Retail

Virus crisis and packaging

The real effects on the packaging industry from the present virus crisis is hard to comprehend. But regarding food packaging in the short to medium term we will see online grocery shopping grow, more focus on hygiene and price without losing the grip of sustainable solutions.

The long-term consequences of a pandemic like this one is hard to have a strong view on at this stage. Likely short-term results appear to be a downturn in the overall economy with double digit declines of GDP’s and increased unemployment. Some of the hardest hit industries, so far, seem to be the hotel and restaurant industry, the travel and event industries and retail.

When it comes to retailing it is not anything like a general decline, the grocery retailing is in a much better position than capital goods retailing. Right now, people obviously stay more at home for eating and socializing. Going out is rarely an option and food and beverages are bought from stores rather than restaurants. Also, pharmacies are open for business selling medicines as well as personal care products.

Where is this possibly going then?

As a result, the pandemic is speeding up trends like remote working but also online grocery shopping and possibly other retail technologies. The effects of this pandemic for the retail industry could be an increased e-commerce business as well as growing interest in cashless stores, automated replenishment and cashier free self-checkouts.

And for food packaging?

Demand for food packaging as such will be up as people will eat more at home. Now when many restaurants and food-service outlets are closed this is obvious, but as the crisis opens for new behavior patterns some will stay, also when things get a bit more normal. There might also be some stockpiling and a new normal can very well be to have more than a few days of preserved food in the larder. This also goes for personal care and healthcare products.

Grocery e-commerce has so far been developing at very different paces in Europe. The UK is still in the lead according to Forbes (2018) followed by Czech Rep. and Estonia. As a result of the virus pandemic the habit of ordering online and receiving, or picking up, your shopping is fast developing and will get a boost from the extreme situation we are now experiencing. This is a clear step in consumer acceptance and adoption of the channel. New and better packaging solutions are being developed and innovative delivery methods are created.

I don’t think that sustainability will go away because of the shifted focus. The consumer demand is too strong, and the concept of sustainable packaging solutions has gotten ingrained in product and company positioning. Demand might temporary go down but if so, it will rapidly bounce back. It could however mean a changed view on initiatives such as the reusable cups introduced at certain coffee chains. People are also probably less interested in the packaging-free shops where you fill loose product in a bag of your own.

Sustainability is also related to the expected increase in general demand for hygiene. Packaging might even become appreciated by the consumers. It is visibly protecting and guaranteeing the freshness of the product. This could also be supporting the introduction of track and trace systems to a broader use. Blockchain technology is available, among other solutions, and is implemented as a useful tool in the distribution chain. This crisis could be a catalyst for increased use of technology for tracking and to guarantee the product origin and what it has experienced before consumption. An increased cost is hard to get around and can, in particular now, be a disadvantage.

It will take a while for the world to get back on track and increased unemployment and uncertain employments will make the average consumer more price sensitive than usual. The result comes as a shift towards a consumer demand for more value-products and private labels will have a field day. Converters and others in the packaging industry will not be spared the requirements for lower prices.

The future is right now not bright, but it is not a dark abyss either. We will have to adopt and be as agile as we can to survive and succeed also in the new tomorrow.

We want less plastic! And more of… what?

Yes, what do we want instead? We can’t always replace plastic with a renewable material. Then what about recycled plastic, more sustainable plastic that is efficiently recovered and that comes from an organised collection system? Does that sound a bit better?

Coca-Cola is in the news with their new line of bottles entirely made from recycled PET. Fantastic! Coca-Cola Sweden is during 2020 switching to only use PET bottles with 100% recycled material for their leading brands, Coca-Cola, Fanta, Sprite and Bonaqua, 40 SKUs.

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This is not a small thing as using recycled material in food contact is a complex mission surrounded by of rules and regulations. The Swedish deposit system really helps here as it makes the recycling stream of PET bottles relatively pure.
Beverage bottles, and cans, are here collected and recycled separately and can in theory be turned back into new cans and bottles. Today around 85% of the distributed bottles are returned and recycled. Normally recycled PET tends to be cloudy due to unintended mixes and potentially tainted by other random plastic in the recycle process. This is avoided in a controlled stream like this.

In a recent report from McKinsey, “The drive toward sustainability in packaging—beyond the quick wins”, this is discussed, among other things. The report concludes that to successfully address the recyclability and waste challenges more collaboration is needed along the value chain. To manage increased recycling new infrastructure needs to be built and more closed system must be employed.

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A closed and dedicated deposit system clearly makes recycling more efficient as it is separate and, closed. The Swedish deposit system is managed by Returpack, an organisation owned jointly by retailers and fillers together. When the deposit system was created also packaging converters were involved which makes it a good example of an efficient recycling structure.

Another brand owner who is blazing new trails in this field is Nestlé. The company is seriously investing in the development of new packaging concepts in their effort to have 100% of its packaging recyclable or reusable by 2025. The newly inaugurated Nestlé Institute of Packaging Sciences is unique and aims to support the process. The Institute is going to do its bit of development of functional and environmentally friendly packaging solutions and to address plastic packaging waste.

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Nestlé is now investing a staggering €2 billion to explore the possibilities to widen the market for food-grade recycled plastics. The Institute will be involved but the main investment will be in driving the market for food-grade recycled plastics by boosting demand and by being ready to pay a premium.
They are now demanding 2 million tons over a period of time and are willing to pay for it, to create a market. Brilliant!

Plastic is at present needed, especially in the food industry to minimise food waste, and it is possible to create a circular economy also for plastics. To get there a system for collecting and recycling plastic must be in place. But there needs to be a corresponding demand as well. Today it is more expensive to use recycled materials than virgin. But with a higher demand and larger volumes the price should go down and thereby generate more demand.
Hopefully a process that creates a virtuous cycle spinning us towards a circular and healthy economy.

These are great examples of steps in the right direction to increase demand for recycled plastic materials. This will also drive the development of efficient systems for processing.
But, in the end, the consumers are going to do a big part of the job. We must not forget to inform and motivate to sort and return the empty packaging through this efficient system.

E-commerce and logistics – room for new concepts!

E-commerce will continue to grow, and that at the expense of traditional retailing. Online shopping will soon be the norm for shopping. The supply chain needs to adjust to this.

One man’s convenience is another man’s stress
One of the consequences of us shopping from home, or on-the-go using the phone, is a stressed logistics system. The result is visible, congested traffic and overloaded bottle necks.
The logistic system supporting online shopping can be divided in two steps. The first leg is from producer to a Customer Fulfillment Centre or CFC. The second is from the CFC to consumer. This is a very different supply chain from the traditional and we have all noticed the growing number of lorries on the roads. New innovative delivery methods are invented and tried out. Robots, drones and electrical vehicles of all kinds, self-driving and not. These solutions are mainly focused on the last mile delivery, that is from the customer fulfilment centre (CFC) to the consumer. This “last mile” transport can be organised in various ways, it can be home deliveries or to a pack-station at offices, supermarkets or in train stations.

Remarkable last mile solutions

Drones
Amazon introduced the concept of drone deliveries in 2016 and shared a few months ago a project update. They are still developing the concept and now showed us an increasingly sophisticated flying vehicle capable to deliver up to 90% of the packages they are delivering today. And safely too.
Wings has a similar solution but with a different spin. They offer the same service, drone deliveries, but instead they link consumers to a range of local stores. An order is placed, and the drone picks up goods from the specified shop and delivers, all the way home. On trial in Australia, Finland and in the US.

Robots
Some drones are instead found moving around on the ground. In the UK, Tesco has started to deliver groceries using robots. A pilot test is located to Milton Keynes where Tesco is working with Estonian based robotics company Starship Technologies. A low 6-wheeled cart carries parcels, meals and groceries delivering to homes within a 3 km radius.
In the US Kiwibot is doing very much the same, home deliveries using robots, but in this case the 4-wheeled carts are bringing food from local restaurants. Also this is a concept in the building but it is inspiring to see all the creativity coming out to meet the demand for fast home deliveries.

The first leg of the supply chain
The above are solutions for shorter distances, the second leg of the supply chain. To get the goods from the producer to the CFCs lorries, train and boats are used, creating traffic overflow. That is until now. Until we heard of Magway.

British Magway has come up with the idea of building a network of pipes around the country. This planned grid of tubes, with a diameter of 90 cm, is supposed to carry goods, beneath and above ground. Instead of using trucks on the road, cargo will be sent around in pods in these tubes fitted with rails and powered by magnetism. An electric current will run through a track in the pipe, creating a magnetic wave that will drive the packed pods at speeds of 80 km/h.

Magway is an example of sustainable new thinking for a new era where consumers want their goods and that immediately. The normal distribution chain with goods-in-cases-and-on-pallets will with increasing online shopping soon not be the norm anymore.
Online shopping means that products are sent on their own or together with random other products. New methods are needed, and Magway has come up with a radical e-commerce delivery system that will reduce traffic on the roads and ease traffic congestion. The system promises reliable and predictable deliveries to CFCs and to a lower cost.

The first route planned is an 80 km route from northwest London to Milton Keynes, where large numbers of distribution centres are located. Already this year a 2 km test track will be built and tested.

This is an interesting period in time when online shopping is growing very fast and shoppers are expecting immediate deliveries. New solutions are really needed to gear up the supply chain for the new needs with lots of room for new thinking and developing of new concepts. All the above mentioned enterprises are going to be exciting to follow and I will absolutely keep an eye on all of them.