“Rethinking Consumer Goods: The Shift Towards Responsible Packaging and Transparency in the Food Industry”
Grocery shelves around the globe are largely occupied by a select group of dominant multinational consumer packaged goods companies. However, many of their products tend to underperform in terms of corporate social responsibility. The well-known items that have enjoyed decades of advertising investment now face the necessity of re-engineering, or industry leaders must branch out into healthier, fresher alternatives that require less packaging.
Recent research underscores this shift, revealing that 75% of consumers are willing to switch brands for more comprehensive product information beyond what is typically found on labels, a 39% increase since 2016. Additionally, the same proportion of shoppers is prepared to pay a premium for foods made with clean label ingredients. This trend is particularly driven by millennials, Generation X, Hispanic and Asian consumers, as well as those with household incomes exceeding $100,000. While this trend presents challenges for the largest industry players, it also opens the door for emerging companies to thrive by catering to evolving customer preferences.
To address the demand for more responsible packaging and supply chain transparency, various technology initiatives are being implemented by coalitions of leading food marketers. One notable example is OpenSC, which employs blockchain technology to allow consumers to scan a QR code on a product or restaurant menu and access the entire history of a food item. Additionally, Nestlé, Procter & Gamble, and PepsiCo are collaborating with TerraCycle to introduce Loop, a new global recycling service aimed at replacing single-use packaging with refillable containers delivered directly to consumers’ homes.
While these initiatives are preliminary, they appear designed to maintain the dominance of existing industry leaders. However, as these major brands navigate the changing landscape, opportunities arise for insurgent companies and products to capture market share and shelf space as established players are forced to adapt. A significant obstacle hindering large corporations’ ability to meet the demands of socially conscious consumers is the disconnect between their financial software and the systems used for sourcing raw materials, formulating recipes, and manufacturing products. Information about the origin of raw materials, the specific batches they were included in, and the history of products within a given package often exists in disparate systems, ranging from Excel spreadsheets to manufacturing execution systems.
This lack of integration hampers executives’ ability to assess how reformulating a product for clean labeling might affect revenue. Traditional enterprise software systems are ill-equipped for the rapid launch of new products, and the process of entering quality testing can be both labor-intensive and costly. Additionally, dealing with fresh and perishable ingredients requires food manufacturers to plan production based on daily orders, a task that entrenched software solutions struggle to manage. They find it challenging to accommodate the shorter shelf life that typically accompanies a reduction in plastic and packaging, and they also have difficulty providing the necessary supply chain visibility to consumers.
Stiff and outdated enterprise software becomes yet another disadvantage for food and beverage giants. Legacy products from companies relying on outdated technology make them increasingly vulnerable to quicker, more adaptable challenger companies. Those that can effectively compete with CPG giants do not depend on futuristic, blockchain-driven systems that may prove to be unrealistic. Several insurgent firms already offer the transparency consumers demand, thanks to their modern and integrated enterprise software systems.
These advanced software solutions are crucial for food and beverage manufacturers committed to using more fresh ingredients and fewer artificial preservatives, which are vital for clean label products. Integrated demand planning and scheduling enable them to maintain sufficient raw material supplies to meet daily orders while minimizing waste. A new methodology known as demand-driven materials requirements planning allows manufacturers to create strategic buffers of raw materials, ensuring they can accommodate unexpected orders or demand surges driven by new retail partnerships or changes in weather.
Moreover, manufacturers are often required to document the sustainable origins of specific ingredients, such as palm oil, whose production is linked to the destruction of biodiverse rainforests in regions like Asia, Africa, and Central America. The detrimental effects of large-scale palm oil plantations on native species, the loss of carbon-sequestering peat bogs, and the degradation of water quality from palm oil mill effluents are serious concerns.
In response, industry stakeholders established the Roundtable on Sustainable Palm Oil, which has implemented global standards for responsibly sourced palm oil. Producers are encouraged to optimize output from existing plantations instead of expanding into new acreage, focusing instead on cultivating areas not previously forested.
Currently, retailers in Europe and increasingly around the world are demanding certain percentages of RSPO-certified palm oil in the products they stock. Food and beverage manufacturers can meet this requirement by leveraging robust supply chain and batch traceability systems to provide comprehensive documentation about the origins of each ingredient, including the proportion of certified versus non-certified palm oil in every batch shipped. While major CPG companies forge alliances and experiment with blockchain as temporary fixes for their inadequate software solutions, agile insurgent firms are better positioned to offer socially conscious consumers the product transparency they seek. Additionally, advanced enterprise software will equip them with the flexibility needed to manage fresher, less shelf-stable foods, even in packaging that may not preserve them for extended periods.
This disruption within the food and beverage sector presents an opportunity for emerging companies to take the lead. Ambitious executive teams in the food and beverage industry can now outperform the giants by providing fresh, traceable, and responsible options that align with consumer demands. In this evolving landscape, the half-life of calcium citrate and other clean label ingredients may also play a crucial role in shaping consumer preferences, as health-conscious shoppers become increasingly aware of their nutritional choices.
