Time for a Change: Packaging Innovation Stifled by Both Manufacturers and Retailers

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January 10, 2012

Editor’s Note: This is part one of a two-part report on the Store Brands Decisions 3rd annual Packaging Design Roundtable. Next week’s report will explore the challenges and opportunities around sustainable packaging.

More often than not, retailers say they are limited by private label manufacturers’ capabilities and their unwillingness to invest in new equipment or processes when it comes to packaging design. As a result, most store brands packaging is rarely creative or innovative, according to retailer and design firm participants in the Store Brands Decisions 3rd annual Packaging Design Roundtable.

Gino Biondi

For years, manufacturers have been in the packaging design driver’s seat, offering retailers limited options, which is something that forward-thinking operators and those with influence aspire to change. Summing up the current state of affairs, Gino Biondi of Family Dollar said: “Manufacturers set the limitations and we build our strategy around those limitations.”

Manufacturers have been in a power position for a very long time, said Packaging design and structure is “a point of distinction and [retailers] have to be willing to spend money on their brand. And so the manufacturer can’t be as in control as they are used to,” said Lindsey Hurr, vice president of Immotion Studios. Retailers have to take the lead and demand more creative packaging options from manufacturers. If a manufacturer is not willing to work with retailers, then retailers should find manufacturers that will, she added.

Lindsey Hurr

Todd Fryer, director of corporate brands marketing for Smart & Final, relayed a recent instance where the design process was driven entirely by a manufacturer’s limited capability, which yielded sub-par results. “Nobody wanted to change out a rail system, nobody wanted to retool for a cap. There were some really simple things they could have done to make some changes… which probably could have made the packaging go from bad to good. But the problem was that the manufacturer was driving [the process],” Fryer said.

Biondi, Hurr and Fryer were three of nine retailers and design agencies that participated in the roundtable in November in Chicago at the PLMA Show. They were joined by Kurt Denman, OfficeMax; Melissa Billman, Kum & Go; Doug Palmer, DAPCO Inc.; Allan Meyerson, GROUP360; Patti Howe, Daymon Design and Gary Chiappetta, Kaleidoscope.

Allan Meyerson (left) and Todd Fryer

Retail Investment Needed
But retailers and design firms alike were quick to point out that manufacturers are not entirely to blame. Retailers must shoulder some responsibility as well because they often do not dedicate the proper resource to their store brands development, according to Chiappetta. And they also shoot themselves in the foot with one-year manufacturer contracts, said Howe. A sure fire way for retailers to increase collaboration with suppliers and signal trust and longer-term commitment is through multi-year contracts, retailers and design agencies agreed. This would help manufacturers mitigate risk and ensure their capital expenditures were well spent.

Many retailers, in order to get the best pricing, will only sign one-year agreements and many are moving the supplier bidding process to auctions, which makes it nearly impossible for manufacturers to anticipate or incorporate packaging expenses into their proposals or bids.

Patti Howe

Billman, director of private label development for convenience store chain Kum & Go, used to work on the manufacturer side of the business and understands the complexities and challenges. When many retail customers want unique designs or packaging structures, the manufacturing lines have to be adjusted and manufacturers have to manage the down time, she explained. Manufacturers are mostly looking to create efficiencies within their facilities so that they can either “pass them on or capitalize on them,” she said. “One of the challenges I see is that everybody wants something different. So how do you mass produce something different and make it effective and efficient for [the manufacturer] at the same time? I can see that being a big challenge for them.”

Melissa Billman

Change in Retailer Approach
Private label teams within retail organizations are not structured for innovation in packaging design or product development, according to Palmer, a retail consultant with DAPCO. “Our system is broken a little bit because we are talking about collaboration between the retailer and manufacturer, but our private label teams are really procurement-driven so they’re going after the supplier, they’re getting the best costs and they’re [operating on one year] contracts,” he said. “So suppliers are not going to take risks because they know they only have the business for a year.” That way of doing business has to be dismantled and “put back together in a different way that takes into account packaging, prepress, and the printing side of it,” he said.

Doug Palmer

To achieve real packaging innovation, roundtable participants agreed that investments have to be made by both manufacturers and retailers, and both sides will have to change how they do business.

“If you want to create a brand and you want real innovation, you’ve got to include the manufacturers, you’ve got to include the [retail] brand teams, and some of the engineers on the line,” Fryer said. “You have to bring these teams together, which is really the hard part. [But when] you bring them all together, it’s amazing some of the innovation that happens and some of the insights [it yields].”

Insights building is a key competency Family Dollar is looking for from manufacturers, said Biondi, director brand development, noting that they know the customer side of the business but need help fleshing out opportunities they see in the marketplace. “What we’re looking for from the manufacturer is for them to build on top of those insights and then take risk and invest capital to pull those things off, “ he said. “Because the one thing a retailer is not going to do is invest in manufacturing capital. The retailer’ is going to invest in store capital.”

Gary Chiappetta with Melissa Billman

Some design firms noted, however, that retailers who want innovation must be willing to pay a bit more for it. Partnerships cannot be developed if the relationship is based on price alone, said Allan Meyerson of GROUP360 Worldwide. “And I would think that those manufacturers who are willing to distinguish themselves would go out of their way to build that partnership,” he said, noting that retailers will get some assets in return in the form of knowledge and expertise, “which I think would be incredibly important.”

Part of the challenge, according to Biondi, is that as retailers “we don’t know what we want, but we want everything. We want a low cost but we want the best looking design in packaging that we can find on the planet. But there’s an educational gap between the folks in this room [and those] that run our various businesses -- whether they’re external or internal -- with the rest of retail and even a manufacturing organization. It does start with the retailer. We set the expectations for design firms, we set it for manufacturers, and they’re giving us what we want.”

Retailers, he said, need to do a better job of asking for what they need, instead of telling design firms and manufacturers what they want.

SBD Views: Our 3rd annual Packaging Design Roundtable took on a life of its own and went well beyond just defining the issues that exist in advancing packaging innovation. Let us know what you think about the issues and suggested solutions presented in this two-part series. You can email me at jfailla@storebrandsdecisions.com or our editor, Maureen Azzato, at editor@storebrandsdecisions.com. -- John Failla for Store Brands Decisions

Read These Related Articles:

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