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Fat and Happy
October 1, 2006 By: Tom Andel Paperboard PackagingConverters enjoying a healthy chunk of the food and beverage sector will have to stay in good shape to keep it.
The food and beverage sector is to a folding carton converter what red meat is to a hungry lion: both a significant challenge and an irresistible opportunity. The red meat is attached to a moving target that represents survival. Food and drink are half of a converter's diet. Pharmaceuticals, hardware and paper products are much farther behind that lion's share.
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Beverage alone is 17 percent, according to the Paperboard Packaging Council. The challenge?
"While beverage packaging is the single largest tonnage consumer in the folding carton industry, it's also the least like other market segments," says Ed Zumbiel, vice president of beverage packaging for Zumbiel Packaging, an independent folding carton converter in Cincinnati. "The volumes are all very large and the margins are all very small, so you must be both an efficient manufacturer and shrewd supply chain manager."
 With the expanded gamut separation capabilities of its seven-color printing operations, Zumbiel hits 95 percent of the Pantone color spectrum. This enables the converter to change copy without changing inks in the press, resulting in quick |
If a Pepsi or Coke customer places an order for beverage carriers today, that means they'll probably want delivery either today or tomorrow. Many suppliers will agree — their big beverage customers don't have words such as "lead time" and "forecast" in their vocabularies.
 Allpak helped Dilettante Chocolates improve graphics for its store displays. As a result, Costco increased its order sizes and allowed palletized displays in its stores, shoppable from all four faces. |
"They rely on the supplier to anticipate their needs and have product available on a true JIT basis," Zumbiel explains. "If suppliers do not understand customers' usage requirements better than the customers, suppliers will either shut down their customer's line or find themselves perched atop a mountain of excess inventory."
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Inventory: Good, Bad, Ugly
Inventory is a necessary evil for any converter. However, the converters that can minimize the effects of that evil do their businesses the most good. Zumbiel balances inventory with data. Its database is filled with historical trends related to usage, and the company launches orders based on what time of year it is and how much product a customer uses on an SKU basis. The company's enterprise resource planning (ERP) software is only part of this solution, however, there are still things only humans can do.
"Those systems do not know how to take a calculated risk," Zumbiel says.
Power of Print
Printing flexibility helps, too. More and more converters are investing in the latest flexographic printing technologies — with up to nine colors and inks that are either affordable enough to stock or processes that are automated enough to justify a converter's investment in its own ink kitchen.
"Water-based flexo inks are relatively affordable; they provide good coverage per pound, which makes them an excellent choice for high-volume, high-surface area converting," Zumbiel says. "Additionally, with advances in flexographic printing technologies, we are finding that we can make the affordable flexo process even more efficient."
He cites the success his company has achieved with expanded gamut separations, hitting 95 percent of the Pantone color spectrum through seven-color process printing.
Even folding carton's brown-box brethren are paying attention to opportunities that evolving printing technologies are opening to them. But Chuck Fienning, president of Sumter Packaging, an independent sheet plant in Sumter, S.C., is also aware of the preparation necessary to take advantage of these technologies.
"We're sending people to our ink supplier now," he says. "We bought an ink kitchen so we could manufacture our own ink in small quantities. There's a closer relationship between the suppliers of plates and inks and dies with people who do graphics. And when you're running four-, five- and six-color work, it's harder for a customer to change suppliers because the plates they purchase to run their item go on your particular machine, which has been fingerprinted by the supplier of the plates so the plates work on your six-color machine."
The Consultative Approach
Fienning also realizes that food and beverage customers expect the same kind of close relationships with vendors.
"They tend to be longer term because the customer learns to rely on you, the manufacturer, to do what they want and do it promptly on your equipment with a high degree of reliability," he continues. "That gets into strategic relationships, as opposed to the transactional ones where the buyers buy for the lowest price. The coordination required to do well in this segment is extensive."
Indeed, converters serving the food and beverage industry might as well hang a shingle reading "consultant" above their front door. Tony Petrelli, vice president of marketing and business development for the Converted Products Group of Caraustar Industries, based in Cleveland, says customers are allowing more up-front involvement in the product development process.
"In the old days, a purchasing agent told us 'This is something I want you to quote on,'" he notes. "Today they're asking our opinion: 'Here's the product we're coming out with, what's your advice on how to package it?'"
Pepperidge Farm, Inc., Norwalk, Conn., values that input from packaging vendors so much that it regularly holds "innovation conferences" with its most important suppliers. The purpose is for vendors to update Pepperidge Farm on their technologies, on new packaging features and benefits, and cost savings opportunities.
"This conference is more of a means to look for opportunities and applications of technologies that might be available two or three years down the road that we're not using today," explains Scott Gantwerker, vice president of research and development and quality assurance for Pepperidge Farm.
The one area of opportunity on which Gantwerker says suppliers should focus is developing a keener understanding of its consumers.
"Every once in a while, we run into a supplier who wants to show us something they believe is innovative and right for us," he says. "We tell them our customer is a premium consumer and a little less price-sensitive, so we're not going to put our product in this inexpensive little bag, we're going to put it in this seven-color graphics carton. Our consumers are interested in treating themselves to something special. The package has to convey that."
Retail's Influence
With the growing influence of the club store format and major players like Price Club, Sam's Club and Costco, converters should also be sensitive to retailer concerns. Petrelli says his company is designing club store package sizes that will turn the consumer's pantry into a convenience store.
"Now consumers are dispensing single portions when they need them," he says. "By designing these club store pallet packs, you eliminate corrugated all together, making the printed vehicle out of miniflute or paperboard folding cartons — but in a way where you're taking out a lot of the secondary shipping materials. You're seeing larger packages that can go right on the pallet for the club store environment."
"It's gone from reaching your hand in a brown box and grabbing the stuff to very sophisticated pallet displays that are self-made," Petrelli adds. "You bust the shrink wrap and you have the merchandising strategy already done in that pallet pack, either the way the pallets have been stacked with the product or the way they're displayed on the pallet."
Studies have shown that in-store displays are having more consumer impact than TV advertising. But Wayne Millage doesn't need a study to convince him of that. As president and general manager of both Allpak, manufacturers of corrugated displays, and Trojan Litho, folding carton specialists, both based in the Seattle, Wash., area, he's an active participant in what's happening at Costco stores. One of his customers sells chocolate-covered berries to Costco stores. Before discovering the power of printing, this customer's product occupied one shelf space in the confectionary aisle.
"They had a white box with gray printing on the side," Millage recalls. "Costco requested that they improve their graphics, so we did some mock ups for them on a direct-print package, where we got rid of the white with one-color print and turned it into a four-color process job where the whole box was just all blueberries on the outside, like a fruit bin. Costco thought that was fantastic. They increased the size of their order and told this supplier if they could convert the graphics on their other products the same way, Costco would allow them to put a pallet in their store, shoppable from all four faces."
Chocolate-covered berries went from being a seasonal item at Costco to becoming an every-day consumer hit. The manufacturer enjoyed million-dollar purchase orders from all the Costco stores. Millage attributes this success to a combination of product quality and display impact. The technology behind the eye candy?
"At Allpak, we put in a five-color Martin DRO two-and-half years ago," he answers. "We tracked it for seven colors. We had it in for six months and realized that four colors plus a coating wasn't going to be good enough, so we added two colors right away. Now we can do seven-color with UV inline, with dryers at every station. It allows us to compete against some preprint. With preprint, you have larger minimums and longer lead times as people have to arrange for the print. Direct print can be more responsive."
As long as consumers are drawn by the bright, shiny and pretty, converters supplying the food and beverage sector will have plenty of chances to win more business. The challenge will be in sorting out the good opportunities from the bad and the ugly.
