Inflation, supply chain delays, labor shortages, long equipment lead times — the challenges today for manufacturers seem daunting.

But one thing I’ve learned over the years is to keep an eye on contract packagers. If ever there was an operation that was critically dependent on a return on investment and, hence, was innovative in solving production challenges, it’s a contract packaging business.

Our guest for this Packaging Possibilities episode is David Gray, CEO of GreenSeed, a contract packaging company that serves large and mid-sized consumer packaged goods (CPG) companies.

Gray shares his thoughts on promising solutions. Robotics comes up in the conversation of course. But some of the other ideas might not be what you’d expect.

Hear how teaching more mindful consumer consumption — and collaboration and greater ideation between brands and their external manufacturing partners — will shape the future.

PACKAGING POSSIBILITIES - Season 2: Episode 4

If you have a topic you’d like to propose for a future PACKAGING POSSIBILITIES episode, please email Lisa Pierce at [email protected].

TRANSCRIPT IS AUTO GENERATED

Lisa McTigue Pierce
Hello, this is Lisa Pierce, executive editor of Packaging Digest, with another episode of packaging Possibilities, a podcast that reveals what’s new and what’s next for packaging executives and engineers, designers and developers. In this episode, I’ll be talking with David Gray, CEO of Green Seed. Green Seed is a contract packaging company that serves large and mid-sized companies selling Consumer Packaged Goods.

Today we’re going to explore contract packaging technology trends. One thing I’ve learned over the years is to keep an eye on the packaging machinery technologies that contract packagers are buying and using. If ever there was an operation that was critically dependent on a return on investment, it’s a contract packaging business. So let’s get into it.

David, welcome! Thanks for taking the time to talk with us today.

David Gray (guest)
Well, thank you for having me, Lisa. It’s very nice to be with you and your organization today.

Lisa McTigue Pierce
Great. Before we get into the questions, tell us just a little bit about GreenSeed. One of your locations is here in the Chicago area, which is where I’m located.

David Gray (guest)
Yes. Well, what many people don’t know is that GreenSeed has got a really rich history in external manufacturing. We’re part of a family office that has been in the space for over five decades. Their first two ventures, they really scaled them to be a very big competitive and instrumental platform in the food space. And then exited them. And then GreenSeed is part of their idea to create a sustainable long-term investment for their families and what came to be is the birth of GreenSeed, creating an external manufacturer that is dedicated to the CPG space. Our initial entry into food packaging was to really hitch our wagons to the innovation side of food and working with “better for you” products in helping Big Brands scale those new innovations and get them into, you know, the omnichannel strategy.

Lisa McTigue Pierce
OK, excellent. And external packaging operations, contract packaging operations, are so key to especially getting new products launched as quickly as possible, as the brand owners then decide on whether to bring that operation in-house or not.

So David tell us what packaging machinery technologies are contract packagers most interested in and why? And obviously you’re going to be looking at it from GreenSeeds’ perspective, but maybe take a little bit of a broader view as well to the contract packaging industry in general.

David Gray (guest)
Yeah, I think a good way to answer is just kind of start on what’s going on in our industry at the moment. When you look at manufacturing and the human capital that supports it, we’re seeing a big shift as it relates to the labor market. And I’ve been part of some cohorts, other CEOs specifically one of them with your PMMI group, talking about what the challenges are today in external manufacturing and labor is the number one issue. As a result, we’ve been looking at ways to mitigate that issue, which is predominantly driven by a couple reasons. One, you’ve got obviously a lot of people in manufacturing that are aging out. And we don’t have really the systems in place from a policy level to bring that education, that technology development at the high school levels.

Two, you’ve got inflation, which is driving up the wage war. So you’ve got competition for people and it’s changed. It used to be your competition was where people that did the same thing, but now our competition is everybody who is looking to hire people at hourly rate.

And then the third biggest issue that we’re seeing with labor is really in regards again to policy and immigration. This country was birthed on people coming here for a great opportunity and really putting in their sweat muscle to develop it. And over the last couple of decades, we’ve really have created more barriers and unfortunately a lot of those people that have come here as immigrants have really come here and have supported manufacturing. So as a result, those situations that are upon us are all wrapped in the red bow of Labor.

You know, the technologies that were starting to really hone in on are robotics and automation. We’re seeing more opportunity there as it relates to accessibility to that technology. And we can talk about that in a moment, but that’s I think … when I look at my peers and what we’re talking about internally, it’s robotics and automation to really support the changes that are happening in the labor market.

Lisa McTigue Pierce
OK. And a lot of these labor issues that you mentioned have been building up for quite a while, but I would imagine the last two years during a pandemic have just made that much worse. I just wonder if the interest in automation though is flexible enough for your needs? I know you talk about robotics and robotics typically are a little bit more flexible than maybe some other types of automation which have a particular motion that they do.

Do you want to talk a little bit though, about this? This need for flexibility? Because contract packagers handle a lot of different products. You have a lot of clients that have a lot of different products, which typically means a lot of different packaging forms, isn’t that correct? So how do you handle that, the need for flexibility?

David Gray (guest)
Yes. I mean, you’re correct that the industry has built its reputation on being agile and being able to provide different types of packaging formats to their clients. But I think what we’re starting to see though is a shift again from the clients to their suppliers, trying to streamline, trying to get really more focused on creating better predictability in their supply chain. And so we’ve seen more companies, specifically through COVID, start to do SKU [stock-keeping unit] rationalizations and really get to a point of focusing on our core now. Because we can really drive better results versus offering eight different flavors to the consumers.

Lisa McTigue Pierce
Yes. And as a consumer, David, let me just say that we’ve noticed. We go to the store and sometimes the flavor that we used to buy isn’t there. My husband was a big buyer of Diet Dr Pepper caffeine free, and we just can’t find it anywhere anymore. So that just happened to be one of those SKUs that got rationalized.

David Gray (guest)
That’s right. So as a by-product of that rationalization, you’re starting to see them also look at the economics behind their core projects. And again, how do you how do you improve that process to continue to create sustainable results with high quality but reducing the impact of the rising costs that we have here. So the answer, what do you do is, of course, in a service industry, it is about your customers journey and it’s about really supporting their needs. But the best way that … like, we do that through ingenuity, not just agility but really creating an environment where our people are coming together and trying to solve these complex challenges that most, you know, brands face in today’s climate.

So it’s a combination of, again, focusing on the repeatable types of solutions — and where there’s repeatable solutions, we’re starting to look at robotics to put into those places and then shift our people into other more powerful areas that had greater impacts to create that ingenuity in place.

But I would say I’m concerned about getting back to a consumer environment where “greater is more” and we constantly provide so many options. We’re just not built that way from a manufacturing; we’re certainly not built that way from a logistics. And retail found out that they can’t service it. So I hope that many of the CPGs do a better job of basically sunsetting SKUs that just aren’t getting their return pretty quickly. I think a lot of those used to sit out there a lot longer try to keep selling them, but they’re just really a stress on the supply chain side.

Lisa McTigue Pierce
Very interesting point. You know, as I’ve already mentioned, my husband not being able to find the soda pop that he usually buys. Of course, we’ve switched to something else. And personally I’ve been thinking over the last couple of years when shopping and seeing fewer variety in the store, fewer product variety in the store. But I’ve thought to myself, but you know, as Americans, we really don’t need all of that. And shouldn’t we be a little bit more conscious of our own consumption and everything. But you know, sometimes the consumer wants what they want — and I hate to say this, but especially Americans. But I do agree with you, David. I do think that SKU rationalization, and focusing on maybe the more popular products, is really something that should just be accepted in the industry as this is the way to go.

David Gray (guest)
Yeah. I also think, Lisa, too … is there’s potentially a greater impact from this too, which would be on the environmental side.

Lisa McTigue Pierce
Good point.

David Gray (guest)
And we wouldn’t be using so much energy and so much, you know, plastic and paper in the environment, which, like I said, a lot of this stuff ends up being spoiled, unused, goes to waste. And, of course, it’s very difficult to find a channel to recycle or reuse it.

I do think that is a big opportunity. If we can get there as well.

Lisa McTigue Pierce
OK. Yeah. And from the consumers perspective, I guess I could say that if there is something very specific that you want, maybe that’s what you buy online. You know you find it online and you buy it online. And that’s kind of where the, you know, brick-and-mortar retail differs a little bit maybe from the online retail. And you know I’ve seen that as a consumer myself. I was shopping for a new wallet over the weekend and couldn’t find what I wanted in the stores. So, of course, then I went online and found something. I haven’t received it yet, but hopefully it’ll work when it gets here. [It does!]

Anyway, before we get into some more details about the go-to automation solutions that David is going to give us a little bit more detail about, let’s take a short break for a special message.

Lisa Pierce here. Executive Editor of Packaging Digest. I’d like to invite you to the upcoming WestPack in-person event in Anaheim California April 12-14. Held at the Anaheim Convention Center, WestPack serves the entire packaging community — from design engineers to distribution leaders. The event helps packaging professionals find creative solutions and efficient automation systems. And, as an added bonus, registered WestPack attendees automatically get access to exclusive online-only sessions going on right now. Don’t miss out! Sign up today at WestPackShow.com.

Now, let’s get back to our Packaging Possibilities podcast.

Lisa McTigue Pierce
OK, David. Big Finish coming up here. So tell us, what are some of the go-to technology solutions that contract packagers are looking at these days? Obviously, you’ve already talked about robots, does that also include collaborative robots, cobots? And what specific areas of automation are you looking at? Is that still at the primary package level? Is it more important at the secondary level and case packing and palletizing? Give us a little bit more detail.

David Gray (guest)
Yeah, that’s a good question. I’ll first answer the cobots. I haven’t seen specifically in the world of food manufacturing where cobots are supporting efforts at this point in time. There may be some … very few types of brands that again are high speed, highly automated that can be using that relationship between a robot and human. But most of the robotics that I’ve seen that had been having the real benefits are strictly robotics that are working in repeatable areas.

Lisa McTigue Pierce
Pick-and-place, as well as maybe some of the larger industrial robots at the palletizing level?

David Gray (guest)
Yes, right. That’s great.

Lisa McTigue Pierce
OK, what about mobile robots though, David, for let’s say packaging line replenishment, getting material to and from packaging lines?

David Gray (guest)
Those seem to work, as we talked about earlier in regards to again very consistent processes because again, robots are driven by algorithms that are built into those systems. And typically there’s a few, and they do the same thing over and over again. So if you’ve got, you know, a very consistent flow of raw material getting moved to production that’s getting pulled out of warehouse, you can see that. But if you’re … getting back to some of the challenges that co-packers have is where you’re changing over a lot in your formula, your algorithm is different every week. It’s more complicated, and that’s where the technology side is looking to improve, is how do we get that artificial intelligence built in so that just it understands the changes that are occurring in real time.

Lisa McTigue Pierce
OK, so maybe the slight nuances that a human can naturally adapt to, but the automation needs a little bit of extra help with that. OK, can you give us an example of a packaging operation, a specific area of a packaging operation, where you see that as being most beneficial?

David Gray (guest)
For a kind of a cobot or a robot?

Lisa McTigue Pierce
A robot with the artificial intelligence. Is it more on the secondary packaging side or the primary packaging side?

David Gray (guest)
I think where the robots or AI and robotics really meet is that interface between moving raw product from warehouse, packaging material from warehouse into production areas. Because once you get into the production area, and as we talked early, you’re going to get into more of a repeatable process that it’s going to navigate, ’cause a lot of the packaging formats stay the same. So you may use a horizontal form-fill-seal machine that’s making stand-up pouches and one week you may be filling granolas, the next week you’re filling pastas. But the format is the same.

What changes is the secondary, the omnichannel. Where now we’re not just servicing just retail; we’re servicing club, discount, mass, ecommerce. Each of those channels have their own required secondary and that’s where the automation has really, really good automation with, you know, artificial intelligence that can be built quickly to understand that, OK, as I’m taking these individual units going through the line and you’ve got, you know, some sort of automated robot that’s picking and packing in there, it recognizes real time quickly when you’ve shifted from the granola to the pasta.

Lisa McTigue Pierce
OK.

David Gray (guest)
And then as a result, that’s going to move from a well, let’s say that the granola was an eight count. And then the next week we’re moving to a 10 count. And then the downline the pallets are going to be cased out differently based again on the warehouse and accompany specs. And so that’s where we see the most opportunity to leverage the technology.

Lisa McTigue Pierce
OK. And as we talk about omnichannel, I wonder David, are most of your clients when they’re preparing products for online sales, are those typically going to a fulfillment house or an etailer as we call them, an electronic retailer like Amazon? Or are these going back to the manufacturer for fulfillment by them. Probably a combination of all of that, right?

David Gray (guest)
So yes, the latter, it’s a combination. Again, depending on the scope and size of the brand, we’re seeing some of the biggest brands you know invest into that technology inside their warehouses.

But then when you get the smaller emerging brands, there’s a lot of 3PLs [third-party logistics providers] that are specializing in that type of ecommerce platform where we see our clients asking us to basically build out bulk product, ship it bulk into this 3PL where they do the pack out required.

Lisa McTigue Pierce
They do the fulfillment.

David Gray (guest)
That’s right.

Lisa McTigue Pierce
Yep. OK, excellent. Is there any opportunity maybe for a contract packager to do ecommerce fulfillment themselves or is that again getting a little too far from core, the core business?

David Gray (guest)
Well, I think there’s always an opportunity, but you have to make a strategic decision where you want to play, right?

Lisa McTigue Pierce
Right.

David Gray (guest)
And in this day and age more than ever, understanding your strengths is really critical and learning to do what you do best and … you know, right now, I think diversifying different capabilities certainly is a solution for customers to try to bring things closer. But I do think it’s a risk again getting back to the labor strains. Can you service it at the level that your core strength is, you know? And so yeah, that’s probably where M&A strategy comes in and you look to acquire. So it’s already in place. Add both those together to provide a greater solution.

Lisa McTigue Pierce
OK, excellent. We will look for future news maybe on that coming from the contract packaging area. OK. I do want to end … not to be … I hate ending on a negative note. But I do want to ask, what are some of the other pain points of a contract packager’s business these days? Why and then how are you handling those challenges? And I do have to … I don’t want to limit it to this, but I do want to also ask about … brand owners are having difficulty getting equipment and getting equipment in time because of the supply chain challenges that we’re seeing caused by the pandemic and now a little bit by the Ukraine war. The availability of … most of the sophisticated packaging equipment these days runs on electronics and getting, the availability of microchips is … you’re competing, packaging machinery manufacturers are competing for those components with everyone else. And I don’t think that they will be the first ones to win out, to be honest with you, in a competitive situation like that. So how are you handling the availability of equipment and the lead times, as well as, are there any other challenges other than the labor that you’ve already talked about?

David Gray (guest)
Yeah. You know, I think all the things that you addressed are certainly the headwinds that we’re all facing today, leading companies, and again, prioritizing those. The people side is number one, right. At the end of the day … I was told early on when I was being mentored that you know the number one asset of any company … is the people.

Lisa McTigue Pierce
I agree.

David Gray (guest)
And so solving for that is really, really critical. And you know what? What are we doing to do that? You know, we’re just trying to bring more appreciation and letting people know that they’re valued and they’re part of something and trying to find ways to invest in them.

But outside that, I mean, supply chain is continuing to wreak havoc on day-to-day business. We’re still seeing ships at port. I was just out West last week at a conference and was just outside of Long Beach. I counted 16 empty shipping containers that are just sitting out there waiting to come into port.

It is continuing to put pressures on our ability to execute.

And then of course, as you, as we talked about earlier too, the inflation, right. When you look at specifically what’s going on with the war right now and impacts that has on our energy. Much of what we use today, whether it’s packaging film, corrugated, all of that is being used by some sort of gas, oil to be able to manufacture and produce it. And so we’re seeing again, our suppliers put on announcements again that their prices are rising. It just really creates a very difficult economic proposition because at the end of the day, you look to go ahead and pass along these costs — not pass along and try to profit on them. You’re pigeonholed because the CPGs and the retailers are, you know, really reluctant to pass along to consumers.

Lisa McTigue Pierce
Because consumers are dealing with inflation too, and their dollars are limited, so yes.

David Gray (guest)
They are, right.

It’s really, really difficult. So it’s really unfortunate this is a … this isn’t anything new to economics … but the pressure on the front end always gets the most heat. And right now, I’d say that’s one of our biggest problems is really addressing the needs of the marketplace, but at the same time getting the support to pass along these rising costs that are happening in real time. Like what we’ve done with all of our contracts. We’ve removed using certain indexes because indexes are lagging. They’re not really telling the truth to where our costs are. Then also we’ve done a lot of hedging in our pricing on an annual basis of looking like, OK we know labor is going to continue to rise. And we also know, which is something that you’re not hearing the media talk about is, but these prices aren’t going to go back down. The comment that I mentioned to a group of CEOs a couple weeks ago is that I can’t go back to all our people and thank them for the last two years and say, oh, by the way, we’re going to bring you back to your labor rates of 2020 or 19. I mean, it’s here to stay. You can’t redo that. So the challenges are probably nothing we have seen probably since after the Great Depression where we started to scale, industrialize, and have those complexities. But I think we’re operating today differently than then, because we’re a global economy now and we’re not just producing at a local regional level. We’re also producing for the world.

Lisa McTigue Pierce
Yes.

David Gray (guest)
And it has a lot of pressure on unfortunately society and in the people that are holding this up.

Lisa McTigue Pierce
Well, maybe some of the things that we had talked about earlier … where consumers, Americans, are getting a little bit more, not accepting … I don’t know if that’s quite the word … Well, I’ll just use it because I can’t think of another word … a little bit more accepting of lower consumption these days both from an availability point of view and the amount of variety isn’t there that like it used to be, as well as the sustainability aspect of it. So it’s kind of hard for a company, a brand owner and its contract packaging partners, to see any kind of a growth when we seem to be in an area, or time period, where there’s a little bit of a drawback, I guess, from a consumption point of view and I don’t know what the solution is for that. But, you know, we’ll see moving forward. Unless you’ve got a solution that’s going to help?

David Gray (guest)
Yeah. Again, I think a lot of that is driven at policy level. We participated in an ideation session with a non for profit out of San Francisco called One Step Closer, which was really … one of their pillars is around packaging and how we can improve the environment and what are the things we need to do to make that next step, right. They engaged a bunch of key stakeholders and we met and really just started throwing ideas and narrowed those ideas. But you know I think there was a couple, like … for us key takeaways which were, one, you said, you know … the word he used for the people would be … Now you … you’re hoping that people would change. I think people are becoming more mindful and in order for them to become more mindful, I think we have to start at an earlier age educating our children on the dos and don’ts of consumption and where we process and package. We certainly don’t have the infrastructure to handle the packaging challenges we have with recyclability.

And so that’s another challenge, but also an opportunity that we’re trying to solve … is how do we get better structure around that packaging so that we can produce packaging that can be recyclable or compostable, but unfortunately we haven’t solved it and the types of structures that they’ve got in place today we’re struggling to run on high-speed assets. They don’t conform in sticks, so they’re difficult to be long-term solutions. And on top of that, a lot of them don’t have the longer shelf life. But again, if we can get a society that isn’t worried about having something for 18 months, but just worried about today, then maybe we can solve it better with packaging that is better for environment. But certainly finding the right materials that can be compostable, recyclable, and then where do you take the recyclable? Right now, the biggest thing is we’ve got this whole movement run. How2 you’ve probably seen that logo.

Lisa McTigue Pierce
The How2Recycle label, which is genius in my opinion, to communicate so much in such a small space about the packaging. Genius.

David Gray (guest)
Yep. And so now we just need to do you create the education of where do you do that at? And then you then we’ve got to set those up and that’s probably an opportunity for somebody to do that.

Lisa McTigue Pierce
OK. Well, we have properly identified a lot of the challenges. David, I’m just wondering if we can kind of end on somewhat of a positive note. What is like a win that you see these days in your business?

David Gray (guest)
Yeah, I speak this because again it’s just the heartbeat of business. But greater collaboration between the suppliers and their brands, getting together, spending meaningful time, and addressing some of these discussions and topics we’ve talked about today. We don’t do enough of that. We’re constantly in a reactive mode and we’re constantly really just focusing on what’s in front of us and we now need to take a few steps back, sit down and, just like great leaders, think about the next three to five years and how we’re going to work together to be better partners.

Because ultimately, it is an ecosystem, a living ecosystem, and without one of those cogs and wheels, it can’t move.

Lisa McTigue Pierce
And even though a lot of what we’ve been talking about is not hard to understand, the interconnectedness and the infrastructure and all that’s behind it, does make this a complex issue. And that’s one of the reasons why it hasn’t been solved. Yet.

But David, thank you so much for talking with me about this. And I’m glad that we ended on somewhat of a positive note because it sounds to me like you are one of those people who are doing exactly what it is that you say we need. And that’s talking about those bigger picture issues. And if you can’t solve … one of the things that I’ve learned from engineer friends and colleagues that I’ve known is, if you can’t find the root cause, no matter what solutions you come up with, they’re not going to solve the problem. So kudos to you for doing some of that hard work and, believe you me, I know it’s hard work.

Thank you so much for your time today, David. We’ve talked about a lot of things, and I wish you the best of luck.

David Gray (guest)
Well, thank you, Lisa. Thank you for your time and giving me the space.