Team effort: the process of packaging improvement12 September 2013
Innovation is all about market share, even for companies that already have a strong market position. Finding the right ideas to improve product packaging requires an understanding of the needs of retailers, consumers and regional markets. Such a complex task begins with the synchronisation of insight and practical tools, as Nestlé Poland’s regional packaging manager for central Europe Iwona Schreuder explains.
Successful innovation is based on a clear understanding of the needs of customers and, for large suppliers such as Nestlé, this means not only the people who purchase its products in stores, but also the many retail organisations that stock its goods. For major food companies, therefore, the development of new packaging ideas has to be based on a clear view of the entire supply chain.
With packaging playing such an important role in the positioning of a brand and the appeal of products to its target markets, the processes that help a company to formulate this view of the supply chain must be comprehensive and clearly mapped out.
"As a leading company in the food industry, we must innovate," says Iwona Schreuder, regional packaging manager for central Europe at Nestlé Poland. "We have to gain market share and we have to reach our KPIs. That is why we have tools to help us understand our customers' needs as well as those of the consumer. Our customers, including the big supermarket chains that we partner with, are at the centre of our thinking.
"We start with analysis of how our existing packaging is performing, which helps us to create a customer-centric way of thinking. We have a holistic approach to innovation, which takes into account the requirements of the trade and the consumers of our products," she adds.
A balancing act
With many variables at play in the formulation of new packaging concepts, there is no single driver of innovation. Instead, companies such as Nestlé must balance and prioritise the many forces that combine to create successful product packaging concepts.
"Packaging is what gives a product its impact, so it is a big part of our marketing efforts," says Schreuder. "We also need to make sure the right information is on the label, whether that is about the ingredients or the methods of preparation; we must look at functionality for our customers, and a big part of that now is portion control.
"Obesity is a growing problem in many regions, so portion control is important from a health perspective. At the same time, we have to think about safety issues relating to packaging and the lightweighting of materials, graphic design and newer concepts such as QR codes, which are becoming more common on packaging."
One of the major issues in packaging is, of course, sustainability, which is steadily becoming a more powerful influence on consumer behaviour.
"Sustainability is an issue because a company like Nestlé has to focus on its environmental targets," Schreuder remarks. "We have to optimise our use of resources, which is a subject on which I report regularly. Consumers, especially the younger ones, are starting to pay more attention to issues such as the use of recyclable materials and are increasingly aware of environmental issues, although price and quality are still the main drivers of purchases."
Is packaging on target? The matrix of drivers defining packaging ideas for individual products is, by its very nature, complex. Understanding this complexity yields new concepts that can help position a product to reach specific customer groups, whether they are defined by demographics or by region.
Slick supply chains
Changes in primary or secondary packaging that improve the impact of a product on a specific consumer group must be looked at in the wider context of the supply chain, and Nestlé is making efforts to ensure its processes are optimised for maximum efficiency.
"Supply chain efficiency is very important," explains Schreuder. "Nestlé is the biggest global food company and in such a vast organisation we need to have many systems in place to run our operations efficiently. Right now, the goal is to eliminate waste across the whole organisation's processes.
"We are making great progress, and have a lot of KPIs in place to measure supply chain efficiency, with crate fill rate being one of the most important. The Nestlé Continuous Excellence [NCE] programme is driving this forward; it is about engaging people and generating team spirit in order to reach our goals."
NCE is an initiative designed to drive process improvement and has been running since 1998. So far, NCE has yielded consistent gains in cost savings for one of the world's largest companies. Driven by LEAN and total productive maintenance (TPM) principles, the programme is seen as one of the key reasons behind the company's consistent organic sales growth, and improved EBIT margin and capital efficiency.
The programme defines many aspects of the company's operations, including the management of the supply chain. It combines with other tools, which are specific to key aspects of the business, including some that enable Nestlé to improve the efficiency of its decision-making processes in regard to packaging.
One such tool is the Packaging Impact Quick Evaluation Tool (PIQET), which has helped Nestlé to lower the environmental impact of its packaging by providing a clear picture of how new materials or the packaging of individual products has performed. The tool relies on a fact-based lifecycle approach that systematically assesses product categories along the entire value chain. PIQET tracks eight environmental indicators including carbon footprint, water use and solid waste.
"New materials come into play constantly and we are always brainstorming for new ideas to improve efficiency and sustainability," Schreuder says. "PIQET helps us a lot with project development as it looks at the technical aspects of new materials or other ideas that improve our environmental performance, so that we can predict the impact they will have.
"It helps us to look at many different factors, including cost-efficiency and product shelf life, so that we can respond as quickly as possible to the arrival of new packaging materials," she continues. "For instance, we are very interested in bioplastics at the moment, but we must prove that they perform better on a case-by-case basis. We can't just use them because they are fashionable."
From Nestlé's experience, it is clear to see that successful innovation in the packaging arena is dependent on many sophisticated tools, cooperation with partners in the supply chain, and a lot of hard work to create and track the right KPIs.
The long, hard analysis of market data and product performance that has led the company to bring new ideas to market is evidence that innovation is more about perspiration then inspiration.