The Changing Landscape of the Global Food and Beverage Packaging: Part 2
SAN LUIS OBISPO, California
September 4, 2012
– Note: This is the second in a part-two series discussing the changing landscape of the global food and beverage packaging. Part one can be viewed here
Most of us trying to stay current with the trends in food and beverage packaging come across numerous insights and strategies promoted by industry mavens. Typically these trends include ageing populations, smaller households, increased convenience factor, rising health awareness, e-commerce, consolidation & globalization of retailers, etc.
The recently concluded 18th IAPRI World Packaging Conference, a collaboration between the International Association of Packaging Research Institutes (IAPRI) and the Packaging Program at Cal Poly State University, San Luis Obispo, California, saw the focus area of “Packaging for Food & Agriculture” garner the top numbers amongst the 93 presentations from industry and academia on the 11 topic areas covered.
Amongst the several keynote presenters at this event attended by delegates from 24 countries, Dr. Michael Okoroafor, the Vice President for Global Packaging Innovation and Execution at H.J. Heinz Company provided a unique outlook on the global packaging trends for food and beverage through six unique perspectives. This week, we discuss channel blurring and affordability. Part 1 can be found here.
1. Channel Blurring: Faced with budget constraints from the global economic downturn and higher food and fuel prices, many shoppers are reducing their basket size to save money while making more frequent trips to nearby drug, dollar and grocery stores. The hyper competitive grocery industry is undergoing a rapid model change mainly due to the above mentioned reasons. Convenience stores no longer just provide “convenience” products but are increasingly becoming a “grocery” outlet. Partly due to the economic reasons but also as a preemptive effort by private labels to improve their branding through packaging, two-thirds of adults now say store brands’ quality is much better today than it was five years ago. On the same stance, traditional grocery stores are quickly becoming the neighborhood convenience stores through their efforts. This channel blurring is causing the brand/outlet owners and marketers to revisit their business models including packaging. The convergence of changing demographics, economic factors and customer preferences has the potential to create a long-term disruption across the food-industry value chain that will transform where and how consumers shop for groceries, as well as what products they choose.
2. Affordability: Reemphasizing Dr. Okoroafor’s recommendation to not predict the future markets based on the “middle class” but on the “buying class”, it must be taken under advisement that the emerging markets must be intelligently explored. It is being reported that “due to economic uncertainty and low consumer confidence, portions of the “middle class” have changed their discretionary spending habits to be more representative of the lower class”.
P&G executives say many of its former middle-market shoppers are trading down to lower-priced goods—widening the pools of have and have-not consumers at the expense of the middle.
That's forced P&G, which estimates it has at least one product in 98% of American households, to fundamentally change the way it develops and sells its goods. For the first time in 38 years, for example, the company launched a new dish soap in the U.S. at a bargain price.
P&G products for “affluent shoppers” (left) and cash-strapped shoppers (right)
The ever existing argument between what distinguishes a “want” from a “need” is now more important than ever for CPG companies. Dr. Okoroafor recommended increasing consumer value through elimination of non-value costs and ensuring a value proposition that is firmly founded on the needs and wants of key consumer segments.
A great article, ‘Understanding the Post-Recession Consumer’ from Paul Flatters and Michael Willmott, about the future trends in consumption for the near post-recession and longer term trends makes a great read on this topic. According to the article, four key trends being accelerated by this recession are consumer demand for simplicity, a call for ethical business governance, a desire to economize, and a tendency to dart from one offering to another. Four other important trends that are identified to be slowing are green consumption, a decline in respect for authority, ethical consumption, and extreme-experience seeking. The article predicts that in the post-recession recovery, some trends (such as green consumption) will resume their pre-recession progress while others (such as experience seeking) will be altered for the long term.
Dr. Okoroafor emphasized three key facts to keep under advisement by brand owners – the economic recession is not a recession in eating, consumer frugality will stay fashionable and the leading brands are at a crossroads. This group will emerge stronger only if they innovate, add value to retailers and improve/increase communication though packaging.