Shelf-ready packaging: why the slow uptake in manufacturing?
Shelf-ready packaging (SRP) is now entrenched on our supermarket shelves, with market research pointing to its presence only increasing. But what’s the impact on manufacturers? Russell Whitby* looks at the challenges behind this trend.
Recent research by PMMI, the North American-based Association for Packaging and Processing Technologies, found SRP has had the strongest uptake in Europe, where the $34 billion (AUD) market is expected to grow 1.3 per cent annually. Next is the $7.55b North American market, which is tipped to grow 1.5 per cent. The highest growth rates are forecast in Asia (5.5 per cent), Africa (4.6 per cent) and South America (3.7 per cent), no doubt reflecting the drivers for SRP of urbanisation, population and economic growth.
However, the PMMI study noted that while US consumer packaged goods producers are investing in new capital equipment to meet increased demands, they are doing so comparatively slowly. Nearly 80 per cent said they were “likely to” buy new equipment to meet increased SRP demands, yet less than half (42 per cent) had actually done so.
So why is this?
SRP — also often referred to by the interchangeable term “retail ready packaging” — has a myriad advantages; three major ones are time saved in stocking shelves and warehousing costs (which help retailers) and more colourful displays (benefiting both retailers and manufacturers).
As defined by the Trading Partner Forum, formerly known as Efficient Consumer Response Australasia or ECRA, a key driver of SRP is to “improve in-store efficiency through increased speed of replenishment leading to better on-shelf availability and increased sales”. (The forum is a business concept aiming to better satisfy consumer needs via businesses and trading partners collaborating.)
Yet SRP also gives manufacturers several challenges, including slowing down the line speed and a reduced area for coding and labelling. But perhaps the biggest is line configuration and needing new equipment to meet the SRP requirements.
Existing equipment creates the standard wraparound, or regular slotted carton (RSC), which is a completely closed carton. The compromise is to provide perforations in cartons so they become shelf-ready to a degree, allowing the retail customer shelf re-stocker to tear off part of the box, revealing the products inside without having to physically remove them.
The problem with this is that these cartons don’t look neat, so there’s pushback from retailers who don’t want cartons with little “bits” hanging from a unclean tear. Another issue is that manufacturers are producing a product they’re not going to accept back into their business down the track because it’s not up to standard and won’t withstand transport rigours.
One answer here is to use higher grades of cardboard, which are both stable in transport and tear cleanly, giving better aesthetics than their lower-grade counterparts. However, higher grades are made from virgin cardboard, which costs more and is clearly not made from recycled material.
Either way, manufacturers are breaking the “recycle cycle”. This goes against the trend for environmentally sustainable — or conscious — packaging, which has been a key trend for several years.
The second type of SRP is a two-piece tray and hood. Basically this means a new piece of equipment because standard RSC set-ups don’t allow that configuration. Generally, this new equipment has a bigger footprint, requiring more space in the plant — plus the associated costs of shutting down the line, writing off equipment, then the capital outlay of commissioning and restarting production. It’s not a small decision.
The extra challenge, or complication, for the Australian market is that most of our equipment has to run multiple-size cartons down the line because, unlike Europe and the USA, we don’t have the consumer base to produce millions upon millions of the one type of item.
So there’s a real market for packaging equipment that is as flexible as possible in these areas!
European and North American machinery manufacturers can’t always provide equipment that meets those requirements, meaning it’s often custom built — and there are challenges in that as well. Cost is one. Australian equipment builders have attempted to tackle SRP machinery — some very successfully — but it’s a tough area to break into because the infrastructure requires engineering, development and R&D. The capital needed is a real challenge as well — but even European companies struggle because it’s outside their comfort zone.
As with many areas, if you don’t provide what your customers want, they’ll drift elsewhere. Australia’s main retailers are moving along down the SRP path; this is particularly so with Coles and Woolworths, which account for almost two-thirds of grocery retail sales.
Manufacturers who are willing to put the investment in to SRP will have the advantage where primary products in SRP are being sought.
But there’s also the ongoing risk of change: tastes change, consumer desires change, and marketers quite rightly continuously try to generate consumer interest with new products. So manufacturers also face the challenge of somehow ensuring that their equipment is flexible enough to cope with unknown changes.
SRP brings another focus to secondary packaging: rather than being solely about safe transport and storage, it equally needs to meet retail store conditions — so must sit well next to other cartons and look aesthetically pleasing.
Nearly a decade ago, Trading Partner Forum (when it was known as ECR Australasia) published a toolkit, which included handling SRP. It identified several key issues behind manufacturers’ uptake lag:
• Is SRP a fad?
• How can manufacturers justify the cost?
• Will different retailers want different solutions?
• Will packaging volumes increase?
• How can SRP requirements be built into new product development cycles?
• What’s the manufacturer’s own capability to deliver good SRP solutions?
… and so on.
An Australian Food and Grocery Council survey later revealed the reasons behind low in-store adoption across all retail groups, listing poor in-store execution, a lack of a clear business case and the impact to packaging volumes (finding all were contentious issues that affected the whole industry that could not be resolved independently by either the supplier or retailer).
This spurred the second, and now the third edition of the Trading Partner Forum toolkit, which aimed to address some of the more significant barriers to SRP adoption.
While there have been improvements, there is still some way to go. There is no “quick fix”: SRP continues to be a balancing act between possible in-store cost savings and efficiency improvements against a cost impost to suppliers. SRP requires further collaboration between all trading partners to ensure it’s effective for all.
This is a longer version of the “Focus: Retail Ready Solutions” article that was originally published in PKN, November-December 2015. You can find the shorter, published version here.
About the Author
Russell Whitby was the National Engineering Project Manager with Matthews Australasia. With 30+ years experience — including a long stint at Murray Goulburn working across various engineering, process-improvement and project-management roles — we got some great insight from the customer/ manufacturer's perspective in this article.