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How to find the optimal packaging for your product

Packaging is one of the largest cost factors. Developing the optimal combination of pack style and material is a challenge.

 

Any industrial consumption product: Biscuits, crackers, chocolate- or muesli bars, cereals etc., must be packed in order reach the customers.

If we analyse the situation in most biscuit companies, we see:

The bakers are the specialists to create new products. Their partners are marketing people who analyse the trends in the market, who know the target group in the market they want to conquer.

Together they define: Market segment: premium, medium or low-price segment, flavour, calories, etc and they define the customer group: gender, age, etc. Based on this they define what the product should look like, taste etc.

Based on this the bakers define the ingredients, develop the recipe and the production process; the settings of the different machines and all the relevant procedures to make the product they have in mind.

Packaging generally is low on the priority list. For both parties, packaging is not their specialism. Marketers are aware that the presentation of the product is vital. Therefore, the packaging design is an area that gets a lot of attention. But unfortunately, there is more a pack than design.

Packaging is one of the largest costs in the total production process. Exact data are not available, but based on my experience with other products, I rank the production cost factors as flows:

  1. Raw material / ingredients          
  2. Packaging material                         
  3. Labour cost.                                      
  4. Energy and financial cost             

I cannot give numbers as these vary a lot from case to case. But packaging material cost reaches easily 20-25%, while labour cost may be between 15 and 20%.  This labour cost can be split in process and packaging. When you do that, you most probably will find that the largest share of labour cost is in packaging. It is important to define the real distribution of these costs for your products to realize the importance of packaging.

You also will notice that the financial cost translated into production cost is minimal

Competition does force any producer to minimize where possible costs. Cost reduction in raw material may change the properties of the product. That is the last you want to touch. That leaves packaging material and labour as possibilities for savings.

Improving the efficiency of the production - and packaging processes will reduce labour. The packaging material may influence presentation, look and feel, shelf life etc. Any change may affect your sales, but it offers the biggest saving potential.

When introducing a new product, a certain packaging style is selected. With this choice the properties, but also the cost of the pack is defined. Later savings in packaging material do not change the basic cost structure embedded in the choice of the pack style. Therefore, the choice of the pack style defines to a large extent the cost structure. This choice should be an integral part of the product development process.

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