In the U.S., we like to think of ourselves as great entrepreneurs who have achieved a position of global leadership through unrelenting innovation. To an extent, that's true. Still, in packaging, it's amazing how Americans often lag other countries.
Last month (November 2011), Packaging Digest sponsored a webcast on retail-ready packaging (RRP), with presentations by Chet Rutledge of Walmart and Martin Kay of the marketing research consultancy Pira Intl. Retail-ready packaging refers to the containers and packaging for consumer products which can be displayed instantly or with little set up in the retail environment. Walmart is a proponent of the use of retail-ready packaging, while Pira recently completed a global study on its growing use.
While RRP does seem to be catching on, Pira's data show faster growth in most other parts of the world. Europe is the largest RRP market by far with an estimated consumption of about 9.3 million tons this year, followed by Latin America at 5.3 million tons. North America is expected to use about 3.7 million tons this year. For now, Asia trails at 3.3 million tons but, with a projected annual growth rate of 7.7 percent, its use of RRP is expected to surpass North America within five years.
RRPs are primarily used in the food products sector, which accounts for more 70 percent of demand. However, demand really is driven by the retailers. RRP is the realm of large retailers who have the purchasing power to drive changes among the consumer packaged goods companies.
For the stores, RRP has many benefits, such as increased store productivity, better product rotation, increase in sales and margin, improved in-stock and modular integrity, reduced inventories and reduced use of sharp knives used to open containers.
Research has shown that effective use of RRP makes shopping an easier experience for customers. When graphics are well-integrated, it increases both the visibility of the products and the prominence of the brand.
Research by the Institute of Grocery Distribution (IGD) reveals that only 4 percent of major retailers currently have no plans to implement RRP. The two major barriers to implementation are cost and lack of standardization, IGD says.
For suppliers, RRP might require substantial capital investments. In addition, to build favorable brand imaging requires more decoration on secondary packaging that previously did not carry any decor. That could drive up costs further.
The other major hurdle is lack of standardization. However, agreement on retail standards could diminish proliferation of SKUs while dramatically improving supply chain efficiency.
Despite the hurdles, retailers and consumers respond positively to RRP, so why does the U.S. lag in implementation? That's certainly a head-scratcher to me.