Beverage packaging firms face new challenges

LAS VEGAS (Feb. 28, 3:55 p.m. ET) -- While the U.S. beverage market is beginning to show some signs of life after two years of weak sales, beverage packaging is facing a number of challenges and opportunities globally, experts said at the recent Packaging Conference.
Mark Redman, director of the American Beverage Association in Washington, said food safety challenges from consumers and government regulatory agencies are just part of the picture.

“Our biggest challenge is fairly obvious: it’s taxes. These are very tough economic times for our cities and states. Financially strapped state and local governments have got to come up with ways to balance their budgets,” he said in a Feb. 7 speech in Las Vegas to about 200 conference attendees.

According to Redman, Republican and Tea Party victories in November’s midterm elections should give industry executives no particular cause for joy.

“When you have a situation where the executive branch is held by one party and you have a split Congress … You see the regulatory agencies start to increase their pressure,” he said. [Hear an audio clip of Redman from the Packaging Conference.]

More Food and Drug Administration guidance documents are coming that will affect the beverage industry, as the Obama administration seeks to enact its health and safety goals in the face of legislative opposition, he said.

Redman also cited efforts in Europe and North America to regulate bisphenol A as proof of the devaluing of science that he said is occurring among governments, the news media and consumers.

He said BPA is being regulated despite the lack of conclusive proof that current exposure levels cause risk to humans. Redman added that a weakening of the peer review process means errors in academic studies are not being caught, and some researchers and government officials appear to be motivated by anti-industry sentiment.

Despite the political challenges, 2010 was a “rebound year” for the U.S. beverage industry, said Gary Hemphill, managing director and chief operating officer of Beverage Marketing Corp.

Of the more than 40 billion gallons of alcoholic and non-alcoholic beverages U.S. consumers drank in 2010, soft drinks made up the largest share, about 23 percent, he said. Bottled water made up nearly 15 percent of the total, followed by milk and beer, each with about 11 percent.

Coffee drinkers accounted for about 10 percent of the total, with consumers of fruit juices bringing in about 6 percent of the overall volume, and tea drinkers consuming about 6 percent as well. The remainder was divided between sport beverages, wine and spirits, energy drinks, vitamin-enriched water, tap water and other beverages.

“It used to be that people would say that beverages are ‘recession proof,’ but I think it’s better to say that beverages are ‘recession resistant,’” he said.

Two important trends that New York-based BMC is following involve consumer polarization, Hemphill said. Households with incomes of more than $100,000 are doing more shopping than the other market segments, he said, while at the same time unemployment numbers are higher among workers lacking college degrees. Therefore, a job-led economic recovery remains the beverage industry’s best antidote for lagging sales, Hemphill said.

“What this basically favors is niche products as opposed to big brands,” he said.

Consumers’ lives have become more complicated, therefore new product strategies must become more targeted, Hemphill said. BMC has identified several “need states” of mind, in which consumers select highly specialized beverages to fulfill individualized wants, niche occasions (snacking or entertaining), and very specific nutritional or energy goals, he said.

Because traditional boundaries are being challenged, packaging must focus on the marketing value it brings to brand owners as much as for its use as a containment system, he said.

“What we’re going to see in the future is a marketplace characterized by low relative volume, but higher value opportunities for products,” Hemphill said.

The “hybridized consumer” of the future will seek packaging that is both functional and conveys a positive image of the product that they seek to buy, he said.

That’s exactly the kind of thinking behind what designers and engineers are doing at Amcor Rigid Plastics, Michael Hodges, vice president of marketing for the Ann Arbor, Mich.-packaging firm, said in his Feb. 8 presentation.

Packaging must be sustainable and on-brand to be successful, he said. Hodges several times used the term “sustainnovation” to describe Amcor’s development process.

“We don’t really begin with design anymore. We begin at the end of the process, where we start to think about size and shape and space; and what does that mean to carbon footprint; and what does that mean to cost reductions and such; and so then we start to work from the back of that process back to what a brand image can look like — something that fits into a certain size and a certain space,” Hodges said.

As an example, Hodges cited a recent PET bottle project that combined bio mimicry (designing a plastic bottle so that its shape mimics the cross-section of a bell pepper) and origami, the Japanese folk art of paper folding.

The result was a revolutionary new heat set technology that evolved into a new stock bottle offering with a bulbous top and five-sided bottom that weighs 22 grams as opposed to the previous eight-sided bottle, which weighed 38 grams.

The 16 gram weight savings — and projected sales of about 2 billion units per year — amounts to saving 38.8 tons of PET resin annually — the equivalent of 351 rail cars of resin, or a freight train five miles long.

While processors are focusing more on sustainable packaging, there remains a serious shortage of recycled PET in the United States, said Dennis Sabourin, executive director of the National Association for PET Container Resources.

He cited Napcor statistics for U.S. PET bottle recycling between 2000 and 2009: In 2009 of 5,149 million pounds of bottles that reached U.S. store shelves, 1,444 million pounds were collected, a gross recycling rate of 28 percent. By contrast, in 2000, of 3,445 million pounds of bottles hit the shelves, and 769 million pounds were collected, for a rate of 22.3 percent.

But while more PET was collected, nearly all of it was exported.

“The thing to note here about the increase in bottles available for recycling over this span of time was that it was all taken by Chinese exporters — well, all Asian exports, but most of it goes to China,” Sabourin said.

Sonoma, Calif.-based Napcor still opposes a national bottle deposit scheme, but remains committed to finding industry-driven solutions to the problem of PET supply — including increased recycling of thermoformed packaging, Sabourin said.

“We’re going to need some public policy, but I daresay that we need to get industry behind the public policy. For plastic packaging, there is no sustainability without recycling. So, if we want continue to take PET packaging as the sustainable packaging of choice, we’ve got to do something or let sustainability go,” he said.

Current extended producer responsibility strategies, such as those mandated in some European countries and Canada, have resulted in increased PET availability, he said. In the short term, Napcor has rejected bio-based materials, degradable additives and resource recovery as unsustainable, Sabourin said.

“All plastics industry stakeholders must become part of the solution in order to meet the threats and challenges to our industry,” Sabourin said. “Unless we are willing to actively engage, we must accept what we get,” he added.