The Consumer Packaged Goods industry provides a good illustration of the challenges and rewards associated with converting from analog to digital product decoration and marking. Over the course of a two-part series, we plan to look at the challenges companies face in the marketplace and some of the solutions that digital inkjet adoption can provide through its ability to provide quick changeovers, short production runs, mass customization, and lean inventories. Part 1 will look at consumer trends that favor digital inkjet adoption, and Part 2 will look at supply-side challenges that drive adoption of inkjet product-decoration and -marking solutions.
But first, a few definitions.
What are Consumer Packaged Goods?
Consumer Packaged Goods (CPG) is an industry term for merchandise that customers use up and replace on a frequent basis. Examples of consumer packaged goods include food, beverages, cosmetics and cleaning products.
Imagine, if you will, that over the next decade the world will gain an additional 81 Procter & Gambles or 458 equivalents of Kellogg’s. This is the sort of growth that will happen in the global consumer-packaged-goods (CPG) sector, which will nearly double in size—to $14 trillion—by 2025, from $8 trillion in 2014.
According to McKinsey & Company, the Consumer Package Goods Industry is poised to nearly double in size by 2025. This has tremendous implications for the direct-to-shape industrial product-marking industry, and this blogpost will look at some of these implications.
Already, digital inkjet is making its mark in the CPG industry, though not to the same degree in each sector. For example, the cosmetics industry has seen digital adoption only in fits and starts, according to Cindy Cooperman, VP of Brand Global Strategic Accounts at X-Rite, a manufacturer of color measurement and management products and frequent consultant to the cosmetics industry.
According to Cooperman, early attempts to harness the power of digital inkjet printing for packaging focused on personalization, but did not heed what consumers were clamoring for. Early examples of packaging personalization centered on marking products with the end-user’s name, but In Danaher Product Identification’s latest study, Packaging and the Digital Shopper: Expectations in Health and Beauty 62 percent of shoppers did not see a value in health, beauty, and personal care items personalized with their names. However, according to the survey, respondents did see value for products specifically customized for their skin or body type with personalized instructions; 22 percent of shoppers said they are highly likely to purchase or would like to see more customized products. Cooperman cited mis-aligned consumer expectations regarding speed-to-market as a major stumbling block to wider adoption of digital inkjet for packaging. For instance, consumers expect packaging changes to take a mere 24 hours, but brands take 198 days to implement them (Source: Keypoint Intelligence).
“The premium personal care segment, which makes up 26% of the category, is growing at 8% while the total category is growing at 2%. On the beverage side, we continue to see growth from the premium beer category, as well as consumers trading up from mass beers to higher dollar wine, spirits and flavored malt beverages.”
Forbes magazine looked at broad consumer trends and how the CPG industry can take advantage of them by converting to digital inkjet solutions. In an interview with Michael Mapes, the CEO of EXAL Corporation, the largest manufacturer of aluminum containers in the Americas, Forbes contributor Jeff Fromm discussed three major trends currently shaping the CPG industry. First, says Mapes, consumers are choosing premium products across product categories, but particularly in the personal care and beverage spaces. Industrial inkjet product-marking solutions provide the premium experience with vivid package designs that are also “greener” since they use fewer raw materials—including energy—further enhancing the perception of premium value.
“The data supports that not only are consumers looking for sustainability claims, they are also voting with their wallets,” says Mapes. “Sustainable products grew at four times the rate of products without a commitment to sustainability. A McKinsey study showed that 55 percent of consumers are willing to pay 15 percent more for sustainable packaging, and Nielsen reports that 66 percent of all consumers are willing to pay more for sustainable brands. Consumers are inspecting product labels for sustainability claims and supporting the brands that are sustainability focused–even if it costs them more.” In short, it can be a “win-win” for packaging producers: cut costs and command a higher price for goods sold.
The third trend that Mapes identified in the cosmetics industry is convenience, developments such as recloseable packaging, thin-film packaging, and sprays.
In sum, these three consumer-driven trends—the demand for premium quality, sustainability, and convenience—can all be addressed by converting from more traditional forms of packaging-decoration to digital inkjet. And these three trends are most pronounced among the Millenials, already the largest consumer group in history. According to Nielsen, Millennials are the most willing cohort to pay more for sustainability, at 75% vs. 66% of total population. “Brands that are successful with Millennials today truly understand that the package should be considered part of the marketing spend,” says Mapes. “Packaging is the first thing the consumer sees when they pick up the product off the shelf. No other marketing spend can impact a buyer at the moment of truth in the store and throughout the life of a product. According to Nielsen, approximately 60% of decision making happens at the shelf.”
We hope you enjoyed this look at consumer trends driving change in the packaging for CPG industry. Be sure to read Part Two of this series, which will look at microeconomic trends within the CPG industry, the challenges packaging producers face in light of declining margins and increased competition for shelf space.