Growth Yes – But different
Total Pack Type Absolute Volume Growth 2018 to 2023 (Euromonitor 2018)
- Flexible Packaging: + 165 billion
- PET bottles: + 109 billion
- Glass bottles: + 16 billion
Growth everywhere. Pleasing. But this time differently.
Because whoever thinks linearly here now has done the math without the host. The host is the consumer here. And in the future this will be even more complex than ever before. This will confront the packaging sector of the printing industry with tricky challenges, and the production processes and printing aggregates must be put to the test to see whether they can meet the challenges.
Nothing new in the country – but everything new
It is not as if consumer habits have not changed in the history of mankind. Change and development is a part of our history and actually also the engine of our existence.
Every decade has its own peculiarities with its very special characteristics. The most important characteristics of our time are global trade, digitalization and thus the almost unlimited possibility of real-time communication via social media. Nevertheless, we also have a phase shift in the development on different continents. If income in the developing countries of the southern hemisphere increases proportionally, we see a proportional downward trend in income in the industrialized countries. The Millenials, for example, have significantly lower incomes compared to previous generations.
Nevertheless, social parameters are also changing. All in all, the change in consumer preferences can be seen in the shift of five main dimensions:
- Increased need for convenience
- Diversity and personalization
- Declining brand loyalty (volatility of brand preference), more local than global
- Focus on wellness and health
- Increased price awareness – price sensitivity
Doesn’t sound very dramatic at first. But it is. Because the shifts along these dimensions will pose enormous challenges for FMCG and thus also for converters. On the one hand, there will be a rapid and very powerful increase in SKUs (stock keeping units), significant changes in the product mix. The converters are required to apply much more flexible and agile processes. All of this is accompanied by even shorter production runs, a much faster development of new products in order to be able to bring them to market quickly.
The convenience factor – nothing new but completely different
Whether it’s easy-to-open and reseal closures, ready-to-eat and convenient food, freshness retention, single portions and small packages and so on. All product launches worldwide focus on the convenience factor. If we all remember, Convienece has already led to several substrate shifts in the last decade. This trend will continue relentlessly and the demands on packaging will continue to be very high in the future.
This will require increased packaging innovation and further shifts in substrates. Convenience is paired with sustainability. The requirement is becoming all the more complex because recyclability is now playing a decisive and decisive role and will take over the dominant role in the very near future. Without making concessions to the loss of convenience. This will be like squaring the circle here and there.
Variety and personalization
Consumers are seeking for packaging options and personalization. What doesn’t sound so serious, however, is a huge challenge for the branded goods industry – especially in the consumer packaged goods sector. We are seeing an exponential increase in SKU’s across the board. Starting from traditional channels up to today’s online marketplace.
But, what does SKU proliferation actually mean?
If we want to put it simply, it’s no different than the process by which a retailer increases the number of products he offers to his customers. We could take the beverage market as an example. If a manufacturer offers six SKU’s at 1 liter sizes, these can simply be six different flavors. All in the same size and from the same brand. If three competitors with different or similar six flavors come onto the market in the same segment, they will be listed as well, because it’s all about the customer’s wallet. So we have 18 SKU’s in one go. A little later the SKU’s will also be offered in 0.33l formats. Then all of a sudden we have 54 SKU’s in retail.
But that does not mean that more has been and will be drunk. It is – especially in Europe and the USA (with a real low population development) a shift by means of proliferation.
The Spiral of Proliferation – Mass Customization
The spiral challenges the entire supply chain. Mass customization and configured products should offer the consumer a very individual choice. For example, seasonal product differentiation has expanded enormously in the F&B sector. Take a pack of nut mix, for example. There are on the one hand the different taste mixtures – as described above – and these then also to the season adapted Sujets, like a spring mix and a summer mix. Meanwhile, I can completely vary the design of the pack for the next season. However, the costs must not be increased, because the adaptive packaging is intended to increase sales and profitability. This puts pressure on the FMCG, as well as the converter. Because accurate product forecasts for the basic products, for the sales plans, must be coupled with procurement. Executions and conversions are sometimes more difficult. Because components, ingredients and packaging must first be designed and ordered.
Production planning is different than before. Here we have a shift from made-to-stock to make-to-order. At first glance, the processes of make-to-order and make-to-stock production are similar. The main difference is that in make-to-order production the production orders are linked to one or more sales orders, whereas in make-to-stock production the orders are the result of production planning, which in turn is based on a sales forecast.
This development initially began in 2014 in a completely different area, but with increasing data-based marketing and the transparent consumer, it is increasingly finding its way into the Food & Beverage segment.
More and more industries and companies are joining the train of mass customization. Many are niche manufacturers and start-ups, unburdened by expensive old factories and supply chains. Others are large brands that have additional customization options to expand their product lines and increase sales. The configurator database project shows how widespread mass customization has become. It provides links to companies that enable consumers to create customized products, and the website lists approximately 1,360 companies in 17 industries.
Declining brand loyalty (volatility of brand preference), more local than global
This trend, which was taking place in the background, has been rekindled and will gain massively in importance. Consumers appreciate regional and local products. Driven by the feeling of product safety and by other positive attributes, such as: Good for the local economy. Millenials in particular reflect on the new, different and authentic.
You can see the volatility by looking at a study by a well-known consulting firm. A Millenial Survey showed that, in contrast to the previous marketing model, the following can be observed with Millenials:
Focus on wellness and health
The fastest growing category is this area. Increased consumer sensitivity, an aging generation that wants to stay healthy despite aging, food safety and obesity are shifting into this area. Whereby, of course, a drift and value/private label and premium segment can be observed. This naturally puts pressure on the traditional mainstream segment. This area is characterized by a high speed of new product launches around health and wellness and these expect packaging that communicates and fits value propositions.
Increased price awareness – price sensitivity
If there is one constant in business life, it is the pressure on prices. To counter the growing price pressure, FMCG producers typically target packaging as a focus for cost savings. As I said, income in advanced economies is falling for the majority of the population. Millenials are thus “poorer” than their parents. This generation’s urge to save in turn drives the growth of private labels.
What does this mean for packaging printers?
All the changes outlined above – coupled with the trends already outlined, such as digitization, margin compression and the forthcoming contribution to sustainability – will present the packaging industry with unprecedented challenges, especially since the pace will be and already is dramatically faster than in the past. The linear approaches of the last 10-15 years will not suffice here!
Printers in this sector would be well advised to rely on adaptive and intelligent systems and to work with partners and manufacturers who have a vision in their equipment product portfolio and are adaptively equipped for the future. IoT (Internet of Things) will play a major role in this respect, so please contact this link for advice.