Consumer Packaged Goods

Consumer Packaged Goods Sustainable Packaging: The Consumer Perspective Staverton Park Conference Centre, 16 June 2011

Agenda • Datamonitor’s Consumer Packaged Goods Knowledge Center • A snapshot of the Datamonitor offering • Sustainability, packaging and the consumer • Do consumers really care? If so, to what extent? • Product trends and packaging concepts • Sustainable packaging innovation platforms and examples

A value proposition to synchronize the way you workThis presentation draws mostly on Datamonitor’s Consumer Insight research • Assess new or non core categories • Interpret trends quickly • Market sizing/forecasting • Enhance market positioning Strategy & Planning Consumer & Market Insight Sales & Marketing NPD & Innovation • Better meet consumer needs by understanding consumption locations, and occasions • Evidence led insight • Map competitive landscapes globally • Refine marketing strategies • Protect/grow market/brand share • Stimulate ideation and inspiration • Reduce risk for new product launches and increase the chance of success

Consumer Insight deliverables form the basis of this presentation 2009 – all encompassing • Sustainable Packaging Trends: Consumer Perspectives and Product Opportunities 2010 – sector specific • The Future of Sustainable Food & Beverage Packaging • The Future of Sustainable Personal Care Packaging • The Future of Sustainable Alcoholic Beverage Packaging • The Future of Sustainable Household & Laundry Care Packaging Accessible in multiple formats: • CPG Knowledge Center • Interactive online report • Full length pdf report • Abridged report ppt. slidepack

Packaging and the ‘sustainability mix’… • “Meeting the needs of the present without compromising the ability of future generations to meet theirs” • About carbon, energy, materials, resources, processes and ecology; but it is also to do with ethics, responsibility/fairness • Companies vary in interpretation • Some define it very narrowly • Some more broadly • Others lack any corporate definition TAKEOUT:One of the most public battlegrounds over claims of unsustainable processes centres on waste and, specifically, on packaging

Sustainable packaging is going to exert more influence on your categories of interest Sustainability is emerging as an industry defining issue for packagers and their customers Escalating consumer concerns: it influences choices Governments and legislation changes are driving industry change Packaging is inherently environmentally harming Sustainability emphasis among packagers and retailers

Widespread environmental concerns are driving the sustainability agenda, including in packaging Protecting the environment is ‘important’ or ‘very important’ Feel ‘fairly well’ or ‘very well informed’ about how behavior impacts the environment 82% 79% TAKEOUT:Consumers areengaged by environmental issues and packaging is a now a common target for criticism. It is an important ‘green’ issue… Source: Datamonitor Consumer Insight Survey, July/August 2010

TAKEOUT: Sustainable packaging is still understood primarily in terms of its ‘back-end’ environmental impact. But can be a first step in thinking about broader sustainability practices Source: Boston Consulting Group, 2009

Sustainable packaging is a consumer concern “At times it does feel like packaging is becoming ‘the villain’, when in reality it is a small player in the overall environmental footprint of the product. However, viewed through the lens of our consumers, packaging is the first thing and also the last thing that they experience with our brands. Thereforeif it is important to our consumers, then it is important to us” Associate director, sustainability, for Procter & Gamble’s Global Package and Device Development 60% Grocery products have too much packaging

The ‘sustainability advantage’: sustainable packaging credentials can lead to more favorable product evaluation Claim would lead to a more favourable perception… REDUCED PACKAGING RECYCLABLE/ COMPOSTABLE 57% 63% 55% 62% TAKEOUT:Packaging attributes can provide a positive halo. It can be used to genuinely inspire customers and enhance product/brand allure Source: Datamonitor Consumer Insight Survey, July/August 2010

Sustainable packaging ‘one-upmanship’ from highly consumer focused CPG companies… 2011–World's first PET bottle made entirely from plant-based materials 2009–First of its kind beverage package made from renewable sources From oil-based plastics to bio-based plastics Already working on the next generation PlantBottle packaging Better than the technology of Coca-Cola. “It's indistinguishable”* TAKEOUT:Every little bit means something in a ‘game of perception’. It can help tip the balance, especially when most basic needs have already been met

Mainstream brands are bringing critical mass to the sustainable packaging movement Since 2009 February 2011 H.J. Heinz Co. will make its ketchup bottles using PlantBottle packaging. An “industry first partnership” The likes of Cadbury and Nestle embracing Fairtrade through signature brands has driven segment growth Parallels with how leading/ flagship brands have bought Fairtrade to the mass market TAKEOUT:Flagship brands will accelerate consumer awareness/concern

Retailers are in the ‘frontline’ when it comes to discontent about excessive packaging Milk bags represent a 'flagship product' for Sainsbury's as well as helping it to raise awareness of its environmental credentials TAKEOUT:As private label takes centre-stage in retailer strategy, large chains are looking at how packaging can support the marketing efforts

There is a role for both retailers and manufacturers to be ‘ethical lifestyle enablers’: i.e. facilitating people to do things differently and better Grocery retailers have taken a ‘high’ or ‘very high amount of action’ towards being more environmentally and ethically responsible Retailers’ ethical policies exerts a ‘high’ or ‘very high’ amount of influence on where one does MOST grocery shopping ‘Very satisfied’ with my personal efforts to protect the environment 11% 12% 28% 9% 16% 33% TAKEOUT:Enable consumers to reduce environmental footprints by designing and stocking products that meet their core needs, but also conserve resources Source: Datamonitor Consumer Insight Surveys, April/May 2009; July/August 2010; Datamonitor Green Consumer Survey, June 2010

Consumers are more sensitive to sustainable packaging issues and perceive grocery products to be over-packaged Agree that grocery products are over-packaged… 71% 52% 68% TAKEOUT:High frequency packaging use and disposal = increasing consumer awareness. Strive for a lower packaging to product ratio as a minimum Source: Datamonitor Consumer Insight Survey, July/August 2010

Food and beverage products are perceived to be more over-packaged than most other FMCG items Grocery products Food & beverages Beauty products Household care/laundry Alcoholic drinks 30% 16% 67% 51% 54% 18% 60% 32% 48% 46% TAKEOUT:Influenced by visibility: the cycle of consumption through to disposal is typically more pronounced for food and beverages than other CPGs Source: Datamonitor Consumer Insight Survey, July/August 2010

Heightened sensitivity to the environmental impact of packaging is influencing consumer behaviour If I see a product has too much packaging I will consider buying an alternative product… 40% 37% 36% 37% ‘Highly’ or ‘very highly attentive’ towards whether packaging is environmentally friendly… 49% 40% 35% 37% TAKEOUT:Environmentally conscious consumers want to purchase high-integrity products in packaging reflecting their desire to ‘do their bit’ Source: Datamonitor Consumer Insight Survey, July/August 2010

But the ‘really engaged’ segment is still comparably small… Highly influenced by the amount of packaging when choosing packaged food products…(June 2010) 18% 19% 21% Reduced packaging exerts a ‘high’ or ‘’very high’ degree of influence when making food and beverage choices…(April/May 2009) 26% 27% 17% TAKEOUT:There is no guarantee that large segments will consistently choose more ‘virtuous products’. This is also influenced by awareness gaps Source: Datamonitor Consumer Insight Surveys, June, 2010; April/May 2009

…with little variance by sector How much does the amount of packaging influence your choice of product in these categories? (share of global respondents) Very high amount of influence High amount of influence Low amount of influence Very low amount of influence Packaged food products 8 21 18 17 Household cleaning/ laundry products 7 20 19 16 Personal care/ beauty products 8 21 18 16 7 15 20 24 Alcoholic beverages TAKEOUT:They are buying the product not the packaging. Standalone messages that packaging has been improved or reduced are not enough Source: Datamonitor Green Consumer Survey, June 2010

SUNCHIPS (US): Environmental benefits compromised the consumption experience! TAKEOUT:But it must not be at the expense of the core consumption experience, just as Frito-Lay discovered in 2010. Improved sustainability benefits MUST co-exist with other core functionality that consumers value

Don’t forget the bigger picture about how consumers talk about, and interact with, packaging TAKEOUT:Multi-faceted expectations;consumers value packaging solutions that are practical, stylish, safe and environmentally responsible Source: Hartman Group/Datamonitor

Environmental considerations are not a primary driver of packaging preference TAKEOUT:Sustainability as a secondary consideration is apparent even when considering the ‘packaging mix’ more broadly. Consumers may buy brands with 'green' packaging, but ultimately they are persuaded by other factors Source: Datamonitor Consumer Insight Survey, July/August 2010

Sustainable packaging concerns align well with consumers’ desire to ‘de-clutter’ = practical value too! 59% 54% 65% 59% 57% 56% Source: Datamonitor Consumer Insight Survey, July/August 2010; National Geographic/Globescan ‘Greendex’, 2010

On a related note, be alert to the “damned if you do, damned if you don’t” reality Reduced packaging in grocery products may compromise product quality Wasteful packaging Deficient packaging • Take for granted functional roles • Fails to protect = the reason not to buy! • Packaging is an important green issue • Think products are over packaged 37% 37% 20% CONSUMER AMBIVALENCE INHERENTLY NEGATIVE PERCEPTIONS TAKEOUT:It’s going to feel at times like you cant win! Source: Datamonitor Consumer Insight Survey, July/August 2010

Final thoughts regarding consumers and sustainable packaging… • Sure, it’s rarely a primary purchase motivator BUT… • Packaging and packaging communications are the first and last impression consumers have of many brands today • They think products are over packaged; not a good start! • The evident ‘value-action gap’ will be driven by lack of awareness, rather than a lack of intent Don’t overlook the issue, tempting as it might be • Sustainable packaging is a claim that can be physically substantiated, rather than other more dubious sustainability claims that still exist • Ensure that improved sustainability benefits co-exist with other functionality that consumers value • Don’t just meet consumer expectations; exceed them • Elevates the importance of sustainability in the packaging ‘mix’. Elevates the importance of packaging in the sustainability mix Think of the ‘sustainability marketing advantage’

Ultimately it is a journey: you must demonstrate how you are becoming progressively better over time Stonyfield Farm takes website users through the “sustainable packaging journey”, highlighting the incremental steps taken over 20 years as well as what the future might hold NEXT:Andrew is now going to take you on an ‘innovation journey’ (after coffee) Consumer opinion ideas? Please share with me… Source: www.stonyfield.com

Consumer Packaged Goods