Packaging Changes From Fmcg To Cut Cost

Under  pressure  from rising prices and competitions  major fmcg  have now focusing on cost  reduction strategies  for  their product packaging . Packaging cost  is   a major cost contributor in product costing .

Few of the strategies   are

• Smaller packs  
• Smaller secondary packaging
• Alternative packing material
• Lighter packaging material
• Lesser printing
• Lesser margins  at end seals  ie reduction in cut off length s
• Pre- formed cartons and packaging boxes
• Universal packaging material and cartons for all locations

A report  published in ET

It is not just consumers who are tightening their belts in the face of runaway food inflation. Some of the country's largest consumer products companies such as Hindustan Unilever and Parle Products too are doing the same by reducing the package.


Now, reducing package has two elements: the content of the pack and the material used for making the pack.


While most consumer goods companies have periodically reduced the weight of packets to deal with increasing input costs, packaging firms are working on developing newer, cheaper packaging materials to control costs. The measures include tweaking the size and thickness of packages as well as replacing costly material with lower-cost alternatives.


"We have already deployed some lower-cost alternative packaging into the market," Tetra Pak India MD Kandarp Singh said. "For example, when the norm was for dairies to offer milk in half-litre and one-litre packs, we offered our customers a 200ml alternative in the TFA (tetra fino aseptic) pouch-shaped format and this is the alternative that is finding ready acceptance amongst consumers," he added.

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 The Economic Times

Packaging Cost Lowers Profits Of FMCG

Recent hike in petrol ,diesel prices and  price rise in  major raw materials coupled with increase in packaging materials  have now forced all major  Indian FMCG companies to revise their prices . Every companies have been holding up  price s  with internal cost reduction programs but now it has become difficult to sustain manufacturing at present prices  .Packaging cost is around 8-10% of the total cost of product . Recent hike in CBB or Carton  price  is  due to  increase of Kraft paper  prices by 25- 30%.

Recent Article On ET

MUMBAI: A sharp surge in packaging costs is tormenting consumer product marketers, squeezing their margins and forcing them to consider increasing


prices of processed food and some other products in a cut-throat market, company sources say.

Prices of packaging materials such as aluminium foil, kraft paper, adhesives for corrugated boxes and packaging plastics have increased up to 25% in the last three months, forcing companies such as Marico and Dabur to talk price hike in a marketplace where increasing prices and cutting advertising spends could prove fatal.


"We believe that any expansion of current margins is not sustainable for long-term volume growth," said Saugata Gupta, CEO consumer products business of Marico. "There will be some moderate inflation in prices," he added.

FMCG companies, working with extremely low margins after absorbing most of last year’s rise in raw material prices and higher logistics costs due to fuel price hike, are also exploring innovation in packaging and hedging materials to retain profitability.


Some analysts expect companies to cut internal and advertising costs for some time before hiking prices in the second quarter of the next fiscal.


"In the current scenario FMCG companies will exercise options like trimming internal costs, hedging in the packaging materials or cut down adverting & promotional expenses for a quarter if they are not launching any new products," says Shirish Pardeshi, senior analyst at Anand Rathi Securities.


He added that companies may increase prices after first quarter of 2010-11.


A Dabur India official said while the company has absorbed higher packaging costs so far, it may increase prices in some categories if costs rise further.


"We are finding it a bit difficult to procure our requirement in the corrugated box and paper segment. However, we have enough hedging contracts in place for packaging materials such as plastics and kraft paper," said Jude Magima, executive director-supply management at Dabur India.

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http://economictimes.indiatimes.com/news/news-by-industry/indl-goods-/-svs/packaging/FMCG-firms-facing-package-ordeal/articleshow/5764859.cms

Packaging Cost Reduction - Few Ideas from Hormel Foods

Austin, Minn. Dec. 3 - Following its reduction of 5.2 million pounds of product packaging in 2008, Hormel Foods Corporation is proud to announce the results of several new packaging projects.
“Our new initiatives build on about 40 packaging reduction projects completed in 2008 and reflect the way we continuously look for means to improve the packaging of our products and reduce our environmental footprint,” said Daniel S. Miller, Research and Development manager of packaging development at Hormel Foods. “In this process, we work with our suppliers to find innovative solutions.”
New packaging reduction highlights and projected savings include:
The elimination of extra room in the Jennie-O Turkey Store® burgers carton is expected to have an annual paperboard savings of more than 175,000 pounds.
Lloyd’s® barbeque tubs no longer have an extra paper sleeve. This modification will eliminate enough solid waste to fill 22 garbage trucks and save more than 660,000 pounds of paper fiber annually.
Reducing the thickness of the glass used to produce each jar of Hormel® bacon bits will produce annual material savings around 411,000 pounds.
Reconfiguration of the shipping box for Hormel® Compleats® microwave meals removed 23 percent of the material required to make the previous corrugated packaging box and generated an annual materials savings of 1.2 million pounds. In addition, changes to the size of the carton flaps of the product and reallocation of materials resulted in annual savings of more than 980 million pounds of solid waste.
Hormel® party trays packaging was redesigned to eliminate the need for shrink wrap to produce an annual savings of approximately 100,000 pounds. The corrugated case to ship the product will be smaller, resulting in a corrugated material savings of more than 174,000 pounds per year.
Redesign of the shipping box for Hormel® pork ribs, butts and bone-in offers more strength while creating an annual corrugated materials savings of about 2.4 million pounds.
Reducing the height, width and length of each box used to ship Hormel® pepperoni, increased the amount of product on each pallet, saving materials and reducing the number of trailers needed each year. The anticipated savings is 188,000 pounds of wood fiber annually and 49,000 pounds of corrugated.
Changes to the shipping of canned food products made by Hormel Foods will result in efficiencies that reduce the number of pallets needed annually by 14,573 and require less plastic and bundling film.
These packaging reduction projects are part of the overall corporate responsibility strategy and goals set by Hormel Foods.
Source : Hormel Foods