The changing landscape of the Packaging sector

Packaging News asked Barry Sheehan, Associate at Livingstone, on how the packaging sector is responding to the ever-changing technological, marketing and business landscape.

The decreasing effectiveness of some traditional advertising media, such as TV and print, has been well documented. While marketers are adapting to an increasingly fragmented audience through the use of digital campaigns to identify and target customers, this also has implications for the packaging industry.

Indeed, the proliferation of media channels in the last 10 years has made it harder and harder to ‘grab the attention’ of customers and ultimately influence their purchasing behaviour.

Because of this, packaging is playing an increasingly important role in the marketing process. Due to its proximity to the point of purchase, a well-designed or innovative packaging solution can have a disproportionately positive effect in driving sales.

An increased appreciation of the value that packaging formats, as well as artwork and design, can play to enhance a product’s shelf appeal is therefore driving investment and growth in certain areas such as flexible packaging solutions as well as the burgeoning market for interactive packaging.

Is the future digital?

The above is very much linked to another current industry trend – the increasing use of digital print technology.

Undoubtedly the increasing use of short-term promotions, brand extensions, product trials and the requirement for different language versioning is creating a larger market for digital printing as it enables brands to be quickly and easily customised and refreshed. Additionally, digital print aligns well with the need for brands to ‘interact’ with their customers.

Take for example the recent ‘Share a Coke’ campaign, which featured hundreds of the most common first names from around the world in multiple different languages.

The campaign was highly successful, seeing both sales and social media engagement with the brand increase and this would not have been possible without the use of digital print technology.

Despite this, whilst most industry experts agree that a digital print capability is likely to become increasingly prevalent among packaging providers, they remain to be convinced that this will cause be a seismic shift away from lithographic and other commonly used print methodologies in the near-term.

And while having a digital capability is of course a useful differentiator, the most successful adopters of the technology has been those who understand how this can be used to address their clients’ needs and ultimately integrate this in their overall solution.

The success of discount retailers

Finally, it would be remiss not to reflect on the impact that success of discount retailers such as Aldi and Lidl has had on the retail sector.

Initially fuelled by the economic recession and customers’ greater sensitivity to price, discount retailers have continued to increase sales and increase average spend per customer even as the economic situation improves.  Discounters are now becoming mainstream and are attracting more middle-class consumers.

Currently these two German discounters alone have more than 20,000 stores across Europe, the US and Australia and are forecast to reach a market share of 10% in the UK over the next two years.

So what does this mean for the packaging industry?

While one might intuitively view the rise of discount retailers, with their cost conscious ethos, as a negative, this is not necessarily the case.

In fact, the changing face of the retail landscape is creating new opportunities within the packaging sector and discount retailers have been one of the earliest adopters of more innovative, lower cost solutions.

For example, a number of packaging providers have addressed discount retailers’ need to minimise handling costs by creating ‘shelf-ready’ packaging solutions, which can reduce replenishment cost by up to 50%.

Indeed, a number of packaging solutions providers have stated that discounters’ core strategy (the bulk buying of a limited range of products) has actually been quite beneficial; as discount retailers typically stock between 1,000 and 3,000 SKU, compared with 50,000 at an average supermarket, this can translate to simpler processes for packaging providers.

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