In turn, these developments are also requiring that contract packagers be light on their feet. One co-packer told me the other day it wasn’t long ago that shrink bundling represented 80% of his business, and he didn’t operate a single piece of cartoning equipment. Today, shrink bundling is 30% of the company’s business, and this co-packer has 14 cartoning lines humming. Cartons represent 30% of its packaging production.
Consumer sentiment is driving changes such as these on the production line. Consumers love to see something new each time they visit their favorite store, and carton variety packs add, well, the variety that distinguishes stores in various distribution channels and even competing outlets within the same channel. Club stores love variety packs. Why? Consumers want to be wooed. They crave the thrill of the hunt for exclusive products. Neither they nor retailers want to see a carton of macaroni and cheese that retails for 69 cents in a mass merchandiser bundled—same
flavor variety and carton size—into a three-pack selling for $2.19 at a club store. It’s too easy for consumers to determine that the multipack, in this example, is an inferior deal. Therefore, they have little incentive to purchase the club-store three-pack.
Instead, both consumers and retailers want value expressed differently through packaging in a club store than in the mass-merchandise outlet. In the example of macaroni and cheese, the product manufacturer could work through a contract packager to produce variety packs with special graphics proclaiming something like “limited-time offer!” on packages offering flavor varieties or fun pasta shapes for kids that the brand doesn’t market through mass merchandisers. The consumer gets a different value for the money. For the retailer, the variety pack adds to the sense of wonderment and shoppers’ hope of uncovering other “treasures” elsewhere in the store—impulse buying that brings them back. This tactic also makes shopper price-value comparisons more difficult.
The point is that product manufacturers, retailers, and contract packagers all have to function better as an organized team to keep up with King Consumer in this environment. In conference after conference over the past year, I’ve heard both consultants who track such things and the product manufacturers themselves say that the packaging industry’s performance in keeping up with consumer demands is mediocre at best. They point out that all who have a hand in the value chain must either adapt faster to the consumer or risk losing sales—whether it’s making packaging lines more flexible in responding to changing marketing conditions or altering packaging formats.
From the product manufacturer to the retailer to the contract packager, those who can operate seamlessly on the leading edge to satisfy King Consumer will thrive. Those who fall short
will risk evolving into commodities where profitability is much harder to achieve.