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The Future of Packaging 2016 and beyond - View on future trends and packaging value chain developments

- Key success factors for brand owners 2016 and beyond

- Expected implications for the packaging industry in 2016 and beyond

- Examples on packaging providers’ support to brand owners

Hannu Alalauri, SVP, Renewable Packaging

Berlin, January 28th at 12.10-12.50pm - Presentation draft

Expected changes in the food packaging value chain 2016 and beyond

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Continued increase of retailer power in the value chain through private label introductions

Intensifying competition drives need for differentiation and shelf standout

Increasingly powerful, informed and convenience seeking consumers

Growth of online will be a game changer – e-tailers

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3

1

Logistics is increasing in importance in providing efficient packaging solutions

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Contract

filling

/packers

Logistics

providers

Brand

owner

Logistics

providers

Consumer

Converting (incl. corru-

gation) Warehouse

Wholesale

Retail Design

Online

Retail

Recycled

fibre

Virgin

fibre

Recycled

CCM

Virgin

CCM 2

4 1 5 3 5

5

Sustainability will grow in importance driven by environmentally aware consumers and

intensifying regulations 6

Key v

alu

e c

hain

deve

lop

me

nts

Packaging value chain - food

Five major trends affect the future of the packaging industry

Increasing

competitive intensity

in the value chain

drives cost focus

Intelligent packaging

will grow stronger in

the future

E-tailing volumes

will continue to

increase

Increasing

importance of brand

building and shelf

standout

Sustainability and

environmental

friendliness is grow-

ing in importance

Key value chain trends 2016 and beyond

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2

3

4

5

Text

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The five major trends drive brand owners to optimize in five

categories through efficient use of packaging solutions

Support

brand value

building

Optimize

operations

Reduce cost

Enable basic

functionality

Communicate

the value of

sustainability

Key success factors for

packaging in 2016 and

beyond:

The priority for brand owners of the future is to reduce costs and increase

revenues in a sustainable way

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• Packaging Provides security and protection to

the products throughout the supply chain

• Fulfillment of basic packaging requirements and

order qualifying capabilities

Basic functionality

What packaging needs to do for brand owners

“Product quality is extremely important,

we have no room for downtime in our

machines”

– Brand Owner, Packaging development

Secure consistent performance

Meet requirements

Support with service

Shelf readiness is a MUST, it is very

important for us.

– Brand Owner, Purchasing manager

“We have to make sure it is user

friendly (to retailer), that no color is

released, that it is easy to unpack and

put on the shelf, that it does not irritate

the retailer”

– Brand Owner, Purchasing manager

High security and protection of the goods as well as consistent performance in the

customer’s production line is enabled by providing tailored packaging solutions

Packaging

Promotion

Price

Place

Product

Packaging design will be increasingly important from marketing and sales

perspective

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Source: Smithers Pira

Support brand value building

What packaging for brand owners

Marketing mix (5P):

“Food companies are giving

packaging more visibility in stores, this

puts demands on the packaging in

terms of appeal, looks , etc"

– Packaging manager, retail

• Brand owners have to focus ever more on

differentiation in face of retailer private label

introductions

• Shelf ready packaging will grow in importance,

elevating the role of secondary packaging

Studies show that 65 % of

purchasing decisions in a

grocery retail store are

made at point of sale,

stating the importance of

shelf standout

Consumers consider sustainability to be important – it needs to be met with a

convincing story

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The environmental issues are important for

us. We have large volumes and we are keen

on keeping these environmentally friendly.

– Packaging manager, Retailer

Communicate the value of being sustainable

Closed carbon loop

• Sustainability considerations will be a

key product attribute influencing

consumer decisions

Cost reduction may be reached by addressing the solution, the process, or the

features of packaging

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Reduce cost

What packaging needs to do for brand owners

• Smart material choices and

design solutions can reduce

the total amount of material

spent

Features

Process

• Improve how the box is

used

Solution

• Look beyond the box to

find solutions that meet

the requirements

Creating cost innovation in 3 dimensions:

• Cost concerns will increase for brand owners - innovations will come in

three key dimensions: solutions, process, and features

“Full pallet places disappears on the retail floor

and is replaced with half pallets which is easier to

make room for and is more rapidly replaced”

– Brand owner, Trade Marketing Manager

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Optimize operations

What packaging needs to do for brand owners

Reliable and flexible

inbound logistics

Disturbance free

production In-store efficiency

Packaging providers need to assist in enabling customers’ operations to run more

smoothly

• The supply chain and logistics processes have to be optimized

• Flexible and efficient packaging machines/lines are required

• In-store efficiency is demanded by retailers

Brand owners need to optimize operations to stay competitive in the future but

also need to address and provide solutions to their customer’s challenges

To succeed, brand owners should require a number of elements from the

packaging providers

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Elements to require from a packaging provider 2016 and beyond

Innovative design capabilities to support brand building and shelf stand out

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Proven experience and capabilities in packaging processes including

automation

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Deep understanding of material, and the mastering of the process to bring in

new material including converting

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Overall value chain mastering, enabling a proactive attitude and problem-

solving

4

Living up to the highest standards of global responsibility

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Increased logistics efficiency

Reduced box size

Increased sales

Shelf space utilization

By innovative point-of-sale design Stora Enso helped to enable an increase in

sales by 40%

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+40,0%

Sales after Sales before

Sales volume

+60,0%

Boxes after Boxes before

Filling of trucks

-20,0%

Size after Size before

Box size

Stora Enso solution

Boxes before Boxes after

+37,5%

Number of boxes fitting in shelf

Additional cost saving after redesign

Increased capacity

Through the development of a new packaging machine Stora Enso was able to

increase the customer’s accessibility from 65% to 95%

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After Before

+30

Accessibility

-4,0%

Cost after Cost before

Cost of new box

Stora Enso solution

Note: 1) Accessibility refers to the utilization degree of the process or

equipment (i.e. actual output/maximum output)

Cost before Cost after

-7,0%

Cost of new box

Initial cost saving