The produce industry is deep into an important re-examination of its shipping container systems, and is discovering that sometimes the package itself can be more crucial than what's inside it.
On its face, the issue is whether returnable packages make more sense than disposable ones for cost efficiency, and if so, what would need to be done to make the switch to returnable systems orderly. Through a task force led by the Produce maketing Association, Newark, Del., representatives from every other corner of the produce and packaging industries are hashing out recommendations for a standardized system. The task force's most recent meeting was last week.
But on another level, the exercise illustrates not only the produce community's fragmented nature, but also its evolving ability to take on controversial issues intelligently and effectively.
The task force itself is a study in political correctness, taking pains at each step to officially avoid the appearance of endorsing any one type of package over any others, and instead focusing narrowly on handing over recommendations for standardizing the trend before it has the chance to spin out of control.
According to sources on the task force, it came about mostly due to the influence of retailers who were either testing or considering testing on some experimental returnable systems.
But beyond the slim confines of the task force is the broader issue of whether it is in the best interest of the produce business to switch from a distribution system dependent on largely recyclable, single-use corrugated cardboard boxes, to one relying on multiple-use containers, most likely made of plastic. It is a highly complex issue that, if it gains momentum, presents prospects both for attractive efficiencies -- particularly for retailers -- and dramatic, costly changes likely to be paid for by growers and possibly consumers. Big questions notwithstanding, field experiments with returnable produce containers -- RPCs -- are under way thanks to a select group of major retailers eager to explore it with a few willing grower-shippers and packaging manufacturers with a stake in its future.
The big issue ultimately will be to see how enthusiastically the retail community as a whole pushes for conversion to RPCs. Players on all sides of the issue told SN there are good reasons not to go with RPCs, just as there are compelling reasons to push ahead. One note was trumpeted by all involved: Compatibility is crucial for any kind of returnable system, because without it, RPCs won't work for produce.
"As retailers, we believe that uniformity is desirable, and would have real advantages if you decide that returnable packaging of some kind is the way you want to go," said Horace Hamilton, produce merchandiser for Cincinnati-based Kroger Co.'s Atlanta KMA. One of the co-chairmen of the PMA-led task force, he said the timing for such a self-evaluation was propitious.
"A lot of different companies and people in the industry appeared to be heading in that direction, and that in large part is what made this an issue to look at right now," he told SN. Hamilton said that while retailers were not the only influence on the creation of the task force, "as a destination for such packaging, they are a key influence. However, there is strong interest throughout the whole distribution scheme."
Some segments of that "strong interest" are not interested in the widespread use of RPCs. Those segments include many grower-shippers who have reservations about the expenses imposed on their operations by switching to RPCs, and about standards that would force them away from box designs they have used for years. They also include the corrugated box manufacturers that provide the industry with millions upon millions of inexpensive containers every year.
They have some strong arguments. A major shift to RPCs would mean converting a fragmented system with virtually as many box types and sizes as there are produce categories, to a system of perhaps four or five sizes of containers.
It would mean negotiating through a maze of tough questions about precisely where the real cost advantages, if any, lie; about who assumes the ownership and liabilities of a system in which the box would often be worth more than what it is carrying; about how to keep a lid on pilferage and shrink; and about how to keep the multiuse bins clean, sound and moving.
As one skeptic on the task force put it, "You are talking about $1.50 for a nice white cardboard box, vs. $5 to $15 per plastic bin. RPCs won't take logos or labels as easily. There are handling issues and a lot of maintenance involved in using them. Who is going to pay?"
Both proponents and skeptics of RPCs point to the European experience with the technology as telling. The use of returnable bins for produce has become widespread there, particularly in Germany and the United Kingdom. But problems with it are also widespread, especially because the industry plunged into it without the benefit of any standards in packaging designs or dimensions.
On the other hand, many believe the evidence of efficiencies -- such as the freedom from the burden of waste removal, the shelf-life benefits for products from better precooling, protection from product damage in handling, etc. -- to be found in Europe's experience is what brought the issue to light in North America, a marketplace that is, not coincidentally, increasingly influenced by European ownership.
"A number of retailers here were expressing concerns that if we did not do something to set standards, we would run into the same problems that Europeans had with their systems," explained Paul Yoder, who co-chairs the task force with Kroger's Hamilton, and is also director of trade relations for Dole Fresh Fruit Co., Westlake, Calif.
Yoder said his company is already shipping product in RPCs to Europe on an experimental basis, and at least some U.S. retailers are "quite interested in experimenting with it, because it apparently offers some advantages to them."
But many suppliers have a different perspective. "It would present significant costs with an industry as diversified as produce, and with criteria now so different for different categories. I think most suppliers have reservations, ranging from extreme to moderate, concerning the costs and whether they would eventually work their way down to the consumer," Yoder said.
Another task force member, who asked not to be identified, said that not all retailers are pushing very hard for the ascent of RPCs into the market, "for instance, many like to use the graphically attractive cardboard boxes as merchandising tools."
One retailer doing the pushing, however, is Wal-Mart, which is eager to dig up cost savings.
"What we at Wal-Mart are doing is, as always, trying to examine the entire supply chain to find ways to deliver products to the consumer in the most efficient manner," Bruce Peterson, produce director at Wal-Mart Supercenters, Bentonville, Ark., told SN. That mandate brought him to push for and join the PMA-brokered task force, and to guide his own operation into ongoing trials with RPCs -- which to Wal-Mart is serious business. "On the surface, it would appear that multiple-use containers are a way to take costs out of the system," he said, "but that is on the surface and we are examining whether that is in fact the case.
"I can tell you that we -- as well as some other significant retailers -- are doing some testing," he continued. "Multiple-use containers are a major initiative we are looking at in produce.
"Here is what it comes down to. If you have got Kroger, Wal-Mart, Meijer and other companies looking to go down this route, you are affecting the grower-shipper community, and the last thing you really want is for major companies to develop their own closed-loop systems. In Europe, they have come to realize that closed loops are not desirable." Peterson said Wal-Mart is searching for answers to two questions: Is it more effective to take and ship items in a plastic box that has several uses, instead of a single-use corrugated box? And is it feasible to wean the industry from more than 400 types of boxes down to five or seven types, all of them compatible?
"But the trick in all this, which is why we and other retailers are moving slowly, is that it is difficult sometimes to pinpoint exactly where, if at all, cost savings are taking place. "The industry should be asking, 'Is there more money to be made in standardization?' If so, maybe the answer is to standardize corrugated boxes. What are the costs of multiple use? It is not as simple as saying, 'Now we are going to use boxes we can return to growers.' Are we ready to go back to the shipper and say, 'Now you have to retool your packing facilities?' There are a lot of things involved."
Peterson said Wal-Mart has been experimenting with RPCs since April, evaluating each step in the process. One of its reality checks is the "milk-crate syndrome." "The boxes we are testing right now would be great in somebody's garage. Can we manage the crates through the system with some reasonable rate of shrinkage?"
It is also watching for RPCs' ramifications for precooling efficiencies and performance in protecting the product in transit. Another sticky issue is, "Who do you want to have the inventory of the boxes? Do you want the retailer, the shipper or a third party to handle that?"
Who holds the bag for inventory is, in fact, potentially one of the most controversial aspects of the RPC issue, one of many questions that the marketplace will have to answer, and one the task force has studiously tried to avoid.
Terry Humfeld, vice president of division programs for the PMA, and its representative on the task force, said that from the start the coalition has kept blinders on to refrain from judging "marketplace" issues, and stick just to recommending standards should RPCs be the industry's destiny.
"Retailers said they were seeing containers in the industry with different footprints, with no compatibility, no stackability. The board decided the PMA should take the lead." The trade group notified its membership and reached out to other industry groups to gauge interest, and was deluged with requests to participate. It eventually created a task force with about 20 members, as well as a "resource group" of 60 to 70 others who have a chance to influence and comment on the task force's findings.
Since January 1997, the task force has moved rapidly to put a draft of recommendations in circulation, and now plans to issue a final report on voluntary specifications for RPCs, along with extensive background on the issue, by the end of the year. It is clear so far that RPC dimensions should conform to compatibility with a 40-by-48 inch produce pallet. While final products could use any number of materials -- even corrugated cardboard -- sources said the front- runner is plastic containers with collapsible sides to allow efficient returns.
Almost every participant and observer of the task force praised its efforts at objectivity in dissecting a difficult and politically charged issue. As one retailer put it, "This was not a self-serving activity. The retailers were not manipulating the task force to cause any result, and you don't have shippers trying to find ways for it not to work."
Humfeld said the task force's work unveiled many questions, which it classified as "considerations" that it would only raise, not contend with. "Our point is not to answer these questions, but to point out that if you plan to get into it, you and your partners need to have frank discussions about the liabilities and issues involved beforehand. There are lots of potential efficiencies, and lots of potential headaches if you don't know what you are doing."
For the industry's other national trade group, the United Fresh Fruit and Vegetable Association, Alexandria, Va., the task force's objectivity was also paramount. "We welcomed the opportunity to participate, and insisted from the beginning that this was and should be seen as an exploratory exercise, and not in any way, shape or form as an endorsement for plastic or any other type of container," said John McClung, vice president of industry relations for United. Despite such careful reins on the task force's official scope, some participants expressed private concerns that even its very existence was an implicit endorsement of the concept of RPCs. "The only thing in it the industry can really stick to is a standard footprint," one source said. But obviously, a standard footprint, though a great start, would be barely the tip of the iceberg. For example, for a company like Chep USA, Orlando, Fla., a champion of pooling systems for reusable pallets and now testing RPCs, such standards are something already anticipated through its growing trial work. The company has secured agreements for trials with six leading chains in the United States, and has two tests well under way, according to Jonathan Mitchell, vice president of the perishables sector at Chep's Parsippany, N.J., operation.
Regarding claims that growers are reluctant to get involved in a movement that augurs major, and perhaps costly change, he said, "It depends on the commodity. For packing-house product, you would have to retool. But for field-packed product, the changes would not be that significant." Mitchell said Chep has experimented with Vidalia onions, cucumbers, celery, romaine lettuce, sweet corn and grapes. "The greatest obstacle will probably be resistance to change," he said, "but once we can prove the benefits the program brings, I am convinced that retailers especially will begin to embrace it." The cardboard industry has views on the obstacles facing RPCs. "It has problems in Europe," said Patricia Layton, senior director of environmental marketing and standards policy for the American Forest & Paper Association, Washington. "Service and crate providers are experiencing financial problems there, and some stores are pulling back from plastic crates. We are not sure it is all it is cracked up to be." Layton said the corrugated box has a lot going for it in the United States, compared with the European market. "Recycling rates here for corrugated cardboard are high, at 73.4% pre- and post-consumer recovery, and we anticipate that to go much higher. And a lot of retailers and growers like the graphic and point-of-sale merchandising advantages of cardboard. It definitely has a solid role in the marketplace." But that role can be rewritten, especially if retailers control the script."I believe the merits of RPCs appear to be worth the effort of exploring this in a very serious way," said Peterson of Wal-Mart. "I am very optimistic that this is the right thing to do. This is not to say this is what we are going to do," he continued. "This is not a box issue, per se. It is an issue of examining the real costs of getting products from the source to the consumer, and if this particular technology and logistics do that, then great. If they don't, there is no use in exploring it further."