Huge Percentage of Brand Owners Will Spend More on Packaging, Finds New Study
8 May 2019
BOSTON, May 8, 2019 /PRNewswire/ -- Many brands are planning to spend significantly more on packaging in coming months, according to a new L.E.K. Consulting study. In a survey of 250 brand owners across the consumer packaged goods (CPG) spectrum, a whopping 75% say they expect to increase packaging spending over the next year. Nearly a third of them will do so by more than 10%. That's a big jump from both 2018 and 2017, when 65% and 40% expected to increase spending, respectively.
Why the even greater emphasis on packaging? A full 90% of brand owners say packaging is critical to their brand's success – a way to adapt to industry pressures, including fast-changing consumer tastes and preferences.
"CPG brand owners recognize consumers want more convenience, and companies are looking to packaging to help provide it. This will entail some major changes to packaging, and CPGs are responding and investing," says Thilo Henkes, Managing Director at L.E.K. Consulting and coauthor of the 2019 Brand Owner Packaging Study. Accordingly, 57% of brand owners say they're developing packaging that's easier to open, 51% say they're working on more single-serve package sizes and 49% say they're stepping up placements in new distribution channels, such as convenience stores, the survey says.
Another top driver of brand growth, according to the L.E.K. research, is the rise of premium products, as consumers turn to these as a way to convey their unique personal tastes. Forty-two percent of respondents say they've expanded their premium offerings, with 35% changing their promotional strategies and 32% expanding their price-pack offerings. And packaging is often central to the marketing of premium offerings, since the packaging format, substrate choice, printing and texture, etc. often conveys the product's high-end status.
Among the other consumer trends that the report says has direct implications for packaging:
- Customization. New technologies have made product customization more cost-effective, and, in turn, consumers have gained a fondness for specialized products. More than half of brand owners have increased product personalization over the past two years, and 42% have implemented additional customization of their products. As such, brand owners say they plan to launch 15%+ more SKUs in 2020 vs. 2018, and differentiated and effective packaging will be crucial.
- Ever-increasing health focus. As demand for more healthy products skyrockets, companies have made adjustments to their products, including more healthy or natural ingredients. And packaging changes in the past two years reflect this, as 60% of brand owners have introduced all-natural or non-processed products and 53% have introduced "health-focused" products that have required adjustments to packaging in order to communicate this change to consumers.
- Green growth. Environmentally friendly products have begun to move out of their corner niches onto the center stage, and brand owners see this as a top source of growth over the next two years. Eighty-five percent say they've made at least one significant change to packaging substrate material in the past two years, most frequently to increase ease of recycling. And they expect the value of packaging containing biodegradable, recycled or compostable material to grow by 1.3 to 1.4 times from 2016 to 2022.
- Ecommerce expansion. As more and more consumers choose to shop online, brand owners are turning to a variety of strategies that involve packaging. Fifty-five percent say they've entered new digital channels, 47% have implemented mobile on-demand ordering and 47% have increased investment in their websites. CPGs will need to make changes to packaging to protect against breakage, maintain freshness during delivery and keep a consistent look and feel across multiple channels.
"All indications are that brand owners consider ongoing investment in packaging to be critical to their brand's success," says Jeff Cloetingh, Managing Director at L.E.K. and report coauthor. "By conveying both valuable attributes and a potent brand message, packaging continues to have the unique capacity to make products stand out in a crowded marketplace."
About L.E.K. Consulting
L.E.K. Consulting is a global management consulting firm that uses deep industry expertise and rigorous analysis to help business leaders achieve practical results with real impact. We are uncompromising in our approach to helping clients consistently make better decisions, deliver improved business performance and create greater shareholder returns. The firm advises and supports global companies that are leaders in their industries — including the largest private and public-sector organizations, private equity firms, and emerging entrepreneurial businesses. Founded in 1983, L.E.K. employs more than 1,400 professionals across the Americas, Asia-Pacific and Europe. For more information, go to www.lek.com.
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SOURCE L.E.K. Consulting