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Packaging and Technology Integrated Solutions Flexible Packaging Manufacturing: Advances/Advantages Report to the Membership FPA Fall Executive Conference Meeting Chicago, Illinois / September 26, 2013 Tom Dunn and Michael Richmond About
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Page 1: Packaging and Technology Integrated Solutions Flexible

Packaging and Technology Integrated

Solutions Flexible Packaging Manufacturing:

Advances/Advantages

Report to the Membership

FPA Fall Executive Conference Meeting

Chicago, Illinois / September 26, 2013

Tom Dunn and Michael Richmond

About

Page 2: Packaging and Technology Integrated Solutions Flexible

HAVI Global Solutions Confidential & Proprietary | 9/24/2013 | 2

CONTENTS

1. Executive Summary

2. Background and Scope of Work

3. Interview Results

4. SWOT Insights

5. Cost Models

6. Conclusions

7. Appendix I: Methodology

8. Appendix II: Cost model assumptions

Page 3: Packaging and Technology Integrated Solutions Flexible

HAVI Global Solutions Confidential & Proprietary | 9/24/2013 | 3

INSIGHTS: MANUFACTURING

ADVANCES & ADVANTAGES

Costs of Flexible packaging formats

now compare very favorably to

traditional rigid packaging ones.

State-of the art productivity and

throughput of flexible packaging filling

equipment offer realistic choices

when new capacity is needed.

Job skill training should accompany

new hardware for flex pack filling

equipment to realize its capacity.

In-place capacity and skill sets favor

traditional rigid packages.

Page 4: Packaging and Technology Integrated Solutions Flexible

HAVI Global Solutions Confidential & Proprietary | 9/24/2013 | 4

BACKGROUND

Page 5: Packaging and Technology Integrated Solutions Flexible

5 | 9/24/2013 | HAVI Global Solutions Confidential & Proprietary

Foil Retort Pouch

Beverage

Plastic Retort Pouch

Dried Fruit

Liquid refills

Snacks

RTE Cereal

Pet Treats

Consumer Environment Manufacturing

Stated reason(s) for change5

Changing Flexible Packaging Landscape

1979 1981 1987 1989 1992 1995 19961995

Page 6: Packaging and Technology Integrated Solutions Flexible

Flexible Packaging Landscape: 2013

Domestically:

• FPA supports industry efforts to grow US demand for flexible packaging.

• US Flexible packaging Industry: $27.7 billion annual sales=+3.4% y-t-y(~$1 billion net)

• Flexible Packaging can replace rigid plastic, metal and paperboard packaging

• State of the art Flexible packaging provides many material advantages:

• Recent experience: significant strategic private equity investment

Globally:

• Developing economies use flexible packages in many product categories for which the

US continues to use rigid package formats

• Strong global growth: Southeast Asia & Oceania (~10%); Central & East Asia (5%),

Eastern Europe (6%), .

6 | 9/24/2013 | HAVI Global Solutions Confidential & Proprietary

• Low package/product weight • Portability • Barrier

• More product retrieval • Convenience • Material efficiency

• Easy open & reclose • Hermetic seals • microwave ability

Page 7: Packaging and Technology Integrated Solutions Flexible

1. Flexible packaging provides consumer-preferred features and

functionality

2. Flexible packaging consistently “wins” life cycle analysis

comparisons– Alternative to expectation of recyclable packages

– Alternative to expectation of recycled-content packages

3. Nevertheless, other package formats continue to dominate market

segments where flexible packaging can offer new benefits:1. Dry foods (cereals)

2. Still liquids

3. Pet Foods

4. Lotions and other non-food liquids

4. What needs to change for flexible package formats to grow and

dominate these segments?

7 | 9/24/2013 | HAVI Global Solutions Confidential & Proprietary

Context of FPA Manufacturing Project

Page 8: Packaging and Technology Integrated Solutions Flexible

HAVI Global Solutions Confidential & Proprietary | 9/24/2013 | 8

TOPLINE ADVANCES IN

MANUFACTURING AND

FILLING FLEXIBLES

Page 9: Packaging and Technology Integrated Solutions Flexible

9 | 9/24/2013 | HAVI Global Solutions Confidential & Proprietary

Advances in manufacturing flexible packaging

Equipment

• Electronic drives

• Digital control systems

• Solventless laminators

• Extruders: auto die control

• Gravure ink station trolleys

• 8-color flexo presses

• Digital to plate/cylinder

• Sophisticated bag making lines

Materials

• High strength linear and

metallocene polyethylenes

• High barrier metallized films

• Coextruded films

• Solventless adhesives

• Water-based adhesives

• Extrudable barrier resins

• Paper-like films

Better quality, efficiency, yield

Smaller economic order quantity

Sourced –reduced structures

multifunctional films

Examples of benefits to end users

Page 10: Packaging and Technology Integrated Solutions Flexible

10 | 9/24/2013 | HAVI Global Solutions Confidential & Proprietary

Advances in filling flexible packages (dry products)

• PLC or PC controls for all timing functions

• Servo-controlled rollstock movement

• Broad height/width/gusset size flexibility : 20 minute change-over

• Pneumatic robotics for piece handling

• Roll-to-roll auto-splicing

• In-line form/rotary fil-seal configuration

CAPACITY: ONE $750,000-$1MM SUP LINE (DRY PRODUCT)Design

ppm

run

efficiency

Effective

ppm

Min/

hr

hr/

shift

shift/

day

day/

wk

wk/

yr

pkg/

yr

200 80% 160 60 7.5 2 5 48 1,382,400,000

200 50% 100 60 7.5 2 5 48 864,000,000

200 50% 100 60 7.5 1 5 48 432,000,000

Page 11: Packaging and Technology Integrated Solutions Flexible

11 | 9/24/2013 | HAVI Global Solutions Confidential & Proprietary

Advances in filling flexible packages (liquid products)

• Incorporating reclosable fitment adds cost and slows speed.

• Rotary fill/seal design accommodates fitment integration

• Liquid foods may require thermal processing (hot fill, pasteurizing)

• Shelf-stable aseptic liquid packaging possible with roll stock

– 250 ml single serve equipment is commercial (100ppm)

– Choice of existing dairies in Eastern Europe and Asia

CAPACITY: ONE ~ $1.5MM SUP –WITH FITMENT LINE (LIQUID PRODUCT)Design

ppm

run

efficiency

Effective

ppm

Min/

hr

hr/

shift

shift/

day

day/

wk

wk/

yr

pkg/

yr

80 80% 160 60 7.5 2 5 48 221,184,000

80 50% 100 60 7.5 2 5 48 138,240,000

80 50% 100 60 7.5 1 5 48 69,120,000

Page 12: Packaging and Technology Integrated Solutions Flexible

HAVI Global Solutions Confidential & Proprietary | 9/24/2013 | 12

MANUFACTURING INSIGHTS:

INSIGHTS

Since 1980, flexible packaging

equipment has provided dramatic

increases in industry productivity,

yield, and quality

In this same period, productivity and

throughput of equipment for

producing and filling flexible

containers has approached rigid

alternatives:

Dry- comparable

Liquid- slower

Efficient operation involves additional

operator skills.

Page 13: Packaging and Technology Integrated Solutions Flexible

Project Objective

To provide data on:

1. Success factors in end users’ manufacturing and operations when using

flexible packages, e.g.

1. efficiency

2. productivity

3. waste

4. fixed costs

5. variable costs

2. Comparable “benchmark” packaging formats for key consumer product

categories:

13 | 9/24/2013 | HAVI Global Solutions Confidential & Proprietary

SEGMENT RIGID FORMAT

13 oz. cereal Film liner bag/folding carton

8 oz. sports drink PET Bottle w/ pp closure

5.5 oz. wet pet food Can with lift off lid

16 oz. shampoo Pet bottle w/ dispensing cap

Page 14: Packaging and Technology Integrated Solutions Flexible

14 | 9/24/2013 | HAVI Global Solutions Confidential & Proprietary

Background

Understandings sought: Outward looking

1. Are flexible package formats more expensive than rigid alternatives?

2. Do CPGs resist flexible packaging formats assuming associated costs are too high?

3. How do CPGs decide to use flexible packaging formats?

4. Who is involved using whatdecision criteria?

5. Why does the US lag in flexible packaging applications compared to other developed economies?

Page 15: Packaging and Technology Integrated Solutions Flexible

15 | 9/24/2013 | HAVI Global Solutions Confidential & Proprietary

Background

Understandings sought: Inward looking

1. Do material and equipment

suppliers share a common

understanding with their

customers of how CPGs

decide to use flexible

packaging formats?

2. What message and media

should material and

equipment suppliers use to

convince CPGs to decide to

use flexible packaging

formats?

Page 16: Packaging and Technology Integrated Solutions Flexible

HAVI Global Solutions Confidential & Proprietary | 9/24/2013 | 16

INSIGHTS: BACKGROUND

Flexible packaging formats have

made considerable inroads over the

past thirty years

In this same period. productivity and

throughput of equipment for

producing and filling flexible

packaging have grown significantly

As a general category of containers

for consumer goods, Flexible

Packaging delivers on all three key

dimensions of “sustainability”

Page 17: Packaging and Technology Integrated Solutions Flexible

HAVI Global Solutions Confidential & Proprietary | 9/24/2013 | 17

METHODOLOGY

For Details on Methodology,

project team and timing, see

Appendix I.

Page 18: Packaging and Technology Integrated Solutions Flexible

HAVI Global Solutions Confidential & Proprietary | 9/24/2013 | 18

INTERVIEW

RESULTS

Page 19: Packaging and Technology Integrated Solutions Flexible

FPA Interviews: Decision makers

Decision Maker

Senior mgmt

Finance

Marketing/brand mgmt

Manufacturing

Product Quality

Procurement

Who Decides?

19 | 9/24/2013 | HAVI Global Solutions Confidential & Proprietary

Page 20: Packaging and Technology Integrated Solutions Flexible

FPA Interviews: Decision makers/influences

Decision Maker

Senior mgmt

Finance

Marketing/brand mgmt

Manufacturing

Product Quality

Procurement

Who Decides?

20 | 9/24/2013 | HAVI Global Solutions Confidential & Proprietary

Influencing factor

Capital Outlays

Consumer insights

Consumer insights cost

1 packaging cost

2 packaging cost

Outsourcing possible?

“Sustainability”

↑ Performance/function

Aesthetics

What influences?

Page 21: Packaging and Technology Integrated Solutions Flexible

FPA Interviews: Decision makers/influences/sources

Decision Maker

Senior mgmt

Finance

Marketing/brand mgmt

Manufacturing

Product Quality

Procurement

Who Decides?

21 | 9/24/2013 | HAVI Global Solutions Confidential & Proprietary

Influencing factor

Capital Outlays

Consumer insights

Consumer insights cost

1 packaging cost

2 packaging cost

Outsourcing possible?

“Sustainability”

↑ Performance/function

Aesthetics

What influences?

Information sources

Conferences

Suppliers

Trade shows

Magazines/e-zines

Colleagues

Trade associations

Info source?

Page 22: Packaging and Technology Integrated Solutions Flexible

FPA Interviews: More context for Decision Making

Product Life Cycle

New Existing

Region

Asia Europe USA

22 | 9/24/2013 | HAVI Global Solutions Confidential & Proprietary

Page 23: Packaging and Technology Integrated Solutions Flexible

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Organizational

Brand Owners Interviews: Geographic

-1 0 1

Senior mgmt

Finance

Mktg/brand mgmt

MFG

Quality

Procurement

R&D

FieldSales

Brand Owners Existing Products

Organizational Influences

USA Europe Asia

Least Influence Most Influence -1 0 1

Senior mgmt

Finance

Mktg/brand mgmt

MFG

Quality

Procurement

R&D

FieldSales

Brand Owners New Products

Organizational Influences

USA Europe Asia

Most InfluenceLeast Influence

Page 24: Packaging and Technology Integrated Solutions Flexible

24 | 9/24/2013 | HAVI Global Solutions Confidential & Proprietary

Influences

Brand Owner Interviews: Geographic

CapEx

Consumer info

Customer research cost

1° PKG cost

2° Pkg cost

Contract Packer?

Sustainable

+ perform/ function

Asthetics

Brand Owners Existing Products

Influencing Factors

USA Europe Asia

Most InfluenceLeast Influence

CapEx

Consumer Info

Consumer info cost

1° Pkg cost

2° Pkg cost

Contract Packer?

Sustainable

+ perform/ function

Asthetics

Brand Owners New Products

Influencing Factors

USA Europe Asia

Most InfluenceLeast Influence

Page 25: Packaging and Technology Integrated Solutions Flexible

HAVI Global Solutions Confidential & Proprietary | 9/24/2013 | 25

INSIGHTS:

BRAND OWNER INTERVIEWS

While consumer preferences have

major influence, the cost to obtain it

does not.

Senior management (Asia & EU) and

market/brand Management (USA)

make decisions about what package

format to use.

Additional investment has major

influence, especially when converting

existing products

Co-manufacturing is more important

in the US than in Asia and EU

Page 26: Packaging and Technology Integrated Solutions Flexible

26 | 9/24/2013 | HAVI Global Solutions Confidential & Proprietary

Influences

Supply Chain Interviews: USA

Senior mgmt

Finance

Mktg/brand mgmt

MFG

Product Quality

Procurement

R&D

FieldSales

Supply ChainPerception of

Organizational Influences

CoMan Machine Material

Most InfluenceLeast Influence

CapEx

Consumer info

Consumer Info $

1° Pkg $

2°/Transport Pkg $

CoMan?

Sustainable

+ perform/ function

Asthetics

Supply ChainPerception of

Influences on Decisions

Coman Machine MaterialMost InfluenceLeast Influence

OEMs: No summary

response too low

Page 27: Packaging and Technology Integrated Solutions Flexible

HAVI Global Solutions Confidential & Proprietary | 9/24/2013 | 27

INSIGHTS:

SUPPLY CHAIN INTERVIEWS

Brand owners do not indicate if their

interest in flex pack formats pertains

to existing or new products.

Perceptions of Brand owners

Marketing & Brand Mgmt makes

decisions with an eye towards

consumer data

The need to invest additional

capital has major influence

Neither primary nor secondary/

transport packaging costs have

major influence

Page 28: Packaging and Technology Integrated Solutions Flexible

28 | 9/24/2013 | HAVI Global Solutions Confidential & Proprietary

Sources

End Users & Supply Chain Interviews

Conferences

Suppliers

Trade Shows

Print/e-zines

Colleagues

Trade Assn

Brand OwnersInfo Sources

USA Europe Asia

Most InfluenceLeast Influence-1 0 1

Conferences

Suppliers

Trade Shows

Print/e-zines

Colleagues

Trade Assn

Supply Chain Info Source Perception

Coman Machine Material

Most InfluenceLeast Influence

OEMs: No summary

response too low

OEMs: No summary

response too low

Page 29: Packaging and Technology Integrated Solutions Flexible

HAVI Global Solutions Confidential & Proprietary | 9/24/2013 | 29

INSIGHTS:

INFO SOURCES INTERVIEWS

Material suppliers, making regular

calls on brand owners usually provide

information about flex pack formats.

Brand owners do not consider trade

associations and conferences

important sources of information

about flex pack formats.

Page 30: Packaging and Technology Integrated Solutions Flexible

HAVI Global Solutions Confidential & Proprietary | 9/24/2013 | 30

INSIGHTS: INTERVIEW

RESULTS

Senior and Marketing/Brand

management make the decisions

about package formats.

Consumer insights have great

influence decisions on package

formats

Information about available

technology usually originates with

suppliers of materials making regular

sales calls.

Existing filling capacity: critical factor.

Procurement does not choose the

packaging format!

Page 31: Packaging and Technology Integrated Solutions Flexible

HAVI Global Solutions Confidential & Proprietary | 9/24/2013 | 31

“SWOT” HIGHLIGHTS

Page 32: Packaging and Technology Integrated Solutions Flexible

SWOT: Shared Themes

STRENGTHS WEAKNESSES

“Package to product weight” ratio

Less waste

Transportation costs (in and out)

Minimal fit to mainstream environmental

packaging “solutions”

OPPORTUNITIES THREATS

Hybrid concepts

Gen-X and Gen-Y familiarity

Cost per unit of product with EPR taxes

Retail ready packaging for retailers

Public misconceptions about plastics &

chemicals

Installed base of efficient filling lines

32 | 9/24/2013 | HAVI Global Solutions Confidential & Proprietary

Page 33: Packaging and Technology Integrated Solutions Flexible

SWOT: Segment Comments

Dry Food (cereal) Still liquids/juices

Material efficiencies

Product visibility

Easy to add reseal

Lower cost of incoming

delivery at mfg

Material cost

Stronger secondary

and transport

package

disposed packaging

volume

Range of heat

tolerance for filling

Good economics

Retail ready packaging

systems

Filling speed

improvements

Custom shapes

Pet Food Non Food liquids

Easy open and reclose

Pest resistance

Complete dispensing

Significant waste

reduction

Filling speed of bottles

Pouring and handle

features

Other animal feed

(beyond cats/dogs)

)

Refill economy

33 | 9/24/2013 | HAVI Global Solutions Confidential & Proprietary

Page 34: Packaging and Technology Integrated Solutions Flexible

HAVI Global Solutions Confidential & Proprietary | 9/24/2013 | 34

SWOT INSIGHTS

Flexible packaging formats align very

well with consumer trends and

preferences

Positive strengths and opportunity

areas

Faster liquid filling speeds present a

major opportunity for liquids in flex

packs

Most consistent strength: package-to-

product weight ratio

Public misconceptions about plastics

& chemicals threaten packaging

generally

Page 35: Packaging and Technology Integrated Solutions Flexible

HAVI Global Solutions Confidential & Proprietary | 9/24/2013 | 35

COST MODELS

For other details of Cost model

current assumptions (awaiting

validation) not in presentation ,

see Appendix II.

Page 36: Packaging and Technology Integrated Solutions Flexible

Common cost model line items

Primary Packaging Delivered Cost

Direct Labor: skilled

Direct Labor: unskilled

Secondary Pkg

Transport Pkg

Pallets

Outgoing Freight

Indirect Labor

utilities-power

utilities-gas

Depreciation

Warehousing

Insurance/Maintenance/Taxes

36 | 9/24/2013 | HAVI Global Solutions Confidential & Proprietary

Page 37: Packaging and Technology Integrated Solutions Flexible

Project Cost Model

Common financial assumptions*

Target Volume for each segment’s production= 1 market share point

37 | 9/24/2013 | HAVI Global Solutions Confidential & Proprietary

Daily Cost : skilled worker.@ 1.33 x payroll $202

Daily Cost : unskilled worker.@ 1.33 x payroll $117

Daily Cost : indirect worker.@ 1.33 x payroll $170

Cost per Kwh of electric power= $0.13

Cost per Therm of natural gas= $1.00

Pallet storage Cost @ $10/ sq. ft. =$90 $90

Shipping Cost per mile=$1.62 $1.62

Depreciation=7% 7%

Property taxes/insurance=10% 10%

Service life of filling equipment (years) 20

*all cost estimates subject to validation

Page 38: Packaging and Technology Integrated Solutions Flexible

Project Cost Model

Common operational assumptions*

38 | 9/24/2013 | HAVI Global Solutions Confidential & Proprietary

Average miles shipped 100

Days per year per shift (5da/wk*50 wk/yr) 250

Cost per corrugated shipping case $0.10

No. cases per pallet 25

Cost per pallet $10

Weight per pallet (lb) 70

Max Load per pallet (lb) 2,800

Weight/TL (Lbs) 40,000

*all cost estimates subject to validation

Page 39: Packaging and Technology Integrated Solutions Flexible

Cost Model: Dry food (cereal)

11.3 oz. Dry Cereal*

Bag in Box EZ Open /zipper Doyen Style

$ 0.17ea $ 0.15ea

39 | 9/24/2013 | HAVI Global Solutions Confidential & Proprietary

*all cost estimates subject to validation

Page 40: Packaging and Technology Integrated Solutions Flexible

Project Cost Model

13 oz. Cereal segment assumptions*

40 | 9/24/2013 | HAVI Global Solutions Confidential & Proprietary

ITEM Rigid Flexible

Annual package production 500,000 500,000

Filling Line Cost $1,000,000 $750,000

Filling Line speed (ppm) 250 200

Filling Line run-to-scheduled time ratio 95% 80%

Unit Container Cost $0.17 $0.13

Unit Container Weight (lb.) 0.17 0.02

Secondary Container Cost $0.0 $0.05

Secondary Container Weight (lb.) 0 0.5

Unit Container/secondary container 1 12

% Containers wasted 1% 2%

Skilled Labor manning 0.5 0.5

Unskilled Labor manning 1 1

Indirect Labor manning 0.5 0.5

Power demand (KwH) 1 1.5

Heating demand (Therm) ---- ----

*all cost estimates subject to validation

Page 41: Packaging and Technology Integrated Solutions Flexible

Dry Food Insights

Manufacturing

real near term opportunity

Need for Shippers/high compression corrugated : important cost factor

VFFS/bag-in-box skills relevant to flexible

Case packaging: trade off unskilled labor cost for capital investment

Other

On-shelf display density favors quad-seal format

Retail ready packaging (RRP) is a positive

41 | 9/24/2013 | HAVI Global Solutions Confidential & Proprietary

Page 42: Packaging and Technology Integrated Solutions Flexible

Cost Model: Still liquids & juices

8 oz. Sports Beverage

PET Bottle with PP twist cap Doyen Style Pouch with fitment

$ 0.10ea $ 0.15 ea

42 | 9/24/2013 | HAVI Global Solutions Confidential & Proprietary

*all cost estimates subject to validation

Page 43: Packaging and Technology Integrated Solutions Flexible

Still Liquids Insights

Manufacturing

Slow filling speeds hinder this opportunity.

Liquid product preservation has major process cost impact

Hot fill

Aseptic

Pasteurizing

Rollstock efficiency (compared to pre-mades) may be imminent.

Other

Target market grew up with pouches

Retail display management is challenge

43 | 9/24/2013 | HAVI Global Solutions Confidential & Proprietary

Page 44: Packaging and Technology Integrated Solutions Flexible

Cost Model: Pet food

5.5 oz. Wet Pet Food

2 piece Al can lift off lid Foil retort pouch

$ 0.12 ea $ 0.15 ea

44 | 9/24/2013 | HAVI Global Solutions Confidential & Proprietary

*all cost estimates subject to validation

Page 45: Packaging and Technology Integrated Solutions Flexible

Pet Food Insights

Manufacturing

Slow filling speeds hinder this opportunity.

Retort cycle time and energy consumption favor pouch

Decades of can-making and filling created an efficient system

Other

Can Coating issue (BPA)

Ease of opening and storing partial package contents important.

45 | 9/24/2013 | HAVI Global Solutions Confidential & Proprietary

Page 46: Packaging and Technology Integrated Solutions Flexible

Cost Model: Non-food liquids

16 oz. Shampoo

PET Bottle with PP pop-up cap Doyen style pouch (hang hole & fitment)

$ 0.20 ea $ 0.15 ea

46 | 9/24/2013 | HAVI Global Solutions Confidential & Proprietary

*all cost estimates subject to validation

Page 47: Packaging and Technology Integrated Solutions Flexible

Non-Food Liquids Insights

Manufacturing

Slow filling speeds hinder this opportunity.

Waste on pouch line may detract from unit cost advantage

Rollstock efficiency (compared to pre-mades) may be imminent

Other

Refill format has taken hold in other countries

Convenience and weight important.

47 | 9/24/2013 | HAVI Global Solutions Confidential & Proprietary

Page 48: Packaging and Technology Integrated Solutions Flexible

HAVI Global Solutions Confidential & Proprietary | 9/24/2013 | 48

INSIGHTS:

COST MODELS

Flexible packaging format costs

compare very favorably to traditional

rigid package ones.

State-of-the-art productivity and

throughput of flexible packaging filling

equipment can provide advantages

when new capacity is needed.

Job skill training must accompany

new hardware for flexible packaging

equipment to realize its potential.

Installed capacity and and skill sets

favor the status quo for traditional

rigid packages.

Page 49: Packaging and Technology Integrated Solutions Flexible

HAVI Global Solutions Confidential & Proprietary | 9/24/2013 | 49

COMMUNICATIONS

OPTIONS

Page 50: Packaging and Technology Integrated Solutions Flexible

Reaching busy decision makers:

Sr. & Brand Mgmt

R&D

Govern-ment

Con-

sumer

Manufac-turing

Field Sales

Supply Chain

50 | 9/24/2013 | HAVI Global Solutions Confidential & Proprietary

Page 51: Packaging and Technology Integrated Solutions Flexible

Through the competing messages?

Sr. & Brand Mgmt

R&D

Govern-ment

Con-sumer

Manufac-turing

Field Sales

Supply Chain

51 | 9/24/2013 | HAVI Global Solutions Confidential & Proprietary

Industry

Initiatives

Page 52: Packaging and Technology Integrated Solutions Flexible

With the trusted messengers!

Sr. & Brand Mgmt

R&D

Govern-ment

Con-sumer

Manufac-turing

Field Sales

Supply Chain

52 | 9/24/2013 | HAVI Global Solutions Confidential & Proprietary

Industry

Initiatives

Page 53: Packaging and Technology Integrated Solutions Flexible

HAVI Global Solutions Confidential & Proprietary | 9/24/2013 | 53

COMMUNICATIONS

INSIGHTS

Busy organizational groups

responsible for the future health of

brands and the whole enterprise

make decisions about packaging

formats.

Material “Suppliers” are the primary

source of information about flex pack

options. They only have direct access

to organizational groups who can

influence the decision makers

Suppliers should provide their

contacts with information that can

persuade decision makers to

consider flex pack formats.

Page 54: Packaging and Technology Integrated Solutions Flexible

54 | 9/24/2013 | HAVI Global Solutions Confidential & Proprietary

Reprise

Understandings: Outward looking

1. Are flexible package formats more expensive than rigid alternatives?

2. Do CPGs resist flexible packaging formats assuming associated costs are too high?

3. How do CPGs decide to use flexible packaging formats?

4. Who is involved using whatdecision criteria?

5. Why does the US lag in flexible packaging applications compared to other developed economies?

Generally “No”; but convenience

features increase costs for both

1: Consumers, consumers, consumers

2: Capital $,€,Rs

Generally “No”; Capital expenditures

(where excess capacity exists) become

key consideration

Senior management and brand

managers considering consumers

and capital costs

US has installed capacity vs. new

investment elsewhere

Page 55: Packaging and Technology Integrated Solutions Flexible

55 | 9/24/2013 | HAVI Global Solutions Confidential & Proprietary

Reprise

Understandings: Inward looking

1. Do material and equipment

suppliers share a common

understanding with their

customers of how CPGs

decide to use flexible

packaging formats?

2. What message and media

should material and

equipment suppliers use to

convince CPGs to decide to

use flexible packaging

formats?

For the most part, yes! , although the

suppliers often only learn about a

decision after it is made during

procurement. The window of

opportunity for industry to influence the

format choice closes before

procurement begins

“Flexible packaging materials and filling

equipment meet or exceed the

consumer preferences, productivity,

efficiency and economics of rigid

alternatives”! Various functional groups

in an organization’s can influence

management decisions by timely relay

of the message.

Page 56: Packaging and Technology Integrated Solutions Flexible

HAVI Global Solutions Confidential & Proprietary | 9/24/2013 | 56

CONCLUSIONS

Flexible package formats for dry foods are

as economical and efficient as rigid formats.

Consumer preferences:

a) Greatly influence package format choices

b) align well with flexible packaging

Brand owners expect material suppliers to

provide information about flexible packaging

technology

Information needs extend beyond materials

technology into capital machinery

capabilities.

Page 57: Packaging and Technology Integrated Solutions Flexible

Advances and Advantages of Manufacturing Processes

That Facilitate the Use of Flexible Packaging

October 30, 2013

Report Contents*

1. Executive Summary

2. Methodology

3. Converting equipment advances narrative

4. Packaging equipment narrative

5. Case studies narrative

6. Interview results analysis

7. Cost Models and sensitivity analysis

8. SWOT Insights

9. Indicated industry priorities

10. Appendix I: Cost model assumptions

11. Appendix II: Sources & references

* Interactive Excel cost model to evaluate alternate assumptions

Page 58: Packaging and Technology Integrated Solutions Flexible

HAVI Global Solutions Confidential & Proprietary | 9/24/2013 | 58

APPENDIX I

Details on project methodology,

team and timing (June- October ,

2013)

Return to

presentation

Page 59: Packaging and Technology Integrated Solutions Flexible

59 | 9/24/2013 | HAVI Global Solutions Confidential & Proprietary

FPA Manufacturing Project Methodology

• Establish background

• Develop questionnaire

• Administer questionnaire

• Analyze resultsInterviews

• Identify sources

• Research std rates

• Obtain estimates

• Analyze sensitivities

Cost model

SWOT Recommendations

Return to

presentation

Page 60: Packaging and Technology Integrated Solutions Flexible

60 | 9/24/2013 | HAVI Global Solutions Confidential & Proprietary

FPA Manufacturing Project Execution

7/29

FPA Committee progress

report

8/23

Expert Group Review

9/26

FPA FEC presentation

10/31 Submit Written Report

June

(Background)

July

(Interviews)

August

(Analyze data)

September

(Additional

Analysis)

October

(Draft/review

report)

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presentation

Page 61: Packaging and Technology Integrated Solutions Flexible

Team Member Primary Project Role

Tom Dunn Project Lead

Mike Richmond PTIS Project Coordination

Keith Damarell PTIS European Liaison

Cyndee Clemann PTIS Domestic Brand Owner Interviewer

Phil McKiernan PTIS Liaison to FPA

Jonathan Fowle Europe/Asia Interview Leader

Dave Benzschawel Domestic Supply Chain Interviewer

Mike Impasato Knowledge leader/flexo printing

Ken Marchetti Domestic Contract Packer Interviewer

61 | 9/24/2013 | HAVI Global Solutions Confidential & Proprietary

FPA Manufacturing Project Team

Return to

presentation

Page 62: Packaging and Technology Integrated Solutions Flexible

FPA Project Interviews

Interviews emphasizing 4 end use segments (47)

• 35 brand owners: from 4 segments and 3 regions: Asia, Europe, NA

• 6 Global material suppliers (Includes FPA “converters” &“suppliers”)

• 2 OEMs/ equipment brokers

• 4 Contract manufacturers

Answer Questions

• Who decides?

• What Impacts decision?

• Where is info found?

• When is Choice made?

• Why is choice made?

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presentation

Page 63: Packaging and Technology Integrated Solutions Flexible

FPA Project Interviews - Participants OverviewGroup No Sample Titles

Brand Owners (35)

Asia 13 Purchasing Manager, COO, Regional Business Head, Sales Manager,

Category Manager, Packaging Development Manager, Strategic

Sourcing, Purchasing Manager, Marketing Manager, Global Packaging

Development Manager

Europe 15 Packaging Control Manager, Packaging Development Manager,

Purchasing Manager, Commercial Manager, Managing Director, Head of

Procurement, Packaging Engineer, Packaging Development, Supply

Chain, Production Packaging Specialist, Global Marketing Director,

Head of Packaging, Quality & R&D, Head of Innovation Global

Packaging

USA 7 Packaging Tech Mgr/Innovation Entrepreneur, Packaging leader: non-

food liquid & pet products, Manager of Packaging R&D, Structural

Packaging Lead: solid/liquid food, Procurement Manager: flexibles &

rigids, Sr. Group Mgr Pkg R&D

Supply Chain 12 VP Business Development, Director of Contract Packing, VP of

Operations, Project Manager, Business Development Manager,

Director of Marketing, Business Development Director, Director of Mktg.

& Business Devt, US Sales Manager, Director of Marketing, CEO

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presentation

Page 64: Packaging and Technology Integrated Solutions Flexible

FPA Project Interviews - Organizations Overview

Group No Companies

Brand Owners (35) ASAL, Avon, Bacardi UK, Clorox, Copella, Del Monte,

DE-VAU-GE, Ganon, Gen Mills, Godrej, Green-n-safe,

Heichelheimer, Henry Lamott, Hunya, Innocent Drinks,

Mamee, MOM Brands, Nestle Cerelac, Nestle UK,

Nivea India, Olivia Herbal, PZ Cussons, Reckitt

Benckiser, Reckitt Benckiser, Royal Canin, Standard

Foods, Starbucks, Target, Ve Wong, Vitaflo, Weetabix,

Wela, Willi Knoll

Supply Chain (12) Lidestri, Sun Products, Heartside, RytWay, ExxonMobil

Films, SKC Films, Berry Plastics, Kelpac Medical,

Copol, Clear Lam, PPI, Hudson-Sharpe

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presentation

Page 65: Packaging and Technology Integrated Solutions Flexible

HAVI Global Solutions Confidential & Proprietary | 9/24/2013 | 65

APPENDIX II

Details on cost model structure

current general and segment –

specific assumptions

Return to

presentation*all cost estimates subject to validation

Page 66: Packaging and Technology Integrated Solutions Flexible

Project Cost Model

8 oz. Sports drink assumptions*

66 | 9/24/2013 | HAVI Global Solutions Confidential & Proprietary Return to

presentation

ITEM Rigid Flexible

Annual package production 400,000 400,000

Filling Line Cost $2,000,000 $1,500,000

Filling Line speed (ppm) 250 80

Filling Line run-to-scheduled time ratio 95% 80%

Unit Container Cost $0.10 $0.15

Unit Container Weight (lb.) 0.17 0.02

Secondary Container Cost 0.02 $0.05

Secondary Container Weight (lb.) 0.2 0.5

Unit Container/secondary container 12 12

% Containers wasted 0.5% 2%

Skilled Labor manning 0.5 0.5

Unskilled Labor manning 1 1

Indirect Labor manning 0.5 0.5

Power demand (KwH) 3 2

Heating demand (Therm) ---- ----

*all cost estimates subject to validation

Page 67: Packaging and Technology Integrated Solutions Flexible

Project Cost Model

5.5 oz. Wet pet food assumptions*

67 | 9/24/2013 | HAVI Global Solutions Confidential & Proprietary Return to

presentation

ITEM Rigid Flexible

Annual package production 200,000 200,000

Filling Line Cost $2,000,000 $1,500,000

Filling Line speed (ppm) 400 80

Filling Line run-to-scheduled time ratio 95% 80%

Unit Container Cost $0.12 $0.15

Unit Container Weight (lb.) 0.17 0.02

Secondary Container Cost $0.0 $0.05

Secondary Container Weight (lb.) 0 0.5

Unit Container/secondary container 1 12

% Containers wasted 0.5% 2%

Skilled Labor manning 0.5 0.5

Unskilled Labor manning 1 1

Indirect Labor manning 0.5 0.5

Power demand (KwH) 1 2.5

Heating demand (Therm)

*all cost estimates subject to validation

Page 68: Packaging and Technology Integrated Solutions Flexible

Project Cost Model

16 oz. Shampoo assumptions*

68 | 9/24/2013 | HAVI Global Solutions Confidential & Proprietary Return to

presentation

ITEM Rigid Flexible

Annual package production 8,000,000 8,000,000

Filling Line Cost $2,000,000 $1,500,000

Filling Line speed (ppm) 600 80

Filling Line run-to-scheduled time ratio 95% 80%

Unit Container Cost $0.20 $0.15

Unit Container Weight (lb.) 0.17 0.02

Secondary Container Cost $0.0 $0.05

Secondary Container Weight (lb.) 0 0.5

Unit Container/secondary container 1 12

% Containers wasted 0.5% 2%

Skilled Labor manning 0.5 0.5

Unskilled Labor manning 1 1

Indirect Labor manning 0.5 0.5

Power demand (KwH) 3 2

Heating demand (Therm) ---- ----

*all cost estimates subject to validation

Page 69: Packaging and Technology Integrated Solutions Flexible

Packaging & Technology Integrated Solutions

a division of HAVI Global Solutions Direct, LLC

3500 Lacey Road, Suite 600 Downers Grove, IL 60515

Phone: 630-493-7400

Fax: 630-493-7599

E-mail: [email protected], [email protected],

[email protected]

Web Site: www.havigs.com

PTIS – Global Management and Packaging Consultants

PTIS™ is the full service packaging solution center for all

your technical and management packaging challenges.

We understand consumer, channel and technology trends and provide marketplace insights to

help you make the best decisions for your business

across the packaging value chain.

69 | 9/24/2013 | HAVI Global Solutions Confidential & Proprietary

For Questions Contact:

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