Packs feel the cost squeeze
Published:  26 August, 2011

In the heyday of the high street, a supply of paper bags was all the baker needed in the way of packaging.

Since then, the baking sector has become probably the heaviest packaging user in the whole food industry, demanding anything from hot drinks holders to sandwich wedges to doughnut multi-packs and shrink-wrap for pallets. But in the face of that proliferation, there is an increasing focus in the food industry on reducing the amount of waste sent to landfill. The major retailers have set self-imposed targets to reduce packaging by 30% by 2015. And EU Directives have placed further pressure on firms to reduce or eliminate packaging.

Along with the environmental pressure, raw material costs continue to rise and margins are being squeezed in the food industry. So is the baking industry headed back to square one? Are we set for the return of the brown paper bag?

The latest Mintel report on food and drink packaging, published in January, shows that, overall, the food and drink packaging sector is in decline. It says that value sales of food and drink packaging decreased by 0.8% year-on-year in 2010 and, in real terms, value sales fell by 4.7%.

It suggests that the packaging sector has been under pressure since reaching maturity in 2007, identifying three contributory factors the recession in 2008, legislation forcing manufacturers to reduce packaging, and the rising prices of raw materials. The report also states that less than one-third of consumers are now prepared to pay extra for environmentally friendly products, with C2DEs the least inclined to pay more.

But Mintel also highlights that in an economic downturn, added-value packaging, such as resealable packaging and packaging that adds to shelf-life is increasingly in demand as it saves consumers money by cutting wastage. And from a supplier point of view, packaging functionality is key in the current economic climate.

Kevin Curran, MD of Tri-Star Packaging says there is continued strong growth in demand for packaging from the baking sector as it moves more and more into convenience eating. But customers are very price-aware and are reluctant to add extra costs by opting to use specifically environmentally-friendly packaging.

Cost is already a huge issue, as raw material costs from cardboard to plastic have risen anything from 5% to 25% in the last year, with increases being passed on to customers, he explains. Innovation at Tri-Star is particularly focused on products that offer "environmental plus" benefits to customers. For example, Tri-Star will launch a new environmentally-friendly sandwich boarding in the next three months. It is not coated in the normal polyethylene (PE) plastic coating and is the same price as a standard option, rather than being 5% to 20% cheaper as is usual. Shelf-life is not reduced.

Tri-Star also recently launched biodegradable and compostable drinks trays for hot drinks to go, called PortaDrink, which can be flat-packed and therefore take up less space while travelling through the supply chain.

Adding value

Supplier Linpac Packaging is also on to the idea of adding value. In the bakery sector, presentation, extended shelf-life and product protection are often the main concerns, it says. Damage to food items in transit, such as iced buns and doughnuts, adds costs both in terms of cash and the impact on the environment, it adds. Delicate bakery products are normally packed in carton board boxes for delivery to the retailer. They can only be packed one layer high, due to the risk of damage, which leaves empty space, increasing transport costs.

Linpac recently launched a transport tray designed with cavities to keep products protected and separate. The trays are turned through 180 degrees, so that up to three times as many items can be packed in a box than before up to 60 items. The trays can also be used to display the products at point of sale. Ian Perkins, business development manager at Linpac, says: "We're confident we have created a solution that [offers] better protection for products, resulting in less waste, combined with a reduced carbon footprint, due to increased capacity and fewer journeys."

Meanwhile, Martyn Sumner, operations director of pallet wrap specialist Golden Valley Packaging Solutions, says that, year-on-year, wrap costs have risen 11%, with highs of around 20% in the course of the 12 months. He foresees that prices will increase a further 5-6% in the run up to Christmas, adding around £2,000 to the cost of wrapping a lorry load of pallets. And he adds that, with costs already rising, buyers' decisions are dictated by price, particularly at this point of the supply chain where product does not come into contact with the customer.

Golden Valley's green efforts focus on trying to educate customers on usage in order to reduce wastage levels. For example, Sumner reports that customers may want to buy the wrong thickness of wrap for their purpose. Some may have had a bad experience where they have had to spend £3,000 clearing up a split pallet, and only want the thickest wrap, which does not adhere to the edges of the pallet as well as a thinner option would.

Customers are also instructed in wrapping pallets properly so that they don't use excessive amounts of wrap. Reducing usage is fine, but pallet wrap is here to stay, Sumner believes. He says: "I cannot see an alternative to pallet wrap that would keep pallets secure, dry and clean in the same way."

And the same conclusion could be applied to a host of packaging options in the bakery and food-to-go arena. A brown paper bag won't see a doughnut through the modern supply chain, and it certainly won't hold a hot cappuccino to go.


Linpac's three best-sellers to the baking industry

l Collation trays for example, six-pack trays for mince pies
l Lidded tubs for miniature muffins
l Clam shell-style containers




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