Innovation key to global packaging success.

Paper packaging has seen market share eroded by plastics, but even customers believe that paper can do more to beat the trend.

Adapt or die is a phrase that can be applied to most modern businesses. However, a session devoted to packaging at the AF & PA Paper Week meeting earlier this year has sparked some serious soul-searching among many people in the industry as papermakers and converters try to stay abreast of a fast-changing marketplace in an ever more competitive global environment.

At issue are the shifting needs and priorities of the some of the biggest food manufacturers in the world as demographics, technology, environmental concerns, and consumer preferences all collide and conspire to push the fast-moving consumer goods (FMCG) industry into overdrive as it seeks new designs, cost efficiencies, and a means of illustrating that packaging companies are already sensitive to their environmental obligations.

In environmental terms, the Global Network Coordinator for Food Packaging at Unilever Best-foods, Graham Houlder, is certainly looking to the paper industry's packaging chain suppliers to do better. Houlder believes that the paper industry is a responsible supplier, but it is not doing enough to tell stakeholders, including consumers, what a sustainable product it already delivers. "The paper industry is a fantastic sustainability story [so] why not share it with the outside world?" he asks.

[FIGURE 1 OMITTED]

And when one of the world's biggest companies talks, it's probably best for packaging suppliers to listen closely. Houlder's group certainly comes into that category. His team is responsible for helping procure literally millions of metric tons of packaging for the [euro]43 billion worth of Unilever products that are sold each year and, as he points out, the global paper industry actually has a good story to tell.

Unilever has been carrying out internal research to ensure that it is doing all it can to boost the group's own green credentials. As part of that effort, the company looked closely at the environmental profile of its main packaging sources, which showed that paper packaging actually had a strong showing in the sustainability stakes.

[FIGURE 2 OMITTED]

Overall, the company discovered that approximately 83% of the paper and board fiber used in the group's European packaging sample was from sustainable sources and the figure might actually be higher since there was no sourcing information available on about 14% of the sample tested. Not only that, but some 71% of the fiber used was from recycled sources.

"When we looked at this we found that only 3% of the material we looked at was not certified and there was a big chunk where we simply didn't know the answer one way or another," Houlder explained. "The great story for us though is that 83% of our paper-based packaging is from sustainable sources and that's something we didn't know before we started this project, but it's certainly something that we'll be telling our customers about."

As Houlder pointed out, the company wants to be able to tell its customers that it is taking sustainability seriously. But even though paper appears to have come out strongly in this study, Houlder believes that the players along the paper chain have to do much more to communicate that message to consumers and other stakeholders.

INDEPENDENT VIEW

On a more positive note for the paper industry, Unilever's close examination of its packaging procurement did allow the group to get an insight into the interlinking supply chains the group uses, the waste management systems involved, and the vast complexities involved in establishing exactly what constitutes a "green" product or package.

At a time when some green groups are threatening boycotts of big retailers and producers in a bid to force them to move straight to their preferred certification scheme, paper groups will definitely welcome a customer willing to expend so much time and effort in finding out for themselves what is reasonable and responsible.

As Houlder himself stated, the systems are simply not in place and there is not enough knowledge available to justify using any particular certification system as a basis for establishing a green procurement policy at present.

"In the paper market, one of the main things we've learned is that a lot of understanding is needed," he says. "From our point of view, it would be very difficult to come down in favor of any particular scheme from what we've learned so far. I still find it difficult to get to grips with all the complexities despite the amount of time I've spent studying the issues, so either. I'm stupid or those guys [arguing for particular green schemes] are glossing over details that we really need to understand further. I definitely think we need to make sure we have a better understanding of all the issues in detail before we can formulate a global purchasing policy."

That is not to say, of course, that Unilever is content to sit on its hands and do nothing. In fact, the group is actively supporting the main principles of sustainability across all its purchasing suppliers (See Figure 3).

"We can certainly do things in the short term For a start, we can try to make sure that all the wood and paper that we use in the business comes from legal sources around the world," Houlder explains. "It may not be everything that some groups are asking us to do, but I think it's a clear first step and in European and North American markets we can achieve that fairly quickly."

[FIGURE 3 OMITTED]

HIGH ROAD

In the near future, Unilever intends to go much further, aiming for a full chain of custody documentation that will form part of the group's purchasing policy. But Houlder knows that there are a number of steps that need to be taken before that aim becomes a reality.

"The low road is where the paper industry does nothing and is slow and reactive, but even then paper still has a role to play even if it is only as part of low value-added solutions such as secondary packaging," he said. "But if you look at the other possible futures, we see that there is a high road as well, because I'm continuously amazed about what a fantastic story you [the paper industry] have to tell."

Unilever has set out its own road map toward the "high road" that includes a strong environmental element:

* understand the environmental "footprint"

* source all fiber from sustainable sources

* ensure that 100% of virgin fiber comes from certified forests

* make extensive use of recycled fiber

* use green energy for processing

* recover energy at the end of the fiber life cycle

* return water used to good or better condition than before

* zero landfill

* set and track improvement targets

* build learning

* improve sustainability at lower cost

* build a communications package.

Above all though, paper has to deliver high quality, innovative solutions as well. For it is only by staying relevant and competitive that the industry will be in a position demonstrate its green credentials.

INNOVATION ISSUES

In fact, this was one of the key messages delivered by another major paper industry customer. As Commercial Manager at Masterfoods USA, Mark Pincott works within the US$ 15 billion Mars empire that serves the confectionary, pet care, food and beverage markets in 100 countries around the globe. And, as he pointed out, the paper chain will have to fight even harder for market share in the future and even burnishing its environmental image will not be enough to ensure its long-term position.

"To start with, we don't view packaging as paper, plastic or metal. We simply choose the most appropriate structure for the application," he said. In other words, don't expect any favors. Pincott went on to point out that market trends are not exactly working in the paper chain's favor, either. As he pointed out, consumers are primarily looking for convenience and a product that can be easily opened and consumed quickly while on-the-go, so re-closure and easy storage are important features.

Customers are also becoming conscious of portion sizes, which are drifting lower, and since demographics mean that more there are more older consumers than ever before, ease of opening is vital.

All of these factors combined have meant that plastics have slowly eaten into the total market share of packaging. Companies such as Masterfoods often perceive plastic packs to offer more flexible packaging solutions, even if the cost is higher.

"Convenience is driving the new pack formats. Stand-up pouches that are re-sealable are increasingly popular, for example, but there are challenges in that they are more expensive, the filling rates are slower, and there are higher scrap and freight costs," Pincott explained.

In one example, Pincott highlights a large pet food bag commonly found in the United States that is currently sold in paper packs. However, in Europe the company has switched to using a plastic pouch with re-seal capability. As he concedes, "there is a huge cost difference between the two." But even though the company likes the value offered by the paper solution, the company has moved to plastic for consumer convenience.

It is examples such as these, Pincott argues, where the paper chain must do more to close the gap between the products, delivering greater convenience for the end-user.

SHOPPING LIST

In fact, Pincott has set out what he believes must be the near-term lessons for the paper industry:

* demand for temporary/promotional displays is growing fast, but the FMCG groups need better displays

* customization will drive an increasing need for one-stop display shops, where the supplier can design the unit, print it, fill it with product and ship it to the customer

* paperboard needs to develop a product that can compete with the plastic standup pouch

* shelf impact is vital for sales and the paper industry needs to work on features such as glass, finish and other embellishments

* brown boxes are seen as hard to open--the paper chain has to overcome this problem

* the converting industry is trending toward bigger presses at a time when complexity is driving a need for smaller, more cost-effective print runs. Is this really delivering value solutions?

* environmental pressures are increasing so the sector will need to do more to address concerns

* if paper really is more environmentally sound compared to plastics, it needs to do far more to get the message across

* the industry needs to be aware of new routes to market and exploit the opportunities that these will bring.

NEW WAVE OF INNOVATION

In fact, Pincott is really asking for a whole new wave of innovation and communication that will help push paper packaging into the position where companies such as Masterfoods will have to sit up and take notice.

Clearly, paper, plastics, metal, and films will always have their part to play in the packaging game. But as both Pincott and Houlder point out, they are definitely interested in keeping their options as wide open as possible, especially if the paper chain can deliver innovative packaging ideas at competitive prices.

That means that they are willing to help drive creative developments forward, but it is still up to the paper and paper packaging industry to do its part in offering new products and communicating the positives about using paper down the supply chain and through to the end-user.

It will take some imagination and a little time, effort and money, but there is really no reason to see the market share of paper packaging wither away if the industry can keep focused on customer needs and stay creative enough to deliver the right solutions.

ABOUT THE AUTHOR

Jim Kenny is contributing editor/Europe for Solutions! magazine, and is based in Brussels, Belgium. He is the former vice president of editorial for Paperloop and today heads his own company, DSI. Contact him by phone at [phone], or by email at [e-mail].

[ILLUSTRATION OMITTED]

JIM KENNY, INTERNATIONAL CONTRIBUTING EDITOR 

WHAT YOU WILL LEARN:

* How major customers believe the paper sector is failing to get its message across.

* How the environmental benefits are not being communicated.

* What the paper chain can do to deliver higher value.

ADDITIONAL RESOURCES:

* "Packaging is moving fast to keep pace with market drivers," by Jim Kenny, Solutions!, October 2003. To access this article, enter the following Product Code in the search field on www.tappi.org: 03OCTS038. Or call 800 332-8686 (US); 800 446-9431 (Canada); [phone] (Worldwide)

* "Can the common footprint stamp out the RPC threat?" by Alan Rooks, Solutions!, February 2003. Product Code: 03FEBS022.

* www.masterfoods.com.

* www.unilever.com.

Total Packaging Usage 2003   million metric tons

Paper & Board                957         40%
Plastics (flexible & rigid)  602         25%
Glass                        633         27%
Metal                        181          8%

Source: Unilever

Paper-Based Packaging (Europe)

Recycled material    71%
Virgin material      29%
Of which, Certified  12%
No information       14%
Not Certified         3%

Source Unilever