As retailers ponder the prospects for 2012, no issue is more top of mind than private label. Those ruminating on the trend would be remiss to overlook the packaging used to communicate with shoppers.
Another area ripe with opportunity is pharmacy. But before putting the final touches on plans, retailers must consider the changes healthcare reform will bring.
Industry observers also suggest that attention be paid to sustainable packaging and the changes happening with fair trade.
Judging a Private Label by Its Cover
By JONATHAN FORD
To understand what is around the corner in the world of private-label packaging, we have to gain an understanding of the ways in which our culture is changing and the cultural shifts affecting the sector.
Moving into the future, there is a huge opportunity for private-label brands to lose their stigma as the “poor relation” of their branded counterparts and learn from their behavior. It is strategically led design that is driving this. There will be a distinct shift from “private label” to “private brand,” with some retailers taking this even further by creating brands that are not even linked to themselves, think Safeway’s Eat Smart and Tesco’s Yoo in the U.K. Similarly, this year, Waitrose developed ‘Good to Go,’ a range of convenience foods to be sold in gas stations and other stores like Boots the Chemist. Due to this shift, strategic design and all its capabilities must be maximized, including tone of voice, naming, structural design and innovation. We will see brands embracing this more, think Safeway’s In-kind and structure, how Walmart’s Geo Girl has embraced tone of voice, how Publix expresses an exuberance through their on-pack graphics and Target’s pharmaceutical packaging.
Two of the most relevant human needs as we move into the future will be our health and convenience. Our lives will not slow down, but our health is our greatest wealth. Packaging will need to enhance convenience and highlight the provenance and vibrant taste cues of healthy food, proving that it doesn’t have to be boring. Food labeling legislation will only increase and more private-label brands will embrace diet and “free from” ranges, so information design is key, with designers having to create a hierarchy of information on pack but also on apps and environments, in a way that is consistent with the brand look and feel. Information design will have to meet needs but also create impact and emotional consumer desire. This is also the case when designing packaging that works in the digital arena. The big idea must come through first. We will see private-label brands incorporating more social media assets onto packs, but this shouldn’t happen just because it can, and we shouldn’t be distracted by short-term technical gimmicks like QR codes.
How we design “value” will continue to remain key for private-label brands; however, simply being cheaper is not enough. Packaging has to make an emotional connection in order to create desire and for savvy retailers in own label, packaging design will become more considered so these connections are built. Our modern world is overcrowded, buzzing and also increasingly disconnected and we want more from our private-label brands. The brands that consider us, and the planet, enriching our modern lives will win. Embracing the right strategically led packaging design is the ticket to success.
Jonathan Ford is creative partner for international design agency Pearlfisher, the agency behind Safeway’s In Kind packaging.
Healthcare Reform Offers Mixed Bag for Pharmacy
By SCOTT WINK
As 2011 comes to a close many people are interested in how healthcare reform will impact community pharmacy in 2012.
FIRST, THE POSITIVES
Provisions: The healthcare provisions to be enacted in 2012 and 2013 are fairly insignificant to pharmacy. The next major provisions of healthcare reform that will directly impact pharmacy are scheduled for 2014.
MTM: Of the provisions already enacted, Medication Therapy Management is probably the most beneficial for pharmacy. The MTM model pays pharmacists for making direct and targeted medical interventions. These interventions have been proven to decrease unneeded or duplicate treatments, prevent drug interactions, and increase patient compliance, all of which help decrease long term healthcare costs.
Mail order: Mail order prescription profitability for Pharmacy Benefit Managers will continue to decrease. The U.S. Postal Service recently announced the end of next-day service and another round of postage increases as they try to battle major financial problems. This along with carriers such as FedEx and UPS constantly raising prices due to the rising cost of fuel will continue to have PBMs feeling the squeeze. The mail order business model collapses as delivery charges rise. As more Americans obtain insurance coverage through healthcare reform, the portion filled at community pharmacies could become surprisingly larger than expected.
NEGATIVES
PBMs: As PBMs continue to merge and form partnerships with the major chain drug stores, reimbursements and gross profits to pharmacies will continue to be pressured to the down side. Pharmacies continue to be forced to choose either accepting the lower reimbursement rates or stop accepting the insurance all together.
Medicaid: Medicaid cuts seem to be at the top of every state’s “to do list” for 2012. States remain financially pressured and as they look for ways to balance their budgets pharmacy reimbursement seems like low-hanging fruit to many state politicians.
UNCERTAINTY
Supreme Court: Until the Supreme Court takes up the constitutionality of the healthcare reform act everything is up in the air. The current timeline shows the Supreme Court taking up the issue by this summer but don’t be surprised if this gets pushed back until after the 2012 election.
Politics: Do not expect any new or major healthcare legislation out of Congress until after the election. Without a supermajority, passing anything related to healthcare in the current political environment is completely improbable.
Mergers: If PBM mergers such as Medco with Express Scripts and CVS with Caremark continue to be allowed, pharmacy reimbursement cuts will quickly lead to unsustainable financial situations for many small pharmacies. These cuts along with any additional ones that result from healthcare reform and Medicaid cuts will result in some larger pharmacy chains going under.
Scott Wink is director of pharmacy for the Piggly Wiggly Carolina Co.
The Future of Sustainable Packaging
By BOB LILIENFELD
The move toward more sustainable packaging follows the time-honored cycle that virtually all trends follow: initial excitement, decision making based upon passion rather than objectivity, growing yet grudging acceptance of the trend, and finally — the interjection of science-based reality.
Think about it. The need for sustainable packaging has become a mainstream concern of packagers, marketers and retailers. But it’s only been in the last few months that reality has set in. For example, the state of California has woken up to the fact that compostable or biodegradable plastics may not actually perform as expected. Also, the growing understanding and acceptance of life cycle analysis is causing people to rethink their beliefs regarding the relative impacts of various materials. It is also causing people to once again understand the relative values of reducing, reusing and recycling.
Against this welcome backdrop of critical thinking, there are three trends I see emerging for the future of sustainable packaging:
Increased Awareness of Packaging as a Waste Reducer: Environmentalists are waking up to the fact that we throw away between 33%-50% of the food we purchase. Without packaging to preserve, protect, apportion and educate, that number would be even higher. This is especially true where food shortages are critical: underdeveloped countries and areas hit by natural disasters. Thus, packaging actually delivers on all three facets of sustainable development: environmental (reduced food waste), economic (maximum food delivered per dollar invested) and social (improved human health and safety).
Increased Acceptance of Packaging As an Energy Producer: Thanks to the public’s growing awareness of the economic and political ramifications associated with continued dependence upon foreign oil, energy recovery (the new name for waste-to-energy) will become a reality. If you don’t think so, consider that Waste Management has stopped building landfills and has started investing in huge organic energy recovery facilities.
Increased Acknowledgement of Packaging as a Piece in a Much Larger Puzzle: In fact, it’s merely the 7% solution. The other 93% lies with the products in those packages. Thus, there will be more emphasis placed on the whole picture — improving a product and its packaging to deliver more functional, emotional and social value with fewer economic and environmental resources.
Robert Lilienfeld is editor of the ULS (Use Less Stuff) report, aimed at spreading the benefits of source reduction.
The Evolution of Fair Trade
By MARY JO COOK
There are many voices in the fair trade movement, all united under a common mission to alleviate poverty through trade. Fairtrade Labelling Organizations International (FLO) is one voice, and they focus on small farmers organized into cooperatives covering less than 10% of global agricultural production. Fair Trade USA is another voice, and is committed to making Fair Trade work for more farmers and workers so we can make a meaningful dent in global poverty.
There are over 10,000 Fair Trade Certified products on U.S. store shelves, and sales of Fair Trade Certified products are up 60%. Yet these products represent only a fraction of those available to consumers.
Fair Trade USA will invest in increasing demand for Fair Trade Certified products. Our “Every Purchase Matters” campaign unites brands, retailers and community organizations behind the idea that individuals can change the world through something as simple as a cup of coffee, a bar of chocolate or a banana.
Fair Trade USA has adapted standards that already apply to farm workers in tea, bananas and flowers, and is applying them to farm workers in coffee.
Fair Trade USA has always required — and will continue to require — that single ingredient products, like a bag of coffee, contain 100% Fair Trade Certified coffee beans in order to carry the full Fair Trade Certified label.
Products with multiple ingredients can also be Fair Trade Certified. In just two years, sales of these Fair Trade Certified multiple ingredient products have delivered over $3.4 million in additional income to farmers and workers. We are soliciting input from stakeholders on how we might further improve this policy.
Fair Trade is a market-based approach that empowers farmers and workers to improve their lives, protect the land, and develop their communities. But the current Fair Trade system reaches only a small percentage of people in poverty.
Fair Trade USA’s goals are to bring the benefits of fair trade to far more farmers and workers; to enable more businesses to develop reliable and ethical supply chains; to allow more retailers to offer more Fair Trade Certified products; and to give consumers a broader selection of high quality Fair Trade Certified products from which to choose.
Mary Jo Cook is vice president of business development and communications for Fair Trade USA.
