Go green to live, CPG companies told

by Pan Demetrakakes
Executive Editor

Pressure is increasing on consumer goods packagers to adopt green strategies, even while the value of recycled packaging is plummeting.

A new report from consulting firm A.T. Kearney warns that consumer goods companies should be adopting sustainable strategies as a matter of long-term survival. The report, titled Rattling Supply Chains: The Effect of Environmental Trends on Input Costs to the Fast Moving Consumer Goods Industry, predicts that companies in certain consumer goods sectors, including food and beverages, could face a potential reduction of 13% to 31% in earnings by 2013 and 19% to 47% in 2018.

The report describes the concept of “ecoflation,” meaning a long-term price rise caused by environmental factors, in commodities used in food and packaging. These factors include climate change regulations, enhanced forest policies, growing water scarcity and new biofuel policies. The commodities include oil, natural gas, electricity, cereals and grains, soy, sugar, palm oil and timber.

The recommendations boil down to companies paying more attention to the long-term environmental consequences of their purchasing decisions and other strategies. Practices that should be evaluated include product redesign, backwards supply chain integration, local versus global sourcing and an upgrade of sustainability standards for the supply base.

Recycling, one of the most popular and highly visible “green” strategies available to consumer goods companies today, is taking a turn for the worse. According to The New York Times, mixed paper is selling on the West Coast for $25 a ton, down from $105 in October; tin is down to $5 from $327. The Columbus (Ohio) Dispatch reports that a ton of cardboard that fetched $105 a few months ago now brings only $22.50, while newspaper has dropped from $95 a ton in September to $5 last week.

The economy is the culprit, especially as it reduces demand in China, the biggest market for American recycled materials. Some municipalities now have to pay to have recycled trash hauled rather than getting paid for it.

On the bright side, even in such cases, it’s still cheaper to recycle the trash rather than pay to have it landfilled, meaning that recycling programs are likely to endure. And glass, which does not depend on the Chinese market as much as other materials, is seeing steadier prices. The Glass Packaging Institute recently affirmed a goal of having all glass containers made with 50% or more recycled material by the year 2013.

TOP DEVELOPMENTS

FDA sends inspectors abroad
In order to better protect consumers at home, the U.S. Food and Drug Administration (FDA) has opened its first overseas office in China. The FDA is sending staff members overseas to work with importers and foreign regulatory agencies to guard against such hazards as contaminated animal feed and dairy products containing melamine. It will start with at least eight American employees, in addition to Chinese hires, in three offices in Beijing, Guangzhou and Shanghai, to certify inspections of U.S.-bound Chinese exports, according to officials. Though officials said they weren’t targeting a particular country, many recent scandals have originated in China due to almost non-existent local food and drug regulations.

Aseptic on rise in the soup aisle
Aseptic soups are the fastest-growing category of soups by package type, growing 26% during 2007, according to statistics from Nielsen. Soups in cartons, like Campbell’s V8, constituted 8.2% of all soup sold in mainstream retail outlets during 2007. Many of them are in unique flavors like golden butternut squash or chipotle-flecked corn bisque. Aseptic packaging exposes the product to more intense heat than canning, but for a much shorter duration, which means less impact on flavor. And the requirement that aseptically packaged food have particulates no more than a quarter-inch has led to the development of puree-based soups, which consumers perceive as more gourmet or exotic.

Poll: People eating in more
People are going out less and eating in more, according to a poll from Parade Magazine. Forty-eight percent of respondents say they eat out less than they used to. Also, more than 80% of those surveyed have changed eating habits due to high grocery store prices, some 35% are making more meals from scratch, 28% are buying more bulk products and 42% have switched to less expensive brands. Healthy foods such as fresh vegetables have also gone up in cost, leaving 21% of those surveyed planting their own vegetable gardens, which are now a $1.4 billion-a-year industry, according to the National Gardening Association.

NEW PACKAGES

Brown sugar comes pre-measured
Imperial Sugar Co. has extended the single-serve concept to brown sugar, in a bid to help cooks avoid the messiness of measuring out portions. Imperial, based in Sugar Land, Texas, is marketing light brown sugar in quarter-cup pouches, trade-named Redi-Measure, which come 12 to a paperboard carton. The pouches are clear printed film, and the carton has a die-cut window that opens onto the rear of one of the pouches, allowing a clear view of the product. Another die-cut window on the carton’s side panel lets consumers see the edges of the pouches.

Mexican margarine targets children
A Mexican company is marketing squeezable margarine in an inverted bottle that is targeted at children. San Antonio Margarina Sin Sal (unsalted) from Cremeria America comes in a 280-gram inverted polyethylene terephthalate (PET) bottle with a gravure-printed shrink sleeve. The bottle’s graphics appeal to children, and it is designed to be easy for children to hold and use.