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Three Packaging Strategies to Adopt in Times of Cost Pressures

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The consumer packaging industry is typically strong in its ability to withstand crises, given the importance of everyday groceries to global revenues; food and drink accounted for 92% of retail packaging volume sales in 2023. However, inflation, interest rates and geopolitical instability serve to amplify operating costs, for packaging converters/machinery players, brands, and retailers, apparent in the final retail price point, paid by the consumer. Volatility in energy prices, if somewhat eased in 2023, combine with raw material prices, logistic pressures (around labour shortages and shipping challenges) and a softer economic climate, calling for greater flexibility in packaging. The rise of investor and regulator interventions are further influencers on packaging design, and costs, today.

Embed design efficiency to secure savings

Packaging designs that increase operational efficiencies can mitigate manufacturing costs and improve consumer affordability, an area of focus in a cost-conscious world. Design efficiency gains, whether in the removal of surplus material or downgauging, bring a secondary benefit to lighten companies’ environmental footprint, a target for many businesses. Reducing void in transit packaging, by minimising the outer packaging is another development area, important given the rise of e-commerce, and coming within the scope of forthcoming EU packaging regulation.

Shifting to flexibles, as an economical alternative to rigid plastics, is apparent. In home care and beauty, the value for money refill pouch sees strongest volume gains among price-conscious consumers in Asia Pacific and Latin America. Unilever Brazil’s Omo brand in detergents clearly communicates to consumers, front of pack, its “Refil Econômico” value.

The efficient pouch proves a dynamically performing retail format, recording growth of 5% in 2023, compared with total packaging growth of 1%

Source: Euromonitor International Passport Packaging

Diversify pack sizing

Consumer brands are adapting pack sizing strategies to better tailor to consumer preferences and budgets and safeguard brand margins challenged by higher operating costs. Reducing pack sizes keeps the retail unit price point accessible for consumers, a strategy apparent from edible oils and butter through to confectionery and ice cream, and beyond. Consumer concern about “shrinkflation” certainly necessitates care in how brands manage downsizing with retail price points, even if rises in operating costs are often the reason.

55% of retail professionals use bundled discounts to encourage shoppers to make larger purchases

Source: Euromonitor Voice of the Industry: Retail Survey, fielded July 2023 (n=1,112)

Conversely, upsizing, through bundling, multipacks, and bulk buy options, can procure for consumers a better price per ml/g option, and help move products in a softer consumption climate. The movement to larger sizes is not confined to food and drink, finding favour even among premium beauty brands. For example, Ouai retails its shampoos and conditioners in a 32 fl oz/946ml pouch alongside its 300ml plastic bottle line. The larger refill pouch option, more attractively priced, proves popular with consumers wanting to stay with their favourite higher-end beauty brands.

Circularity: Driving force in packaging development, also a reputational opportunity

Advancing sustainable packaging is a challenge amid elevated costs, but what is encouraging is that food brands carrying a sustainability claim, in dairy products, staple foods and snacks, all performed far better in 2022 sales than those without; food for thought on the merits to continue the sustainability path. This alongside mounting pressure from policymakers and consumers to reduce environmental impact and cut greenhouse gases. Some 48% of business professionals surveyed in Euromonitor Voice of the Consumer: Sustainability Survey, fielded January to February 2023 cited “comply with legislation” as the reason for investing in sustainability; this is up considerably, from 41% in 2022. 

Regulatory intervention on packaging is a continuing focus in 2024 as country, regional and global governance gathers momentum, with clear objectives being waste reduction, increased recycling, recycled content use and material reuse

Source: Euromonitor International 

Plastic is the material most individually targeted in packaging regulation, due to its prominence in use and in waste. 2024 so far has seen Ireland introduce a deposit return scheme (DRS) for plastic PET bottles and beverage cans, to advance beverage packaging collection for recycling and reuse. The EU’s Packaging and Packaging Waste Regulation draft, in March, reached provisional political agreement on the text with final parliamentary approval expected this month, while on a global level the UN Plastic Treaty text is due by the end of the year.

Consumers certainly want to make a positive impact on the environment, evident in path to purchase decisions and daily actions. Likewise, more brands, retailers, packagers, and investors are embedding sustainability into their business strategies and product developments, with expectations of the same responsibility, from those they do business with.Chart showing Top Seven Actions that Consumers Undertake to Positively Impact the Environment or  Lead a More Sustainable Life 2023

ESG reporting is growing, via company sustainability statements, financial reporting and in NGO releases, with many having set 2025 and 2030 targets. Nestlé, in its latest 2024 sustainability reporting, places “Packaging lifecycle management” as one of its five most important “major” material topics when it comes to impact on its business success. One target is to reduce virgin plastic use by one third by 2025 (from the base year of 2018). Nestlé has achieved a 14.9% reduction by 2023; availability and costs of recyclate such as rPET have hampered progress.

There is recognition that investment in packaging sustainability is necessary, and a business opportunity. Further cross-value chain coalitions and collaborations can be expected to advance action to lighten packaging’s environmental footprint. With inadequate action, businesses run the risk of reputational loss as others improve, as the specifics of regulation come into effect (added taxation costs, even material bans) and as consumers may well decide to buy sustainably, elsewhere.

Learn more about global packaging strategies and trends, in our report, Consumer Packaging Strategies: Adapting to Cost Pressures.

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