. It might then come as a relief to you that even though packages change, your beer will still taste the same – thank goodness or rather, thanks to branding.

One Response to Is Packaging Becoming More Important Than Content?

  1. Frank Decavele says:

    As Tetra Pak founder Ruben Rausing’ motto: “The package should save more than it costs”

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