The evolution of flexible packaging for mayonnaise in South America, or how small companies beat big ones in their field
Jorge Maquita, packaging developer for PepsiCo, won a silver award at the world's largest annual packaging competition, the World Packaging Organization. Details can be found in his LinkedIn profile. Published with permission of the copyright holder.
This is a story about the appearance of doy-pack stand-up packages in South America. We can not know for sure absolutely all the details, but the main line of history, morality and conclusions from it, however, are very important.
In general terms, the following has happened.
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It all started with two large companies, for simplicity, we will call them A and B, which dominated the market for mayonnaise packed in glass. Their products sold well and people highly appreciated its quality, although it was somewhat expensive and not affordable for some consumers. Not every buyer could afford to buy this mayonnaise, released under the brands of large companies. An affordable alternative was a cheaper brand of mayonnaise in glass, manufacturer S.
In search of opportunities to increase revenues and reduce costs, producer C investigated alternative ways to produce mayonnaise, including various options for packaging format and material. Since it was a relatively small company, it did not produce much marketing research and did not develop a separate project with process analysis, etc. They decided to try something else, to carry out a test with real conditions. They just took it and “jumped” - they released a batch of mayonnaise in a package of laminated film. I believe that they checked different materials and chose the most suitable.
When the product was laid out on the shelves, it aroused curiosity and interest among consumers. In addition, it was sold at a lower price and was packed in unbreakable material. In addition, the package allows you to extract almost the entire product - in contrast to the can.
As a result, Company C increased its revenues by dragging out some buyers who were not strongly loyal to brands A and B.
When the leaders of these companies saw this new product on the counter, they thought: “who needs this mayonnaise in a bag? It looks base and cheap, the consumer, of course, will choose our product. ”
With the expansion of the geography of sales of mayonnaise in bags, especially in Europe and South America, producer C decided on the next step and offered mayonnaise in a stand-up doy-pack bag.
The performance of the equipment was low, the cost of materials for new packaging increased slightly, but still was lower than that of competitors who continued to proudly offer high-quality glass packaging.
After that, the growth of company C’s revenues rose even higher than after the first step and it began to take significant market shares from manufacturers A and B. The new packaging format allowed the consumer to get the initial advantages of the laminated film and added to them the possibility of more convenient vertical refrigerated storage the most saving space. Vendors also benefited from the placement of stand-up doy-pack packages - this package does not require additional group packaging or display.
Companies A and B expressed concern and began to investigate the problem. However, the decision-making process in their structure was long and complicated. In addition, they had a streamlined structure of the production process, which is difficult to change. To harmonize new investments, they had to be justified and necessary.
The consumer was happy, but not satisfied until the end of the stand-up package. The problem was that this package could not be closed again. There was no way to prevent the mayonnaise from escaping, in the event of a packet falling, it is also inconvenient to dose the exact amount of the extruded product.
Company C took the next step by adding a re-closing lid that was oriented across the container wall.
Starting with this innovation, company C revenues increase exponentially and reach the income levels of companies A and B. Fearing further loss of market share, these companies are also starting to produce cheaper products in standing doy-packs and plastic cans.
It was, to put it mildly, a late decision and now they compete on equal terms with Company C.
But this is not the end of the story.
The selected valve placement design had a drawback for the consumer. It was inconvenient to use the neck placed in this way.
The European market of such equipment by this time offered a more complex technological process, which allowed to place the shoulder with a neck in the corner of the doy-pack. This decision increased the cost of retrofitting, the new valve and laminate, but solved this problem.
In the process of implementing a new technology, Company C decided to offer a stand-up doy-pack on the market with a neck in the corner at a slightly higher price to compensate for these additional costs.
And that is what stopped the growth of income. The consumer did not agree that the price of the product could increase without the appearance of additional visible benefits. He was not ready to pay extra cents for this. In another part of the market, companies A and B have begun to fight for a place on the counter for their brands, packaged in a similar doy-pack.
Innovation should appeal to consumers, meet their needs and solve their problems or create new ways to use, always looking at the ratio of price and benefits.
"All is not gold that glitters, but we will know what is what when we appreciate it."
You need to constantly check and identify the real reasons why buyers choose your brand or your packaging. Revise and abandon the contrived values ​​that are not in the eyes of the buyer.
Many companies have shown by their example how the lack of internal criticality leads to failure. This works in various industries, for example, manufacturers of film cameras, which were completely supplanted by digital cameras, rental companies for video cassettes, who missed the arrival of digital media, etc.
The impact of innovation is inversely proportional to the number of companies offering it. When competitors are already present in the market, it is important that the offer to the consumer does not look like a copy. It should be original, new, clearly demonstrate its value to the user.
The period of time for which similar solutions will appear is inversely proportional to the number of your competitors. So if you plan to unleash the know-how of innovation you should make sure that there are effective confidentiality agreements for your research and development.
Price, although in many studies and is not considered as a factor influencing innovation, has a significant impact on consumer preferences, within the framework of the consumer culture of some countries.
The advantage of a relatively small company is the ability to quickly implement and then, if necessary, refine the innovation. Large enterprises with prescribed and streamlined procedures, as a rule, do not demonstrate flexibility and this is a serious structural problem.
Investment in equipment for any product should have prospects that are not limited to the next 3 years. Elements of equipment should take into account the possibility of innovation, give room for maneuver, act on the advance.
Many US or European companies invest in high-performance equipment in order to have the lowest operating costs. They limit the possibility of change in order to maximize productivity and efficiency.
This makes the transition to other forms and sizes of packaging more difficult because of the higher investment required for this equipment. In turn, this situation makes companies vulnerable to smaller but more flexible equipment.
The story ends here. Please pay attention to the fact that these conclusions were confirmed not only by the above story, but also by my entire career.
I hope you find them useful.
Translation by Roman Leonov.
Original
This is a story about the appearance of doy-pack stand-up packages in South America. We can not know for sure absolutely all the details, but the main line of history, morality and conclusions from it, however, are very important.
In general terms, the following has happened.
')
It all started with two large companies, for simplicity, we will call them A and B, which dominated the market for mayonnaise packed in glass. Their products sold well and people highly appreciated its quality, although it was somewhat expensive and not affordable for some consumers. Not every buyer could afford to buy this mayonnaise, released under the brands of large companies. An affordable alternative was a cheaper brand of mayonnaise in glass, manufacturer S.
In search of opportunities to increase revenues and reduce costs, producer C investigated alternative ways to produce mayonnaise, including various options for packaging format and material. Since it was a relatively small company, it did not produce much marketing research and did not develop a separate project with process analysis, etc. They decided to try something else, to carry out a test with real conditions. They just took it and “jumped” - they released a batch of mayonnaise in a package of laminated film. I believe that they checked different materials and chose the most suitable.
When the product was laid out on the shelves, it aroused curiosity and interest among consumers. In addition, it was sold at a lower price and was packed in unbreakable material. In addition, the package allows you to extract almost the entire product - in contrast to the can.
As a result, Company C increased its revenues by dragging out some buyers who were not strongly loyal to brands A and B.
When the leaders of these companies saw this new product on the counter, they thought: “who needs this mayonnaise in a bag? It looks base and cheap, the consumer, of course, will choose our product. ”
With the expansion of the geography of sales of mayonnaise in bags, especially in Europe and South America, producer C decided on the next step and offered mayonnaise in a stand-up doy-pack bag.
The performance of the equipment was low, the cost of materials for new packaging increased slightly, but still was lower than that of competitors who continued to proudly offer high-quality glass packaging.
After that, the growth of company C’s revenues rose even higher than after the first step and it began to take significant market shares from manufacturers A and B. The new packaging format allowed the consumer to get the initial advantages of the laminated film and added to them the possibility of more convenient vertical refrigerated storage the most saving space. Vendors also benefited from the placement of stand-up doy-pack packages - this package does not require additional group packaging or display.
Companies A and B expressed concern and began to investigate the problem. However, the decision-making process in their structure was long and complicated. In addition, they had a streamlined structure of the production process, which is difficult to change. To harmonize new investments, they had to be justified and necessary.
The consumer was happy, but not satisfied until the end of the stand-up package. The problem was that this package could not be closed again. There was no way to prevent the mayonnaise from escaping, in the event of a packet falling, it is also inconvenient to dose the exact amount of the extruded product.
Company C took the next step by adding a re-closing lid that was oriented across the container wall.
Starting with this innovation, company C revenues increase exponentially and reach the income levels of companies A and B. Fearing further loss of market share, these companies are also starting to produce cheaper products in standing doy-packs and plastic cans.
It was, to put it mildly, a late decision and now they compete on equal terms with Company C.
But this is not the end of the story.
The selected valve placement design had a drawback for the consumer. It was inconvenient to use the neck placed in this way.
The European market of such equipment by this time offered a more complex technological process, which allowed to place the shoulder with a neck in the corner of the doy-pack. This decision increased the cost of retrofitting, the new valve and laminate, but solved this problem.
In the process of implementing a new technology, Company C decided to offer a stand-up doy-pack on the market with a neck in the corner at a slightly higher price to compensate for these additional costs.
And that is what stopped the growth of income. The consumer did not agree that the price of the product could increase without the appearance of additional visible benefits. He was not ready to pay extra cents for this. In another part of the market, companies A and B have begun to fight for a place on the counter for their brands, packaged in a similar doy-pack.
Morality
Innovation should appeal to consumers, meet their needs and solve their problems or create new ways to use, always looking at the ratio of price and benefits.
findings
"All is not gold that glitters, but we will know what is what when we appreciate it."
You need to constantly check and identify the real reasons why buyers choose your brand or your packaging. Revise and abandon the contrived values ​​that are not in the eyes of the buyer.
Many companies have shown by their example how the lack of internal criticality leads to failure. This works in various industries, for example, manufacturers of film cameras, which were completely supplanted by digital cameras, rental companies for video cassettes, who missed the arrival of digital media, etc.
The impact of innovation is inversely proportional to the number of companies offering it. When competitors are already present in the market, it is important that the offer to the consumer does not look like a copy. It should be original, new, clearly demonstrate its value to the user.
The period of time for which similar solutions will appear is inversely proportional to the number of your competitors. So if you plan to unleash the know-how of innovation you should make sure that there are effective confidentiality agreements for your research and development.
Price, although in many studies and is not considered as a factor influencing innovation, has a significant impact on consumer preferences, within the framework of the consumer culture of some countries.
The advantage of a relatively small company is the ability to quickly implement and then, if necessary, refine the innovation. Large enterprises with prescribed and streamlined procedures, as a rule, do not demonstrate flexibility and this is a serious structural problem.
Investment in equipment for any product should have prospects that are not limited to the next 3 years. Elements of equipment should take into account the possibility of innovation, give room for maneuver, act on the advance.
Many US or European companies invest in high-performance equipment in order to have the lowest operating costs. They limit the possibility of change in order to maximize productivity and efficiency.
This makes the transition to other forms and sizes of packaging more difficult because of the higher investment required for this equipment. In turn, this situation makes companies vulnerable to smaller but more flexible equipment.
The story ends here. Please pay attention to the fact that these conclusions were confirmed not only by the above story, but also by my entire career.
I hope you find them useful.
Translation by Roman Leonov.
Original
Source: https://habr.com/ru/post/400673/
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