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One to One Magazine
September 2008
Basic Packaging Competes in Challenging Times
Low prices and green concerns are among the issues facing companies that produce basic packaging.
Joy Zaccaria discovers how these companies are competing.
RISING ENERGY PRICES affect consumers
and industrial manufacturers alike. With
higher fuel costs come higher
production and shipping costs. This certainly
has not alleviated any of the pressure that
entertainment media packaging manufacturers
have already been facing. In these times of
business models evolving towards more digital
distribution at the expense of physical media,
those who produce basic physical packaging for
discs are required to step it up.
Different manufacturers of basic packaging
are finding different approaches to respond to
their particular situation. Shorewood Packaging
is a business of International Paper, and
provides printing, packaging, and retail display
products. The company has multiple
manufacturing operations in North America,
Europe and Asia.
Dustin Wills, vice president of sales for home
entertainment at Shorewood, describes the
current state of the market as: “An
increasingly competitive
environment. Between the decline
of the physical medium and the
increase in competition, the
landscape of the home entertainment market has
changed.” To meet the challenge,
Shorewood leverages its experience
in the industry to be quicker,
smarter, more creative and more
aggressive than the companies
against which itis competing.
Despite the growth in online
distribution services such as
iTunes, Super Jewel Box
International in The Netherlands
contends that optical discs are still
the primary means of delivering
pre-recorded content to the vast
majority of consumers.
Brigit van Winkel, director, international operations at the company, says: “Super Jewel Box is doing very well and our business continues to grow. Last year was a very good year. Sales of SJB Standard have almost doubled. For 2008 we expect similar growth. Super Jewel Box’s marketshare in packaged pre-recorded media is growing by the year.” Super Jewel Box products are manufactured in both Europe (Germany) and Asia (China).
Blu-ray of hope?
Ivy Hill, a Cinram company,
produces the printing and packaging for a
variety of entertainment media. Rich
Oppenheimer is the company’s sales and
marketing executive vice president. He
recognises the importance of making the most
of his resources and not limiting the company’s
talents to entertainment media. “We’re facing
more diversification in terms of our offering to
different industries,” he says. “There are a
multitude of suppliers that are working in the
entertainment industry and there’s not enough
business to go around. All the packaging
companies are facing diversification.”
"There are a multitude of suppliers that are working in the entertainment industry and there's not enough business to go around. All the packaging companies are facing diversification." -- Rich Oppenheimer, Ivy Hill
Ivy Hill and others in the packaging world are
looking to Blu-ray Disc as a ray of hope for
physical media packaging. “We find on the DVD
side, not talking about Blu-ray, there has been a
flattening out of sell-through on ‘A’ titles,” says
Oppenheimer. “The large printing runs of Amaray wraps are not what they were, say, three or four
years ago.” On a bright note, Ivy Hill is seeing a
heavy uptick in packaging for Blu-ray and some
surprisingly big quantities for the new format.
Among Blu-ray’s claims to fame in pushing
the manufacture of new hardware and players,
physical media pins its hopes on Blu-ray as
well. “In this selling season for consumer
electronics, the Blu-ray players, PlayStation 3,
and anything else that takes Blu-ray format will
have to have a very good sell-through in order
for Blu-ray to continue on the path that it’s on,”
says Oppenheimer.
Responding to green pressure
Basic packaging has a responsibility to respect
the environment. Pressures from retailers such
as Wal-Mart, along with the general perception
among consumers that green is preferable, has
put manufacturers on the bandwagon to create
more sustainable packaging. “Shorewood has
been very involved in sustainability and has
been in the environmental arena for a couple of
years now,” says Linda Lombri, director of
marketing services at Shorewood. “Our
green choice programme is increasing in
visibility throughout the industry.”
Shorewood and its competitors are
introducing new items of packaging thatare
more environmentally friendly, and use
renewable materials that are recyclable. They
are offering clients more choices in this arena
and are also responding to consumer perceptions of needing something that is environmentally friendly.
Shorewood has introduced several new
packages in the past year. “Our REPAK and Flip-Pak
are all paperboard,” says Lombri. “This spring we introduced SunLyte trays which are made of
recycled polyethylene terephthalate (RPET), a
plastic on Wal-Mart’s list of preferred materials.
More packaging options are under development.”
Shorewood’s new SunLyte disc trays are
manufactured entirely of post-consumer waste
(PCW) from recovered plastic products.
Ivy Hill is also pushing its environmentally
responsible products. A tremendous amount
of information has been exchanged in both
the record business and the video
business – less so in the games market,
according to Oppenheimer. “In terms of the
types of materials that are currently available
for recycle-ability,” he says, “many of our
customers have switched over to recycled
stocks. More of them are looking to make
packaging changes that would be construed as
more environmentally friendly.”
Ivy Hill has pursued many different types of
materials and put together packaging options
for its customers. “We have used the Wal-Mart
metrics to articulate the various scores of
various packaging,” says Oppenheimer. “We’ve
done presentations for groups thatre present
our clients.” In those presentations Ivy Hill has
developed a series of packaging options and
articulated what the score at Wal-Mart would
be for each, to indicate what package will be
most favourable environmentally.
Wal-Mart has a system that grades packaging
in terms of its affecton the environment and its
carbon footprint. “A jewel case would get a low score,” says Oppenheimer. “An all-recycled
paperboard, as an example, would get a higher
score. It would be more favourable.”
Wal-Mart is doing this with all of its
suppliers across the board, from toy
companies to toilet tissue manufacturers.
“They’re trying to get their suppliers to be
more environmentally conscious and use
packaging that they consider to be more
responsible for the environment,” says Oppenheimer. “Wal-Mart has been very
proactive in this way for several years. I’m
sure other retailers have similar
systems, but Wal-Mart has been
at it longer and probably is
deeper into it so far
than anybody
else.”
"Most people agree plastic is better than paper because it doesn't consume trees to produce. Both are 100% recyclable, so it is just a matter of consumer commitment to recycle what they use." -- Brigit van Winkel, Super Jewel Box
What
packages are
made of is
becoming increasingly
important for Super Jewel
Box as well. The company’s
products are 100% recyclable, “which makes them a good
eco-conscious choice”, says van Winkel.
“Most people agree plastic is better than paper
because it doesn’t consume trees to produce.
Both are 100% recyclable, so it is just a matter of
consumer commitment to recycle what they use.”
Super Jewel Box contends that polystyrene,
the raw material from which SJB products are
made, is chemically inert, so it will not
decompose or harm natural resources if
disposed of in landfills.
Curbing global footprints
There are new issues surfacing regarding
manufacturing in the Far East. For Shorewood,
between the value of the dollar, rising prices in
China, and the carbon footprint associated with
the shipping of goods out of China, Wills
anticipates more packaging manufacturing
coming back to the US.
“The biggest challenges we face right now
are the rising oil and energy prices and how
that affects our raw material prices,” he says.
“You’ve got a customer base that continues to
push for lower priced goods. However our raw
material and energy prices continue to go up.”
Everyone is feeling the pinch of rising energy
prices and it has a heavy impact on
manufacturing. “It’s not something people are
doing to increase margins,” says Wills. “The
pressure is real and it’s affecting everyone.”
High energy costs impact on the manufacture
of products as well as the transport of those
products. “There is a lot of thought now given to transportation and the logistics of moving the
material from place to place,” says Ivy Hill’s
Oppenheimer.“In terms of the high cost of
energy, it’s affecting both us and our customers.”
Ivy Hill’s customers, such as studios, record
companies and game manufacturers, are
certainly more cognisant of trying to shorten
the distance that a product has to travel and
more effort is going in to finding the most
efficient mode and location for manufacture. “I
think the situation has the potential to create a
more level playing field for American
manufacturers,” Oppenheimer adds.
The dynamic of sourcing is changing.
Certainly there are some items that will always
be less expensive to produce in the Far East,
“but getting material from the Far East, from
Europe, to the US, has become very prohibitive
in terms of the economics of it,” he stresses. “So
when you put a pencil to it, it has the potential
to remove the advantage. I would say
‘potential.’ It’s not there yet.”
Anybody with a disc-based product that has
an add-on, a gift with purchase, or something
they would ordinarily source overseas, “I think
now they’re having to think about the container
costs and what it’s going to cost to get it here
and then truck it to the middle of the country”,
says Oppenheimer.
The whole aspect of energy and carbon footprints and how they are affecting this particular business is leading to changes in basic business practices. “The customer is more cognisant of how far the material is moving and the cost associated with that,” says Oppenheimer. “These are international companies, I think they understand what is involved. It’s part of the times we live in.”
Ivy Hill: Packaging changes construed as more environmentally friendly
Shorter lead times
At Shorewood, Wills observes the trend towards
reducing shipping due to the impact of the
perception and reality of a carbon footprint.
“We’re trying to focus on producing the
products locally to where they’re going to ship,”
he says. “For the US, we manufacture in the US.
For Europe, we produce packaging in two locations: Poland and the UK. We also have
facilities in China.”
The trend that Wills sees is that business is
going to get more global with local production
prepared to react when called upon. “There is
more focus on the carbon footprint of
shipping and its impact on the environment,”
he adds. “Being able to create locally, in real
time, is going to be one of the new trends
around the corner.”
Home entertainment has been somewhat
shielded from the carbon footprint conundrum
in dealing with shipping since its timelines are
so condensed compared to other industries. The
immediacy of entertainment packaging is a
priority in getting an album or a DVD released
while the artist or movie is still hot. Compared
with confectionery, hair care, or pharmaceutical
packaging, the studios, music, and games media
have much shorter lead times.
“The speed with which a release is created,
put together, printed, and sent to the replicator
has shielded our industry from a lot of the
standard print going offshore,” says Wills.
“Whereas for consumer products such as golf
balls or hair care where they plan the product
weeks and sometimes months in advance, you
have time to print the standard pieces like just
board and paper overseas.”
Shorewood only manufactures home
entertainment packaging in China when it does
elaborate, high-priced box sets, because of the
dramatic cost savings. “There’s more lead time
with those types of projects than for standard
home entertainment packaging,” says Wills.
In Europe, the company has expanded its
operation. “We’re able to get products into
market quickly because we’ve got capabilities
for the European market in South Wales and
we’ve expanded in Poland,” says Lombri.
Special packaging
Studios and artists are pursuing more special
packaging in general to offer consumers a
reason to buy physical media as opposed to downloading music and movies.
“We are definitely seeing an increase in
special packaging,” says Wills. “You’ve got to
give the consumer something they can feel,
something they feel a part of, an experience
with the package to entice them to buy it
physically, as opposed to digitally. We are
certainly seeing that and it is a focus across the
entire business.”
The main challenge for Super Jewel Box has
been to convince the industry to abandon the old
and outdated jewel case and switch to the Super
Jewel Box. “In 2006 Universal Music was the first
to embrace the Super Jewel Box,” says van Winkel.
“They have not regretted their decision, which
was made based on response from music fans
who were highly in favour of the Super Jewel Box.
Many others have followed Universal’s lead.”
Basic packaging is not so basic anymore. What was at one time the ubiquitous jewel case is now more of a rarity. Packaging manufacturers face many more pressures about environmental accountability, offering a consumer a package with more staying power in terms of environmental sustainability as well as a reason to buy an album or DVD instead of downloading it.
www.ivyhill-cinram.com
www.shorewooddigital.com
www.superjewelbox.com