Mike Edgett is director of industry and solution strategy for food and beverage at Infor.
Consumer awareness about the environmental hazards of plastic, especially in food and beverage packaging, has reached a tipping point. Although plastic provides a relatively inexpensive container that can protect taste and prolong the freshness of food, the shocking amount of unrecycled plastic bottles floating in oceans and washing onto beaches is driving public outcry and demand for changes. For manufacturers in the food and beverage industry, this means pressure to rethink packaging strategies, revise go-to-market plans and forge new supply chain partners.
Fortunately, modern software solutions can help manage these multiple factors, starting with research and development and ending with consumer feedback.
A widespread transformation
The shift away from plastic packaging is like the proverbial “back to the drawing board” type of mandate. The ramifications are complex. A wide variety of factors will be impacted, from package sizes to labeling and shipping, as manufacturers begin to migrate to containers made of more environment-friendly materials. Old standbys such as glass, tin/aluminum and paper, will see a resurgence, and single-use plastics may soon be phased out.
Costs and margins will also be influenced. Manufacturers must determine what premium consumers are willing to pay for alternative forms of packaging – and what conveniences they are willing to forego to help reduce the environmental footprint of their favorite foods and drinks.
This will not be an overnight process as some questions will be difficult to answer, needing to be examined through the lens of science, logistics, profitability and public opinion. Some of the data points around bottom-line costs and environmental impact may take years of study and advanced analytics before final conclusions can be drawn. For example, scientists seem to agree that glass is easier to recycle than plastic. But it is also known that the recycling process consumes large amounts of energy. Will the energy consumption be worse for the environment than reusing plastic or reducing single-use packaging altogether?
These topics are likely to be dissected and debated for some time, continuing to fuel consumer reaction and keeping food and beverage manufacturers in the hot seat. Undoubtedly, sound data will be helpful in making logical conclusions and commitments to consumers and other stakeholders.
Driving forces calling for change
The environmental and economic impact of plastic is now certainly in the spotlight. Business Insider recently reported on the consumer outcry. Plastic use has increased 20-fold in the last 50 years, and it continues to rise. In the U.S., consumers do not reuse or recycle as many plastics as they could, causing the waste to go into landfills. Plastics in landfills start to break down to microplastics, which enter the water table and food chain. Microplastics are harmful to humans, animals and plants.
Single-use plastic containers and packaging often find their way to the oceans. In fact, only 14% of plastic packaging is recycled. Plastic packaging is the biggest source of plastic pollution in the oceans. Some estimate that plastic packaging now accounts for about half of the plastic waste in the world. It is estimated that the ocean is filled with about 165 million tons of plastic.
Further, by 2050, plastic in the oceans will outweigh fish, predicts a now-infamous 2016 report from the Ellen MacArthur Foundation, in partnership with the World Economic Forum. The report projects the oceans will contain at least 937 million tons of plastic by 2050. It also helps readers visualize just how much plastic this is by saying, “It’s equivalent to dumping the contents of one garbage truck into the ocean every minute."
Should manufacturers rethink packaging?
Food and beverage manufacturers have a massive job ahead of them. Consumers expect change and are increasingly making buying decisions based on the social responsibility of the brand.
Unilever recently conducted a study that reveals one-third of consumers now buy from brands based on their social and environmental impact. The study points to an unprecedented opportunity for companies that lead the way in sustainability. More than one in five (21%) of people surveyed said they would actively choose brands if they made their sustainability credentials clearer on their packaging and in their marketing. This represents a potential untapped opportunity of more than $1 trillion.
Unilever is embracing a sustainability strategy in several of its brands, like Hellmann’s and Ben & Jerry’s. The company reports that the brands aligned with sustainability messaging are growing 30% faster than the rest of the business.
A recent corporate sustainability report published by Nielsen reiterates the bottom-line value of being socially conscientious. The study indicates that 66% of global consumers are willing to spend more on a product if it comes from a sustainable brand. Millennials are especially outspoken about their expectations, with 81% saying they expect brands to declare their positions on social issues. Millennials also put their passions into action. It is common for this generation to bring their own take-out containers to restaurants, carry their own to-go mugs to coffee shops, and refuse plastic lids, straws and ketchup packets from restaurants.
By taking advantage of this mindset, more and more zero-waste or plastic-free shops are opening. These stores sell bulk foods — from coffee and peanut butter to sugar and salt — based on weight. Customers bring in their own reusable containers to fill. More than 60 plastic-free shops have opened in the U.K. in the last 18 months.
Across Europe, plastic-free aisles in supermarkets are becoming common. Small shops selling groceries without packaging have started to appear in Canada, Australia, mainland China and the U.S., especially on the West Coast and in cities with large millennial populations.
Some brands are committing to change
Whether companies are motivated by the desire to “do the right thing” or win the loyalty of sustainability advocates is hard to say, but several popular brands are already making commitments to environmentally sustainable packaging and processes. For example:
Aramark food and facilities management says it will significantly reduce its single-use disposable plastics by 2022, starting with straws, cups and soup containers.
Last July, Kraft Heinz announced its plans to make 100% of its packaging recyclable, reusable or compostable by 2025.
In April, Aldi announced a similar initiative and time frame to convert its packaging to reusable, recyclable or compostable materials in six years.
Coca-Cola announced that it would recycle one bottle or can for each one it sells by 2030.
In 2018, PepsiCo made a $10 million investment in The Recycling Partnership to launch “All In On Recycling,” an industry-wide challenge to raise $25 million to improve the recycling infrastructure.
How software technology can help
Market-savvy manufacturers will begin transforming their packaging strategies to better align with expectations of consumers. As conscientious global citizens, executives will also recognize environmental responsibility.
But rethinking packaging is no simple project. For example, evolving from a plastic cup with a pull-top seal to a glass jar with a screw-on metal lid brings many issues into consideration, from weight of the container, convenience for the consumer, ease of shipping, to loss due to breakage. The glass jar/metal lid option is much heavier, less convenient, making the single-serving packaging for lunch boxes impractical. So how can the product be repackaged so that it still fills the grab-and-go need of consumers? Some market research and engagement with consumers may be needed to formulate a new strategy.
The heavier glass container will also affect shipping costs and require changes to shipping containers to prevent breakage. The new glass containers will likely also take up different shelf space in the retail store and may require new merchandising. Different machinery for filling, sealing, and labeling the glass containers will be needed as well, which may result in capacity constraints or the need for additional capital. These considerations must be incorporated into a cohesive strategy — with the profit-impact carefully analyzed.
If changes in packaging potentially impact both product and profitability, the questions that companies need to answer are 1) Can I produce the same quality product that consumers expect? And 2) What is the financial impact of that change?
Start with R&D
Product lifecycle management (PLM) solutions help manufacturers track and monitor the entire lifecycle of a product, beginning with R&D and carrying through to product testing and pricing strategies. A modern PLM solution will help the organization simplify the complexity of revamping packaging. The new package designs can be managed as a product launch with tasks broken down into steps for easy project management. The tool will also empower designated people to access packaging specifications, batch formulas and research data around shipping needs so they can stay informed about transition progress and projections for new release dates. Collaboration tools also help individuals to share documents, record strategy decisions, and discuss pricing and go-to-market tactics across department lines, eliminating silos.
Recipe and batch specifications may need to be adjusted to accommodate changes in packaging and serving sizes, and how the product will be prepared. Eliminating protective plastic layers may change the shelf life, the freshness or appearance of the food, calling for refinements in the recipes. ERP solutions purpose-built for the food and beverage industry contain the functionality needed to refine such adjustments.
Next, resources and the financial impact
End-to-end visibility made possible by ERP solutions will be essential for tracking and quantifying the holistic impact of major packaging changes. One highly reliable version of the truth will help top stakeholders monitor progress and drive further decisions concerning packaging.
A connected supply chain network will be more important than ever, as the manufacturer will likely need to source new packaging resources for many needs, from product containers and lids, to new types of material handling equipment and new shipping containers that can protect breakables or control temperatures. A modern supply chain management solution will be valuable in forging new relationships with reliable vendors and deciding new shipping routes.
Predictive analytics will be extremely helpful as manufacturers consider the financial impacts of alternative packaging options and understand the bottom-line impact. Changes to internal processes, like retooling machinery, as well as shipping ramifications, will need to be considered carefully. Managers will want to compare “what if” scenarios as they think through choices. Modern analytics, driven by artificial intelligence and machine learning, will be critical to devising new strategies to align with the price points consumers are willing to pay.
Finally, reaching the consumer
Customer relationship management solutions can help track communications with customers and support customer engagement, from marketing campaigns to focus groups and websites, which explain the company’s sustainability story. Traceability and the farm-to-fork journey is also closely tied to sustainability and can be highlighted on the company website. The entire customer experience can be enriched by using online customer portals and e-commerce tools, as well.
Companies must take responsibility for their impact on the environment. The massive amount of unrecycled plastics is becoming detrimental. Consumers are demanding action. As they become more vocal about their expectations for sustainable packaging, manufacturers will need to rethink their product lines and consider new packaging resources. Numerous internal processes and go-to-market strategies will need to be evaluated.
This is an opportunity to take a holistic view of the environmental impact of the brand, plus align with customers and build loyalty. Although the issues are complex, often affecting profitability, modern software technology will help simplify decision-making, collaboration and network-building among potential vendors. This issue is not going to go away soon. Manufacturers that act now can be part of the solution, rather than part of the problem.