WASHINGTON — A new industry initiative has been launched to change the way CPG products are packaged by manufacturers and stocked on store shelves.
The initiative aims to promote the use of “retail-ready packaging,” including ready-to-stock corrugated trayAnother is making cases s full of products that allow store employees to replenish display shelves more efficiently than the customary practice of filling shelves one item at a time. The trays are designed to feature product branding and meet recycling requirements, while the cases containing the trays are configured to be easy to identify and open.
In addition to expediting shelf replenishment, retail-ready packaging is expected to improve in-stock conditions, reduce back-room inventory and offer new marketing opportunities on the shelf.
But the industry faces major hurdles in implementing this initiative, such as the need for standard tray dimensions and enough buy-in from retailers to enable manufacturers to create a large-scale, cost-effective packaging process. There are also unanswered questions about how shoppers would react to revised shelf layouts.
The Grocery Manufacturers Association here and the Food Marketing Institute, Arlington, Va., are taking the lead in developing retail-ready packaging through their FMI-GMA Trading Partner Alliance. “The industry is looking for a common approach,” said Stephen Sibert, GMA's senior vice president, industry affairs, in a presentation last month in Phoenix at the Supply Chain Conference, sponsored by the Trading Partner Alliance. “We want to define one system across retail.”
Last year, the Trading Partner Alliance created a retail-ready packaging subcommittee that consists of a number of major manufacturers but is still seeking retail members. “We're recruiting Kroger,” Sibert said. “And we encourage anyone to get involved.”
Supplier members of the subcommittee include Georgia-Pacific, J.M. Smucker, Schwan's, Continental Mills, Mars, Procter & Gamble and Unilever. The subcommittee is developing a retail-ready-packaging resource guide expected to be completed in about a month.
The retail-ready packaging concept originated in Europe, where it has been adopted by Aldi, Tesco and Asda, a division of Wal-Mart Stores, said Sibert. It then gravitated to Canada, where “Wal-Mart and Loblaw are in the process of developing rollout timelines by category,” said Lesley McKeever, senior vice president, industry affairs, Food & Consumer Products of Canada (FCPC), Toronto. Wal-Mart Canada and Loblaw declined to comment.
In the U.S., Kroger has met with suppliers to discuss the initiative and H.E. Butt Grocery has developed a resource guide for manufacturers, while Wal-Mart and Target are preparing programs, said Sibert. Aldi and Tesco's Fresh & Easy Neighborhood Market stores have begun to use retail-ready packaging on shelves, he added. Some retailers, such as Wal-Mart and Target, are dropping open cases of paper towels and toilet paper into display areas in a variation of retail-ready packaging, Sibert said.
GMA and FMI are collaborating on retail-ready packaging with the two major Canadian trade associations, FCPC and the Canadian Council of Grocery Distributors (CCGD), North York, Ontario.
Retail-ready packaging is characterized by five traits intended to make the distribution process easier, or the “five easies,” said Ian Ricketts, director, operational excellence, Unilever, London, which has engaged in retail-ready packaging in the U.K. for five years. One is designing outside case packaging so that products are easy to identify in the back rooms of stores, and night stockers are not faced with a “sea of brown,” said Ricketts, who followed Sibert in the Supply Chain Conference presentation.
Another is making cases or secondary packaging easy to open at the shelf, so that it takes “five seconds rather than 25 seconds to open a pack and stock the shelf,” Ricketts said. The third trait is designing trays that allow easy replenishment, or transfer of products to the shelf in groups rather than individually; two trays would occupy the width of a shelf, one behind the other.
The trays are also intended to show branding information on the shelf to promote easy shopping. “It's one more shelf-based marketing opportunity,” said Sibert. And the trays are meant to be easy to recycle. “We want to be in compliance with environmental legislation and public policy concerns,” he said. To be more sustainable, for example, cases could be designed so that the upper part detaches and leaves a tray of products at the bottom.
But retail-ready packaging also faces a number of issues making its implementation hard rather than easy. For example, standard trays are difficult to develop because the depth of store shelves varies, from 17 inches for traditional shelving to 22 inches for newer shelving, among other variations. Manufacturers may have to create trays that can accommodate different shelving dimensions, adding cost to the process, Sibert noted.
While shelf-ready packaging makes the stocking process more efficient, retailers may have to deal with labor union restrictions on stocking activity, Sibert said.
Another challenge is understanding how shoppers react to trays. “If a tray has three items left, do they pick from the back tray? We don't have a lot of insight into that,” Sibert said.
“It's hugely important to make a solution for packaging with the eye of the consumer,” added Ricketts. “If you miss that part, you really miss the boat.” Trays need to be designed to be in harmony across a category, he said.
Moreover, not every category lends itself to retail-ready packaging, so retailers and manufacturers will need to assess each category, examining its profitability and sales velocity, said Ricketts.
The business case for retail-ready packaging is based on faster replenishment, greater in-stock availability and marketing opportunities at the shelf, said Sibert. Thus far, the case has been easier to make for retailers, who don't bear the additional packaging costs, though GMA is working on showing that it applies to manufacturers as well.
Economies of scale — getting a large number of retailers to accept the new packaging — will make it easier for manufacturers to benefit. “FMI and GMA are looking at this as an issue that needs to scale to find ROI,” said Sibert. “Anytime a manufacturer does this for just one customer, it adds to the expense.” Manufacturers are not currently passing the additional cost of retail-ready packaging to retailers, he added.
Collaboration between trading partners will be important as well, said Ricketts. “In the U.K., we failed to listen to our trading partners and ended up chasing our tail.”