Local interests influence far-off events

The maxim “All news is local” explains why I—and perhaps you—react to breaking news stories by asking two questions: “How will this news affect me? And what should I do about it?”

Ben Miyares
Ben Miyares

How near or far from your packaging ops the answers to those questions bring you will determine the extent to which distant news becomes personal or local, relatable, memorable and, above all, actionable. Reports about hurricanes, tax reform, e-commerce, cybersecurity, and China no longer wanting our used plastic packaging have been resonating with packaging managers lately. Let’s look at the hurricane and e-commerce reports as examples.

Sheltering from the storm
Headlines from late September tracked Maria, a catastrophic hurricane that whacked Puerto Rico and knocked out its power and water. But unless you live or work in Puerto Rico, have critical suppliers who do, or have family or friends in the hospital, you may not realize that five months after Maria, the storm is still wreaking havoc. The hurricane put a crimp in the healthcare industry’s ability to produce intravenous medications and IV bags just as the country’s worst ever influenza season was getting underway.

Three and a half months later, Scott Gottlieb, MD, commissioner of the U.S. Food and Drug Administration, said: “I’m optimistic that supplies of IV saline and amino acids will increase over the next few weeks and the stress of the shortage will begin to abate, even if the shortages will not be fully resolved immediately.

“That said,” cautioned Gottlieb in a January 4 post, “the production situation in Puerto Rico remains fragile. As many risks and challenges remain and there are still shortages affecting patient care, we’ll continue to take all possible steps to help improve shortage situations… We’re fully committed to Puerto Rico’s recovery… as a vital and robust base for the skilled manufacturing of medical products.” The complete statement can be found at: [pwgo.to/3353] along with an updated January 16 statement on the IV fluids shortages, found here: [pwgo.to/3354]

It may seem obvious to many manufacturing managers that neither of the commissioner’s January statements addressed one elephant in the room: manufacturing risk management. There is extensive guidance from the FDA on quality risk management, but nothing we could find covering manufacturing risk—a puzzling omission.

Perhaps the agency is relying on industry to be guided by widely used manufacturing risk principles and practices. Supplemental operations and contract manufacturing lines are two options that come to mind.

E-M-B packaging revolution
A storyline that CPGs may be watching more closely is the evolving E-M-B marketplaces. The E-M-B acronym encompasses electronic-commerce, mobile-commerce, and BOPUS (Buy Online, Pick Up in Store). Retail is undergoing dramatic change. And lately the digital market for groceries has been heating up. To date we haven’t seen significant impact on packaging from E-M-B markets outside of a clean label here or some added protective packaging there.

But packaging change is coming. The physical and environmental demands of the less-than-load full case grocery orders that E-M-B favors are certainly different from those of truck-hauled pallet loads. Perhaps we’ll see the emergence of an e-generation of ultra-lightweight, drone-friendly containers that can be drop shipped in customers’ yards.

Maybe we’ll witness the resurgence and growth of multi-trip returnable packaging. But what’s apt to be the greatest E-M-B packaging change agent is the rapidly transforming structure of the digital retail industry—a transformation currently being driven by mergers and acquisitions—that will likely lead to changes in products and how they are manufactured and packaged.

Consider just a few of the M&A activities shaping the E-M-B marketplace. Amazon, with a 43.5% share of the overall e-commerce market according to research firm eMarketer, bought Whole Foods, turning its 365 stores into a network of online distribution centers. Whole Foods’ private label products are credited with helping to boost Amazon’s online grocery sales by 35% since the Whole Foods acquisition. Market trackers don’t expect Amazon’s buying spree to stop there, with possible acquisition targets said to include Target and its 1,828 stores.

In 2016 Walmart, the country’s largest brick and mortar grocer, acquired Jet.com, one of the fastest growing e-tailers in the country. Walmart’s e-commerce sales jumped 63% in the first quarter after the deal. Last month Walmart announced the closing of 63 (about 10%) of its Sam’s Club warehouse outlets. Plans call for 10 of the former warehouse outlets to become online sales fulfillment centers.

Kroger, the country’s second largest traditional grocery purveyor—along with Aldi, Costco, Target, and others—is said to be eyeing the purchase of Boxed, a bulk grocery startup with a growing online presence and a popular line of private label products.

M&A activity isn’t the sort of thing packaging developers normally focus much attention on. But the grocery field’s growing interest in online transaction is one reason they should. The market appears to signal that online groceries will be substantially different than their traditional supermarket cousins in at least one aspect: branding.

Unless we are misreading what’s going on, a new grocery shopping day is dawning—one in which the online pipeline of groceries is filling up quickly with house brand rather than national brand grocery products. That will be a new experience for many shoppers. And a new challenge for developers to find and engage with packaging vendors able to help them chart their way through the new reality.

Ben Miyares, Packaging Sherpa, is a packaging market and tech-nology analyst and is president of The Packaging Management Institute, Inc. He can be reached at bmiyares@packmgmt.org.

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