A Balancing Act: How premium packaging leads to profits
Today's consumers want something that catches their eye and meets their needs for freshness, sustainability, messaging and fun
Editor's note: This "A Balancing Act" story is the 12th in a series for Food Dive, where experts examine trends uncovered in earnings reports and discuss strategies that impact the balance sheet. Previous articles in this series can be found here.
Attractive colorful exteriors on food products are often what first attracts consumers to pick one product from among other competing options. Unique designs, bright colors and eye-popping images can improve brand identity and communicate the product's message to the consumer. And they can make a product seem more premium, allowing it to be sold at a higher price.
Chris Gretchko, vice president of marketing for Tetra Pak US & Canada, believes the hardest-working brand message is what people see on the package.
“Packaging is one way food and beverage brands can grab a new customer’s attention on real and virtual store shelves or through social media,” she told Food Dive by email. “In this cluttered landscape, the right packaging is as important as the contents inside. And as we know, brands have just a few seconds to make an impression, so it had better be bold.”
In that respect, she recommends that brands set the mood with their packaging, creating compelling designs that can visually and quickly tell a brand’s story.
“Today’s consumers desire package designs that are more adapted to their needs than ever before,” Gretchko said. “Attributes like functional features, shape and graphic design have the ability to make a package and its content appear more desirable and thus more valuable in the eyes of the consumer. Functional features like sturdy, well-designed openings and closures can sometimes be seen as worth the higher price tag.”
Alan Moskowitz, a customer insights consultant and food and beverage industry specialist at C Space, said the most important thing packaging does in helping sell products is both overtly and unconsciously and quickly communicating lots of information to help consumers make complex purchase decisions.
“Colors and images, product claims, the brand, ingredient info, product stories, the package shape, package format and many more elements all contribute — whether we admit it or not — to our decision about what goes into our cart,” he told Food Dive. “The difference between you picking one type of potato chip, salad greens mix, beer or whiskey often comes down to your sensory reactions to which package looks and feels ‘right’ to you in the moment.”
Rich Trotter, president of Rosati Ice, America’s oldest Italian ice company, said the company has long realized the importance of fun, innovative packaging.
"The package is the invitation or the ‘welcome back’ message to the consumer. It needs to grab the consumer’s eye and trigger a response to pick up the package,” he told Food Dive. “The size of the package is very important. The subliminal mind recognizes the uniqueness of the size and/or shape of a package vs. the surrounding SKU’s and will be drawn to it.”
To further improve purchase drivers, which translate to sales and profit, companies can also consider picking a package shape that maximizes visual interest.
“Creating a compelling billboard effect works much better with packages that fit together on a shelf,” Gretchko said. “When combined, such packages can easily form a grid, the perfect canvas for bold, multi-package designs. These comparatively large surfaces also allow for an endless array of compelling and creative designs that can ultimately help land a product in consumers’ shopping carts.”
Patrick Trevino, vice president of business development for premium flavored salts, sugars, and seasonings manufacturer Twang Partners, said the company is a big believer in offering one-of-a-kind shapes in its packaging.
“Our patent[ed] beer bottle design for the Beer Salt line allowed for consumers to immediately connect the dots on usage. The cuteness of it draws in curiosity, which makes consumers pick it up and ultimately give it a try,” he told Food Dive by email. “We always gravitate towards unique containers shapes or use color palettes in our packaging to cause interruption when a consumers eye is wondering around.”
For the company's Zas! all-purpose seasoning, the container is slimmer than the average spice jar, which feels better in the hand and more premium. And since the line is positioned to be sold in the produce section of a grocery store, which is usually covered with vibrant, beautiful colors of fruits and vegetables, the company decided on white as the primary color with the logo providing a larger color pop.
According to Nielsen, 63% of consumers say renewable packaging is a key driver in purchase decisions. One way packaging can enhance consumers’ perception of a product is by tapping into the growing desire for stronger connections with brands that promote sustainability and corporate responsibility.
Sustainability also plays a role in meeting criteria for performance and cost. The Sustainable Packaging Coalition document “Definition of Sustainable Packaging” points out that costs previously borne by society, such as disposal and emissions, are now redirected to producers.
“Sustainable packaging initiatives offer multiple strategies to meet and even exceed market criteria for performance and cost, including: improved package design, resource optimization, informed material selection, design for recovery and source reduction,” it says.
For its plastic cups and pails, Rosati Ice uses high-density polyethylene.
“More consumers prefer packaging that meets the needs of the present without compromising the future,” Trotter said. “The more sustainable a package is, the more inclusive your potential customer base becomes.”
Sustainability is an important factor in packaging for Follow Your Heart, a plant-based company best known for its signature Vegenaise.
One strategy that the team recently implemented is a waste-saving technique around Vegenaise lids. The cap design made recycling difficult because there was it had a cardboard liner that was tough to separate for proper recycling. The company removed the cardboard liner. Based on average figures, the company says it diverted 160,000 pounds of caps away from the landfill and reduced the packaging impact by over 23,700 pounds per year.
Many food and beverage product labels convey the company’s commitment to sustainability. These are often related to carbon footprint, recycled content, certifications for sustainability, and social aspects like ethical sourcing.
Stephen Birtsas, senior manager at Kalypso, said the true winners at sustainability make it part of the consumer value proposition.
“They tell a compelling story in their packaging that targets environmentally responsible or health conscious consumers and they deliver on their promise with sustainable products,” he said.
Technology playing a role
Kristin Harper, who is in charge of implementation and innovation at CedarLane Natural Foods, said the company is on the forefront of high pressure processing technology.
“A new non-thermal packaging system enhances food safety, creates a longer shelf life, ... a clean label with no preservatives, and less shrink,” she told Food Dive. “All these packaging advantages improve profitability for the retailer and supplier.”
Tetra Pak’s E3 platform utilizes electron beam sterilization offering huge opportunities to drive profitability through increased speed, better environmental performance and energy efficiency.
“With eBeam, speeds of up to 40,000 portion packs per hour, or 11 packs every second, can be achieved — and market tests have shown this increased capacity can save beverage manufacturers as much as 20% in operational costs,” Gretchko said.
Mark Hardy, CEO of InContext Solutions, is seeing developments in CPG product marketing that include augmented reality and innovative materials for greener and smarter packaging.
“On the manufacturing side, virtual reality simulations allow companies to bypass many expensive and time-consuming processes associated with packaging and packaging innovation by creating and evaluating them within a virtual environment,” he told Food Dive. “For example, when it comes to evaluating multiple concepts, the process of setting up displays and recruiting individuals to participate in surveys and focus groups is extremely time-consuming and expensive. With VR, companies can slim down resources by conducting side-by-side, in-depth analyses of several concepts in different formats to obtain real shopper data that will accurately predict customer behavior.”
Moskowitz said printing has advanced so that it can be done in high quality on almost any material, which is why there’s more graphic packaging than ever before.
“Look at something like a six pack of soda or juice cans, which is now fully wrapped in a tight plastic that has great graphics all over it. Beer cans are a great example too,” he said. “Another advantage of labeling innovation is that we can now cost-effectively do much smaller print runs so you can do limited batches or ‘personalization,’ like Coke did so well.”
Many consumers are much more conscious about the materials used in packaging food, and have concerns about plastics, chemical coatings and packaging linings. This concern — especially around canned foods — has driven many manufacturers to new product formats like pouches or cartons.
Nanotechnology is one of the largest areas of innovation. Some of the latest ideas involve using mineral molecules as barrier materials to prevent spoilage and oxygen absorption in plastic beer containers. Birtsas said nanotechnology can drastically improve packaging materials and create new ways of protecting products that can sense changes to products relative to their shelf life.
Gretchko said Tetra Pak designs packaging made from materials that improve value because they deliver on ever-increasing consumer demands for sustainability. They are made mainly from recyclable paper and renewable materials, like plastics sourced from sugarcane.
Other companies are beginning to test integration of digital technologies such as sensors and smart connected packaging.
“Smart connected packaging can open new revenue streams such as automatic re-ordering, subscription models and cross-selling with digital content delivery,” Birtsas said.
Packing it up
Packaging companies supplying the food and beverage industry are responding to trends impacting their customers.
Brian Dickinson, SAP’s director of packaging solutions, said today's one- or two-person households, who prefer single serve or two-person serving sizes, gravitate toward multi pack, single-serve, or resealable packages that keep food fresh.
“Another trend is packing food in stand up pouches that are lighter and more compact," he told Food Dive in an email. "This reduces the volume of packaging used to ship and reduces food waste, as it allows consumers to fully utilize the contents. Consumers will pay more for the product.”
From a supply chain point of view, a product can be more profitable when it has a lightweight package that can ship undamaged, takes up less space for shipping and storage, and gives consumers a more attractive product on the shelf.
The "A Balancing Act" series is brought to you by BMO Harris Bank, a leader in commercial banking. To learn more about their Food & Beverage expertise, visit their website here. BMO Harris Bank has no influence over Food Dive's coverage.
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