This byline from Magid’s Steve Flynn originally appeared in CPGmatters.
Cities are now having to deal with the environmental and economic impacts of excess waste as the export market for recyclables shrinks. Turns out recycling is hard, and the truth is just two percent of recycled plastic used in packaging – and product packaging generates more plastic waste than any other industry.
Under pressure by consumers and the broken economics of recycling and waste management, governments are working to respond. The European Parliament has voted to ban a wide swath of single-use plastics by 2021, while the California Legislature has introduced a bill that aims to eliminate the use of single-use plastic bottles at hotels. Recently, the Zero Waste Act was introduced in Congress citing the critical need to combat pollution and social justice issues.
Businesses are also moving to respond. Many of the world’s largest consumer packaged goods companies, retailers and suppliers have signed the New Plastics Economy Global Commitment. Since the launch, the number of business signatories has grown from over 100 to nearly 200, including six of the top 10 global fast-moving consumer goods (FMCG) companies such as Nestlé, PepsiCo, Unilever, Coca-Cola, and L’Oréal; seven of the top 10 global plastic packaging producers such as Amcor and Sealed Air Corporation; and five of the top 15 global retailers like Walmart and Target.
Among other initiatives, these companies have agreed to increase the amounts of recycled plastic used in packaging to an average of 25 percent by 2025, but Amazon may force hands even sooner by driving a reduction of plastic. Starting in August, the company began requiring vendors to meet waste-efficient packaging standards. Additionally, chargebacks were implemented on clamshells or other plastic packaging for medium- and large-sized products.
Three Imperatives for CPG and Retail Companies
1 – Return to consumer intelligence basics: Millennials and the coming-into-power Gen Z continue to shift brands toward social responsibility. If you don’t know what matters to this demographic when it comes to your category, you’d better learn fast or prepare to cede market share to a direct-to-consumer brand who puts social responsibility at the top of their value proposition. For retailers, the plastic dilemma has been most apparent in the checkout aisle. In the U.S., stores typically push point-of-sale displays of reusable bags and incentivize consumers who bring their own bags. While in Europe, a bag tax is often deployed.
Beyond bags, smaller, socially conscious brands have historically had to fight hard for shelf space. Empowered with knowledge on what consumers want, retailers may find themselves in greater positions of power to make shelf space decisions that deliver sustainable choices their consumers desire.
2 – Consider how zero waste intersects with brand loyalty: CPG players, retailers and their partners will have to continually seek to understand consumer attitudes while balancing the right level of education needed to sustain engagement. Each consumer will have a different level of awareness and interest in reducing their footprint, properly recycling and finding more reusable options.Segmenting audiences to understand the opportunities and challenges for each ‘zero waste profile’ will be critical. Seaweed-based packaging and bio-plastics that disintegrate in as little as 11 weeks and sound great, but what percent of your consumers might reject those kind of innovations.
And how many of those segments are willing to buy their [insert favorite CPG brand here] at [insert favorite retailer here] according to level of environmental impact? What behaviors are at risk of changing? The question is: Where does this interest curve intersect with brand loyalty, and to what benefit or detriment to perception, market share, and size of basket at purchase
3 – Strengthen partnerships that put the customer first: The food industry accounts for more than 60 percent of all clamshell packaging, but if your CPG brand could stand out without plastic packaging, does that start to break down the grip plastics have on the CPG business? For retailers, could you make it easier for CPG brands to stand out without packaging? How could you collaborate to improve signage that is good for sustainability while reducing plastic waste?
Zero waste shops are popping up across the U.S. and Europe, while Loop – a sort of modern milk man alliance made up of companies like Procter & Gamble, Nestle, PepsiCo, Unilever – aims to do that in an e-commerce-first approach. The website mentions retailers Kroger and Walgreens, but the vision for the in-store experience is not yet clear.
Consumers will likely have to give up some level of convenience but developing partnerships will be critical to addressing challenges and building solutions that can compete with what consumers have come to expect on some level. By better understanding your partners’ challenges and desired future states, you can aim to be better partners in solving problems that are a win-win-win for you both alongside consumers.
Imperative Questions for the Future
What else does your organization consider imperative and what are you doing to address waste in your products? CPG and retail organizations need to start answering the following questions.
- How do you align your value proposition and waste profile to consumer sentiment?
- Do you know what matters most to your core and desired consumers?
- Are you sure you have a plan that address where their preferences are today and will be in the future?
- Do you know what niche products are about to encroach on your space requiring you to pivot or give up market share?
- Do you know where your employees sit on these issues?
- How do you utilize retail to help drive distribution channels and partners to drive the adoption of behavior change?
- How do you ultimately align your efforts alongside brand loyalty goals?
By addressing these questions, CPG and retail brands can begin to create a path toward a more sustainable future. While the impact of any initiative may not be felt immediately, it will show consumers that you are willing to innovate and align with them on their needs. A more sustainable future will be a team effort, whether it be through partnerships with other retailers, consumers, or some combination of the two.