Packaging becomes focus of CPG sustainability goals
This Food Dive article on Nestle highlights the largest food and beverage company’s push for reducing waste and greenhouse gas (GHG) that also has implications for the rest of the consumer packaged goods industry. While many food startups have made environmental friendliness a key part of their ethos, often using alternate supply chains entirely, the largest CPGs have the potential to make the greatest immediate impact while also serving as a blueprint for other companies’ programs as well as possible government regulations.
Here are highlights from the Food Dive article and a couple others around the web:
- Nestle plans to have 95% of its packaging be recyclable by 2025.
- Nestle plans to achieve net-zero GHG emissions by 2050.
- Most GHG emissions come from souring ingredients, such as dairy.
- Twelve percent of GHG emissions come from packaging — an area where companies can take actions that are immediately impactful.
- Nestle is developing paper pods for its Nespresso coffee with an eye toward keeping the taste unchanged.
- Nestle is running a pilot program for refillable vending machines in Indonesia.
- Similarly, Tyson Foods is also testing more sustainable packaging for its packaged meat products.
Developing greener packaging adds a range of new challenges including:
- Compatibility with food safety standards.
- Compatibility with existing manufacturing facilities.
- Not being cost prohibitive.
ODW Logistics executive talks retailers’ vendor compliance programs
Phil Schmidbauer, senior director for analytics and solution at ODW Logistics, appeared on a nine-minute segment on Tuesday’s FreightWaves Now. According to Schmidbauer, retailers are not trying to make on-time, in-full (OTIF) fees a source of revenue — they just want shelves to be stocked. As such, retailers are open to engaging in productive conversations and willing to work with CPGs on their logistical issues. Still, shippers remain responsible for knowing the retailers’ rules of how the fees are administered and for getting to the root cause of rules not being followed, which could be an issue with the carrier or consignee. Schmidbauer’s comments highlight how the stakes are higher for valuable freight since the fees are based on a percentage of the value of the shipment. For that reason, I would expect the fees to be 20%-plus higher than they were two years ago simply to reflect CPG price inflation.
Heads up to DTC shippers: UPS, FedEx may be more interested in your business
Whatever a consumer wants, there seems to be a subscription box for that. Subscription boxes not only provide consumer goods manufacturers with valuable recurring revenue, they also create an avenue for dialogue with dedicated clients that give feedback on products. Oftentimes, new products are first introduced through subscription boxes and then tweaked based on early dialogue with subscribers. Whether we are talking about subscription boxes or not, direct-to-consumer revenue for manufacturers is higher margin than wholesale revenue. Therefore, I expect goods makers to push for DTC growth until the strategy stops working.
The growth in DTC and subscription boxes has made many CPG companies utilize parcel delivery firms more heavily. For DTC shippers, I recommend Mark Solomon’s FreightWaves article on the competitive dynamics between the national and regional parcel carriers. Lately, UPS and FedEx have started taking share from regional carriers on the basis of:
- Offering generous discounts.
- Looseness in the freight markets (motivating the national players to compete for smaller shippers).
- Consumers’ preference for familiar national brand names.
- A more precarious financial position of some regional parcel carriers.
This week in healthy food news
- According to The Wall Street Journal, you should start to feel bad about how many sandwiches you eat and the fact that your turkey offering has tripled in size. I don’t recommend reading the article because it might make you unable to enjoy a Reuben.
- CPG supplier Ingredion is adding to its portfolio by offering ingredients made from citrus fruits designed to replace undesirable and high-cost components.
- Alternative sweetener company Bonumose opened a new facility in Virginia. Bonumose produces tagatose, a rare sugar found in nature that is 90% as sweet as traditional sugar with far fewer calories and does not spike blood-sugar levels. The concept behind the startup is to streamline the process for producing tagatose to reduce the cost to a point where it is commercially viable.
Motif FoodWorks has started its commercial launch of an ingredient designed to make the texture of plant-based meats feel more like real meat.
To subscribe to The Stockout, FreightWaves’ CPG supply chain newsletter, click here.