New blog: Food for thought

Blog: Food for thought – by Sandor Willems

At the beginning of a new year I would like share some thoughts on trends that I expect that will materialize even more in 2019. Trends related to Food Packaging within the Retail market.

Basically I see three major trends that will become of increasing importance. These trends are:

1. The public image of a Retailer
2. Driving costs down to a minimum
3. Corporate Social Responsibility

In this blog I would like to share my thoughts with you on these subjects.

The public image of a Retailer
The value of any company is vital for its continuity. When the value of a company drops, people can be in panic. Just looking at the highest valued companies around the globe, you will see some shocking figures; Amazon is world’s leader in terms of brand value with a value of 151 billion US$, follow by number 2 Apple with 146 billion US$ and number three Google at 121 billion US$. Enormous figures that can have be very vulnerable due to public image issues. As I am writing this blog, stock exchanges around our globe are plummeting just because Trump tweeted some annoying messages into the Ethernet. Result; stock exchanges are panicking and companies lose value. In today’s age of fake news and – thanks to the internet – fast spreading headlines, the need to avoid company image issues is of vital importance.

As a producer of food packaging film we see this in our day to day operations as well. Our food packaging film is used in many type of product packaging that you will see in your local grocery store or retailer. The vegetables you pick from the freezer, the bag with candy you buy, or your bread bag, your bag with your favourite biscuits are all examples of where we produce the packaging film. Where we produce the film for the retailer or for the converter (the company who puts their product in a bag for the retailer). The product, the bag and everything involved should be top notch. The end-customer (the consumer) should have a great experience buying and using your product, right? Any issue related to your product (and retail store) should be avoided at almost all cost. With that in mind, retailers have quite some stringent requirements for food packaging producers like ourselves. There should be no leakages in the bag or packaging film, there should be sufficient amount of barriers in the film, the bag needs to be of the right quality, the printing needs to be in line with corporate guidelines and branding principles. Plastic film should function but not be excessive; waste should be limited, recyclability should be optimum. Companies cannot afford to lose public face by having product recalls or facing other issues related to product quality issues. When you Google infamous product recalls you will see some stunning results. A large and well-known Swiss producer of chocolate cookies, cakes and coffee had to recall for example 300.000 boxes of refrigerated cookie-dough products, such as chocolate-chip bars and tubs of gingerbread cookie dough because of an E. coli risk. Product quality issues should be avoided where the branding, reputation and image of a company is critical. All these aspects help build a strong “brand equity”. The public image of a company (and thus also retailer) will become increasingly important in 2019.

Driving costs down to a minimum
The second trend is not a new trend but one that will continue to get a lot of management attention. Basically a company can do two major things to improve its financial situation; sell more or reduce costs. Models, methodologies, processes, initiatives and the like to reduce cost will continue to be one of the key performance indicators and critical success factors for many companies all around us. And especially within the world of Retail where margins are typically quite low and competition severe. Standardization is key. How can we streamline processes better, how we can reduce duplications, and standardize and optimize our internal and external processes? What initiatives can we explore to reduce waste? It’s the culture of Operational Excellence and the world of Kaizen that flourishes in many large (and smaller) enterprises. Retailers feel the constant pressure to avoid waste (or in Japanese Muda, Mura, Muri, as per Toyota’s Production System). The era of standardization has arrived! No more tons of suppliers with different conditions, specifications, etc. No, todays Retailers are looking for one shop stop (or one stop shop) for all their enquiries. The same is true for their food (packaging) suppliers. Standardize where we can, drive avoidable costs down, implement improvement plans and reduce level of risk and amount of business partners. Select those business partners that can cover all or most of your needs for generic enquiries and for specialties. Where the real smart retailers are not just looking at the initial buying price, but at the TCO (total cost of ownership) of buying certain food (packaging). TCO will become of greater importance within the Retail market. Those food packaging companies that are able to standardize and still have a broad portfolio of solutions will be the ones that will prevail.

Corporate Social Responsibility (CSR)
Today around the globe there are thousands of new companies registered daily all over the world. Just China alone already counts about 11 to 13 thousands new businesses per day. Where the total number of registered companies in China exceeds 77 million, all over the world there are roughly 200 million companies registered. Of which most companies provide a need to cover the needs of our global population of +7 Billion people. This (successful) business system and supply chain has however one major downside; the production of goods and services have an enormous impact on our environment. The negative impact is significant with pollution and ecological degradation as a result.

Of these companies that cause environmental side-effects are for example businesses that produce products like toxic gasses. As these effects damage the society where we live in, our environment and the earth in general, it is imperative that we reduce this negative impact. Several of the toxic substances we create are difficult to breakdown again. “Cradle to cradle” solutions are for instance beautiful ideas but in practice very hard to realize. The good news; in general we as earth’s population we are aware of the side-effects of our consuming society and many companies are actively engaged in tackling these issues head-on.

This basically means that organizations who are committed to CSR focus on ethical and sustainable ways of production in order the reduce their pollution and impact on the environment. In today’s society organizations are not obligated to run CSR-programs by law but public onions expect nothing less. Companies like Ahold Delhaize, Tesco and many others have their own CSR-program that they publicity announce to the public with concrete goals.

As legislation and enforcement is still limited, why should commercial businesses with above and below the line (profit) targets be concerned about CSR? There are even some neo-classical economists who share the believe that businesses owe nothing to our society. Their only concern is to increase profit levels and grow their businesses year over year in order to increase stakeholders’ value. Within all boundaries of the law. Are these stakeholders then the only stakeholders of these firms or are they any other stakeholders present? There are actually many more stakeholders. Stakeholders like your employees and the customers of your companies, NGO`s, the communities where we live in, other societies involved, animals, et cetera. Businesses and organizations affect more people than just their primarily shareholders. This understanding and believe is being spread rapidly around our (Western) society. The need for companies to have a strong CSR program in place (and not just for window dressing purposes) is imminent and ubiquitously present.

Conclusion
Of the different trends retailers will be facing in 2019, the 3 trends outlined here above are all somewhat related to each other. Personally I am very curious to see how they will influence our retailers, how associated programs will look like and will be implemented and how processes will be optimized and standardized. All in order to utilize these trends fully and make them beneficial to us as customers. Because one thing is for sure, these trends do require an open mind for change and a set of actions in place.

Sandor Willems
Commercial Excellence Leader AFP