By Nevo Hadas, Partner at DY/DX
The behemoth trillion-dollar packaging industry is on the brink of a massive disruption. It’s an industry filled with archaic business models and industrial-age methods. However, with the convergence of technology, sustainability, and innovative materials, the future of packaging promises to be more efficient, sustainable, and customer-centric.
Driven by increasing consumer awareness, regulatory pressures, and corporate social responsibility objectives, the retail industry faces an urgent call to embrace true sustainability, particularly in packaging. Plastic packaging has become a climate, health and social justice issue. To meet sustainability targets in retail, companies need to go beyond reuse and recycle, to truly reimagine.
The transformation extends far beyond just the physical aspect of packaging. It's also about reimagining the role of packaging in business models and customer experiences. To stay relevant and competitive, companies need to rethink their strategies and adapt to the changing landscape.
Consumer demand for sustainable packaging increases
The COVID-19 pandemic triggered a focus on hygiene that paused many efforts to eliminate single-use packaging. Consumers once again prioritise sustainability, with manufacturers and retailers innovating new packaging formats to improve circularity and meet their sustainability commitments.
A study by McKinsey found that 67% of consumers considered the use of sustainable materials as an important purchasing factor. Trends show a notable preference for plastics with more recycled content and a significant inclination towards paper-based packaging for categories like pet food. There's also a growing demand for fibre-based products and recycled materials as
consumers perceive these as more sustainable options.
Legislation drives change
Regulators worldwide are introducing compliance measures to curb the use of unsustainable packaging, placing greater pressure on retailers and brands to adopt new approaches. French legislation, for example, requires retailers to dedicate up to 20% of their floorspace to package-less retail by 2030 and the UK has passed a plastic tax on all packaging that does not contain 30% recycled plastic.
Corporate leaders taking action
The top ten global FMCG firms have already initiated swift actions to reduce plastic leakage, signalling the beginning of a significant shift. Key players, from large corporations like ExxonMobil, Sherwin Williams, PepsiCo, and Aptar Group, to numerous start-ups and venture capitalists, are also investing heavily in smart materials and connected packaging. These investments aim to differentiate their products, while also addressing the growing consumer demand for sustainable alternatives. These transformations are not just about meeting consumer expectations; they also align with the companies' broader sustainability goals.
Citizen and regulator activism
At the same time as FMCG firms make commitments, they are starting to see significant legal action against them. PepsiCo is being sued in New York by the state for plastic pollution due to its discarded single-use plastic packaging. These types of actions could see an increase in cost for manufacturers.
Innovations and trends in sustainable packaging
Companies are realising the need to incorporate sustainability into their packaging strategies, with new technologies playing a crucial role. Blockchain, intelligent inks, printable circuits, and sensors are among the technologies that hold the potential to fuel further innovation in the packaging industry. Innovations such as reusable packaging, concentrated products, and lighter weight materials are leading the charge in this disruption. The integration of smart labels, Internet of Things (IoT) technology, data analytics, and blockchain are further propelling the industry's transformation.
The retail sector is witnessing a significant shift in packaging trends, primarily driven by consumer awareness and the need for sustainable solutions. Innovation is playing a crucial role in driving this sustainable shift. Here are some key trends in packaging that emphasise circularity and sustainability:
- Sustainable Materials: Companies are switching to renewable, biodegradable or compostable materials like cornstarch or sugarcane, or recycled plastics that have a lower environmental impact than traditional materials.
- Minimalism and Simplification: There is a growing trend towards minimalism and simplification in packaging design. Brands are adopting the "less is more" philosophy, reducing the amount of material used in their packaging while ensuring it remains functional and attractive. Apple has simplified its packaging by reducing materials and using thinner, lighter designs. They have also increased the use of recycled content in their packaging.
- Reusability and Circular Design: Reusable packaging and circular designs are being adopted to reduce waste and improve resource efficiency. This could involve designing packaging to be easily disassembled for recycling or creating return systems for consumers to send back packaging for reuse. Loop, a shopping platform, works with brands to offer products in reusable packaging. After use, customers return the containers to Loop, where they're cleaned and reused.
- Smart Packaging and IoT: Smart packaging, integrated with Internet of Things (IoT) technology, allows companies to track and manage their packaging waste. This can provide valuable data to improve operations and make them more sustainable. For example, Water.IO offers smart packaging solutions that integrate IoT. Their Intelligent Packaging platform allows companies to monitor product usage and interact with customers.
- Package-less Retail: In line with the push for sustainability, package-less retail is emerging as a viable option and is set to grow rapidly to meet demand around affordability and a consumer preference for brands with circular characteristics. Stores offer a variety of food and cleaning products without single-use packaging, encouraging consumers to bring their own containers. Smartfill, a next-gen smart dispenser developed by global retail specialist Smollan in partnership with dY/dX, is an example of technology that facilitates this change. The patent-pending technology enables customers to use their own containers or opt for low-cost biodegradable paper bags to take only what they need. This approach significantly reduces packaging waste, aligns with circular economy principles, and offers an innovative shopping experience. It also reduces retailer cost of management, improves logistics, and provides real-time shopper data in a secure IoT environment.
Through our work at DYDX, we see a significant opportunity for unpackaged and plastic-free groceries. Do we still need packaging? How much of packaging is for shelf appeal, and how much is to actually protect the goods inside? The disruption is not just in changing materials, it lies in reducing materials and rethinking logistics and distribution. What if you can dispense at the last mile, and eradicate small packaging altogether?
Innovations like Smartfill show just how much opportunity there is in a packaging-free future. Not only will it deliver massive benefits when sustainability cost will no longer be an externality and the real cost of packaging will need to be paid by manufacturers and consumers .. but it makes business sense today.
Retailers have a unique opportunity to become leaders in sustainable packaging, or indeed package-less innovation. By rethinking their packaging strategies, they can create more sustainable solutions that resonate with consumers and contribute positively to the environment.
With a track record of rethinking and redesigning products and services through the value chain across multiple platforms, DY/DX is helping businesses navigate the digital disruption in the packaging industry. We have the tools and the technology to make a difference. It's time we start using them to their full potential.