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Be offensive!

Every company and industry plays defense and offense--defending their existing markets from competing products and materials while attacking new markets and creating new products. As a mature industry, pulp and paper tends to play more defense than offense. But to stay relevant--and stay in business--we must get smarter about our defensive strategies and more "offensive" with new products.

One example is the shipping container market, where corrugated carton makers have rediscovered the old cliche that the best defense is a good offense. The March issue of Solutions! included an article about how the U.S. corrugated industry is defending its market from returnable plastic containers (RPCs) by developing new packaging alternatives like the "Common Footprint" that meet the supply chain needs of its customers.

European box makers are facing an even greater challenge from RPCs, since business conditions and strict recycling laws there help favor RPCs. Yet even in this case, the rate of RPC use varies by country, depending in part on the willingness and resolve of corrugated box makers to fight for their markets.

According to Ann Sterling Roberts of Pira International, RPCs are expected to displace about 400,000 metric tons from the 21 million metric ton corrugated box market by 2005. By that time there will be about 138 million crates in circulation. The UK, Germany and the Netherlands account for over 70% of the crate pool.

Factors favoring increased RPC usage include large retailers with high market shares, high levels of private label product penetration, and distribution networks in densely populated areas. For those reasons, RPC use has grown rapidly in the UK, where large retailers like Sainsbury have driven the market. In Germany, highly restrictive packaging laws have driven RPC usage.

However, there are some inherent disadvantages of using RPCs that corrugated box makers can exploit. For example, RPCs must be reused several times before their higher cost can be amortized. When RPCs are lost or stolen, costs rise. According to Roberts, Sainsbury is using about 5 million RPCs but has exact location information on only 1.5 million of those crates. Likewise, returning RPCs over long distances--more than 400 kilometers, or about 250 miles--produces an environmental negative for RPCs due to higher energy usage, said Roberts. She also noted that France, which would likely be a good market for RPCs, faces only limited RPC penetration since the French corrugated packaging industry worked with its customers to add value to packaging, such as standardized sizes.

Back in North America, new packaging opportunities are being driven by marketing and business needs. Mike Redohl of Anheuser-Busch Companies has noted several packaging trends, such as the growing need for visual appeal, lower cycle times, stronger and more lightweight materials, and more vibrant colors. For example, he said that 80 percent of convenience store beer purchases are planned, so the packaging must make it easy for the customer to quickly identify the brand he wants. Redohl also noted that packaging materials must help reduce total system costs, accommodate higher packaging speeds, and perform better with reduced variation on packaging equipment.

On the negative side, Curtis Chaney of Yum Brands' Unified Foodservice Purchasing Co-Op noted that about 20 percent of his organization's packaging purchases have moved from paper to plastic.

The battle for markets will continue, and paper still has some important advantages. Brian Hopkins of ConAgra neatly summed this up when he said, "We don't go into a process saying that a certain package needs to be made out of plastic; we look at what we want to do with the package. Paper prints better than plastic, it offers low start-up costs and fast turnaround, and it can be inexpensively tested. Paper can be formed in ways plastic cannot." Let the product development begin! Note: The sources above were speakers at AF&PA's Paper Week. S!

ALAN ROOKS Editorial Director
COPYRIGHT 2003 Paper Industry Management Association
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 2003, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

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Title Annotation:Viewpoint
Author:Rooks, Alan
Publication:Solutions - for People, Processes and Paper
Date:Jun 1, 2003
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