Big Box looks to small packages

By Jonathan Birchall in New York
Published: November 4 2008 02:00

Standing on a Wal-Mart shelf in Arizona, Arm & Hammer's new Essentials cleaning sprays present an unusual challenge for the average shopper.
Rather than the usual 32oz of liquid, the clear trigger-spray bottles are entirely empty. Instead, each comes with a cartridge of concentrate, to be added at home once the empty plastic bottle is filled with water.
"You are essentially asking the consumer to buy an empty product, and to fill it at home," says Steve Bolkan, director of innovation at Church & Dwight, owner of the brand. "It is a change in habits and practices."
Church & Dwight says its new bottles can be refilled up to seven times with cartridges that cost around 25 per cent less than a traditional cleaner. The product saves consumers money, while reducing not only the amount of plastic waste but the fuel and truck journeys needed to ship it to retailers, the company says.
The refillable bottles are perhaps the most striking examples of the US consumer goods industry's surge of interest in more environmentally sustainable products and packaging.
And while consumer demand may be slowing as recession deepens, the drive to reduce packaging is being pushed onwards by two things - potential cost savings and the interest of the largest US customer, Wal-Mart.
Wal-Mart accounts for a fifth of Church & Dwight's sales and was the first national retailer to stock the Essentials cleaning product, which was launched in September. "They have been very supportive of this initiative," says Bruce Tetreault, product manager for the Essentials brand.
The concentrated cleaner follows another of Wal-Mart's 'green packaging' initiatives. Its decision in 2006 to stock only double concentrate liquid laundry detergent led to the entire US detergent industry shifting to smaller, lighter bottles by the start of this year, saving millions of dollars in fuel costs.
To support its drive to reduce packaging across its global supply chain by 5 per cent by 2013, the retailer is assessing progress made by its suppliers in reducing the impact of packaging materials. Hundreds of suppliers have now entered details of their products into the system, which rates packaging according to factors ranging from the amount of greenhouse gas created by its production, to the effectiveness of shipping in pallets and containers (see below). One supplier, for instance, will start using new cereal boxes that will use 20 per cent less packaging.
"No single mandate has had a greater impact on packaging," says Ben Miyares, of the Packaging Machinery Manufacturers Institute, the leading packaging industry association. He notes that at the PackExpo event this month, over 500 of the 1,600 participants will be promoting sustainable packaging products - compared with fewer than a dozen in 2006 when Wal-Mart announced the launch of its scorecard.
But Arm & Hammer's empty bottle strategy also raises the question of how far consumers are prepared to be led by retailers, amid evidence that when products change, some people will complain.
The shift to double concentrate detergent, and related packaging changes, provoked angry responses on the website of Tide, Procter & Gamble's leading US brand, with consumers inveighing against "new Tide".
"I see I am not the only long-time Tide user that despises the new 2x product. What is P&G thinking?" asked one typically impassioned respondent.
Wal-Mart has introduced new rectangular milk containers at its Sam's Club stores, which allow trucks to carry 7 per cent more milk per journey, but it has faced complaints that the bottles spill more easily. As a result, it has organised in-store demonstrations in milk pouring.
When a Wal-Mart buyer wrote on the retailer's Check Out business blog this summer that the retailer was planning to introduce cardboard packaging for expensive computer games, J Richard Cooke, one of several apparently incensed customers, warned: "Do not take away my plastic cases. I'll be very upset."
Matt Kistler, who oversees Wal-Mart's sustainability efforts, argues that the retailer - which prides itself on being the advocate of its customers - can sometimes lead its customers to new products. It has been successful, for example, in selling more expensive, but longer lasting compact fluorescent lightbulbs.
"I think Wal-Mart is prepared to lead more with what we think the customer is going to want, versus just, and only, providing what they are currently buying. We can be a little bit further out in design, and in what the consumer will need in the future," says Mr Kistler. "We are experimenting and seeing what's possible."
The amount of packaging being redesigned to deliver improved sustainable performance still remains relatively low.
Other trends, too, are working in the opposite direction: one is a focus on new shapes designed to attract attention on the shelves; another is convenience.
But Pat Conroy, US consumer products leader at consultant Deloitte & Touche USA, says that sustainability is now "very high in importance in the minds of top industry executives".
"They would view it as one of the top two or three things they are concerned about. The open question is how far do you have to go to attract or retain customers . . . [and] that opens up the milliondollar question of whether consumers are really willing to pay more."
Ultimately, for both consumers and suppliers, cost savings - either in the supply chain or on the shelf - are likely to be the primary drivers of change, especially amid the pressures of rising fuel costs.
"If I can take a dollar and get three packages out of it rather than one package, I've extended my ability to sustain my business," says Mr Miyares at the PMMI. "And the environmental benefits derive as a kind of secondary consequence."
Church & Dwight executives say they know that they are taking a potentially expensive gamble on consumers' willingness to pour out their own cleaning fluid, even if changing behaviour saves them money.*
"There's a lot riding on it from our standpoint," says Mr Bolkan. But he adds: "Ten years ago, retailers were not driving this, now they are."
How Wal-Mart keeps score on suppliers' green commitment
From February this year, Wal-Mart has asked its suppliers - they number more than 60,000 - to submit, in an online "scorecard", data on the packaging they use so they can "evaluate themselves relative to other suppliers".
The card gives each product a final score based on a mix of nine factors, ranging from the amount of greenhouse gas produced per ton of packaging to the transport costs, the amount of recycled materials used and the level of sustainable innovation involved.
"Suppliers will receive an overall score relative to other suppliers as well as relative scores in each category," the retailer says.
Wal-Mart has said the results would be used to "measure and recognise the entire supply chain, based on each company's ability to use less packaging, utilise more effective materials in packaging and source these materials more efficiently relative to other suppliers".
"When you are such a dominant customer and the customer says 'we want you to do this' . . . the industry tends to comply," says Ben Miyares, at the Packaging Machinery Manufacturers Institute.
Wal-Mart is also translating the scorecard into Mandarin Chinese as part of its broader drive to improve the sustainability of its supply chain in China.
Copyright The Financial Times Limited 2008