In Brands We Trust

In Brands We Trust: How Simplicity, Affordability and Sustainability Can Be the Key Drivers for Packaging in the New Decade and Beyond

This webinar will:• Show how simplicity in packaging is what consumers crave•Explain why affordability is crucial for today's shoppers and manufacturers•Demonstrate how sustainability will continue to play a key role in packaging

Peter ClarkeFounder | CEO

In Brands We Trust

Confidential | Product Ventures | 01.28.10

Peter ClarkeFounder | CEO

In Brands We TrustHow simplicity, affordabilityand sustainability may be the key drivers for brand packaging in the new decade and beyond


State of the Marketplace


People are uncertain and disillusioned as a consequence of scandals and avoidable disasters like the collapse of the financial system





• The current recession will most likely exceed the length of the 1973-75 and 1981-82 recessions, making it the longest since the Great Depression Fortune Magazine, December 3, 2008


Consumers not likely to go back to the excessive indulgence of the past


Frugality and responsibility have become the new badge value


The stretching of the dollar as consumers are more cautious with their spending


• In 2009, retail sales in the United States have fallen 10% since peaking in November 2007 –Naked Capitalism, August 18, 2009

• US unemployment rate is forecasted to be 10.2 % by May 2010. It has more than doubled in the past ten years, from 4.0% in 2000 to 9.3% in 2009 U.S. Bureau of Labor Statistics, January 2010

The stretching of the dollar as consumers are more cautious with their spending


Product safety issues and health scares in the news


• Spinach E-Coli outbreak sickened 205 individuals across 26 states and killed 5, cost the leafy green industry more than $350MM and sales of RTE spinach are down 20% since the outbreak in 2006 USA Today, September 20th, 2007

• Salmonella contaminated peanut butter sickened 575 individuals across 43 states and killed 8 and responsible for the recall of over 400 products MSNBC, January 2009

• Childhood obesity has risen 17% with more than 9MM children over 6yrs old considered obese and type-2 diabetes, once unheard of in children, is now a regular occurrence eScience News, February 6, 2009

• The rate of premature heart disease among obese teens is set to triple Reuters, October 27, 2009

• FDA expresses concerns about possible health risks from Bisphenol-A (BPA) after declaring it safe in 2008 New York Times, January 16, 2010

Product safety issues and health scares in the news


There’s a continued movement toward healthier living as consumers become more informed


• People taking personal responsibility for own health and well-being and that of society at large

• Sales of organic food products in the United States have soared to nearly 14 billion from less than 1 billion in the last 14 years and expected to rise to $17 billion in the next two years Forbes, September 30, 2004

• World organic food sales jumped from US $23 billion in 2002 to $52 billion in 2008 Datamonitor, 2009

• The number of new organic products introduced in one year increased from 290 in 1997 to 1,107 in 2007

• According to Prepared Foods, more than 2,000 new low- or reduced-fat products have been introduced since 1997

There’s a continued movement toward healthier living as consumers become more informed


The Environmental movement inspired by Al Gore and the need for sustainable packaging put into action by Walmart


The Environmental movement inspired by Al Gore and the need for sustainable packaging put into action by Walmart• Concerns about climate change move into the mainstream,

from the connections drawn between global warming and Hurricane Katrina to Al Gore's film “An Inconvenient Truth”


The Environmental movement inspired by Al Gore and the need for sustainable packaging put into action by Walmart• Wal-Mart has pledged to work with its top suppliers to help improve

operations, teaching them how to increase energy efficiency, and cut unnecessary materials or orders will be pulled by 2012

• To-date Wal-Mart has insisted its 100,000 suppliers comply with their new Carbon Reduction Label and their Universal Rating System to evaluate environmental and social responsibility

• Sept. 2007 Wal-Mart pledged to transition to all laundry detergent concentrated “compact” versions, in May 2008 this project saved more than 125 million pounds of cardboard, 95 million pounds of plastic resin and 400 million gallons of water Walmart’s 2009 Sustainability Report


Consumers leverage the power of their combined voice




• State of the marketplace has empowered the consumer to get their voice heard

• People find importance in associations and groups which define who they are

• Social networks and blogs are now the 4th most popular online activity ahead of personal email, member communities are visited by 67% of the global online population, time spent is growing at 3 times the overall internet rate, accounting for almost 10% of all internet time Nielsen Online, March 2009

• In 5 years, YouTube has completely reshaped the internet, media, the political landscape and the power of the consumer and the ordinary citizen Fast Company, February 2010

• LinkedIn has 50 million users worldwide and is growing that figure at roughly one new member per second LinkedIn, October 14th, 2009

• Facebook now serves 300 million people across the world and almost half of them are using Facebook every day Facebook, December 1st 2009



Store brands on the rise with quality at a lower cost than the national brand


Store brands on the rise with quality at a lower cost than the national brand• 40% of grocery shoppers report trading down to store

brands since the recession hit Media Post News, July 16th 2009

• In the past year dollar sales of private label items have risen a dramatic $5.4 billion across the mass trade classes Nielsen Co., November 10th 2008

• In the past year, store brands have grown by approximately 10% in dollar sales, compared to 2% for branded items, suggesting that consumers are switching over to a store brand alternative Neilson Co., October 6th 2009

• While store brand items make up roughly 10% of the assortment on shelf, they achieve over 20% of the dollar sales of the store, on average Neilson Co., October 6th 2009

• As shoppers have tightened their food budgets, many supermarket chains have removed products and cleared shelf space for their own lower-priced, store-branded items Wall Street Journal, January 13,2010

• Store brands have increased the effectiveness of their brand positioning and communication


Store brands on the rise with quality at a lower cost than the national brand• Store brands are now leveraging structural packaging

improvements to enhance the consumer experience


National brands struggling to maintain their profit margins


National brands struggling to maintain their profit margins• ”The real story behind the growth of store

brands is less often about price gaps than the shrinking value gap between national and store brands.” The Hub January/February 2010

• Many brands downsized to combat rising costs of goods and threat of store brands


• ”The real story behind the growth of store brands is less often about price gaps than the shrinking value gap between national and store brands.” The Hub January/February 2010

• Many brands downsized to combat rising costs of goods and threat of store brands

• Led to some unethical package reshaping to look the same but hold less

National brands struggling to maintain their profit margins


National brands struggling to maintain their profit margins• With the rise in sophistication in store brands,

national brands find themselves lacking effective differentiation to justify their higher cost


How did we get here?


The advent of industrialization enabled most of mankind to achieve access to whatever desired



• Moved from local handcraft to machine manufacturing and mass distribution



• The number of brands on American grocery shelves went from 15,000 in 1991 to over 45,000 by 2001 McKinsey & Company, December 2003

• Grocery store shelves have been bursting with products in the past ten years and they’re straining with about 50% more products than 10 years ago, including new formulas, flavors and sizes of existing lines Associated Press, February 16, 2009


Led to an era ofinstant gratification


Led to an era ofinstant gratification, overindulgence


Led to an era ofinstant gratification, overindulgence, selfishness


Led to an era ofinstant gratification, overindulgence, selfishness and greed


Now health issues, economic crisis and environmental threat are a reality


People abused the privilege of convenience and we became a disposable society


A Time for Change


Just because you can doesn’t mean you should


Just because you can doesn’t mean you should• As examples of the level of abundance there are

more cars than people in the US, and there is a vast, 17-billion-dollar-a-year, self-storage industry for “all our extra stuff”. ” A Whole New Mind by Dan Pink, March 2005

• SKU proliferation exists in part due to the short tenure of brand managers wanting to leave their mark – often comes in a line extension or something easy and fast to execute

• With the low financial investment in overseas manufacturing, many companies leverage the tactic of “let’s try it and see if it sells”

• The result is the waste of resources, the overcrowding of the marketplace, and unnecessary impact on our planet


People now find they are out of balance with themselves and with nature and can no longer afford to be excessive and shortsighted


People now find they are out of balance with themselves and with nature and can no longer afford to be excessive and shortsighted

• The world produces enough food for everyone, yet over 800 million people go hungry One World, April 19th 2009

• We are presently experiencing the largest mass extinction since the demise of the dinosaurs 65 million years ago; only this time it’s occurring at a much faster rate savetherainforest.org 2005

• The unequal distribution of food and conflict over control of the world's dwindling natural resources is likely to reach crisis status as climate change advances and world population expands from 6.7 billion to 9.2 billion by 2050 Guardian News, 2008


As people seek to regain balance they will inevitably seek brands that can help …brands they can trust


As people seek to regain balance they will inevitably seek brands that can help…brands they can trust• During the recession consumers feel a heightened sensitivity to people in

need

• Cause marketing or “buying into meaning” is one of the new ways identified to generate support for a brand

• 80% of Americans agree that it is important for companies not just to be profitable, but to be mindful of their impact on the environment and society National Marketing Institute’s 2007 Consumer Trends

• 72% of consumers say they purchase a brand because it supports a cause they believe in PR Week, 2007

• 85% of consumers around the world are willing to change the brands they buy or their consumption habits to make tomorrow’s world a better place Environmental Leader, March 2008


3 Principles for Brand Packaging Success

1 2 3


1 Simplicity

• Provide clear, concise, and consistent communication of the essential identifying nature, character, purpose of the brand/product and its ingredients, use, and benefits

• Be transparent and truthful in your messaging

• Don’t be complex, complicated, or difficult

• Avoid over embellishment as the marketplace is currently crowded and noisy

• In this new era of thoughtfulness, “less may actually provide more”


Simplicity tactics being employed today







Simplicity tactics being employed today





• Whisper when others are shouting to provide contrast and stand out



Purity in Form and In Use• Purity in the design language

• No unnecessary decoration or embellishment

• Cohesiveness to the form

• Stark in contrast to the busier forms in the marketplace

• Hyper intuitive to use

o fewer features and buttons

o Simple to use with no unnecessary steps or over complication


Fewer, Simpler Ingredients• Companies that offer products with fewest number

of ingredients compared with rivals stand to win big in 2010 USA Today, October 28, 2009

• “As soon as you stress fewer ingredients, you’re implying that the food is healthy.” Bestselling author Michael Pollan

• In March 2009, Haagen-Dazs launched a new premium product line called Five. Five was developed with fewer, more recognizable ingredients (the name reflects the number of ingredients in the product: milk, cream, sugar, eggs and a natural flavor such as vanilla bean.) In just eight months, Five sales have grown to account for 10% of Haagen-Dazs business. SGB Media Group, December 30th, 2009

• Lay’s lists just 3 simple ingredients, “just potatoes, all natural oil and a dash of salt”


“Point of Origin” Storytelling• Best storytelling takes us on an emotional journey,

appealing to our wants, needs, desire, while at the same time, telling us of the product’s origin Fast Company, July 24, 2009

• Lay’s touts that it’s potatoes are grown locally

• Hellmann's "Eat Real, Eat Local," initiative in Canada Popular Economics, September 8, 2009

• Foster Farms, one of the largest producers of poultry products in the country, is labeling packages of chicken and turkey "locally grown." Popular Economics, September 8, 2009

• Wal-Mart is getting in on the act, hanging bright green banners over its produce aisles that simply say, "Local." Popular Economics, September 8, 2009

• Point of origin offers credibility, digestibility, most importantly emotional resonance Fast Company, July 24, 2009


SKU Reduction• The overabundance of product offerings creates

unnecessary costs, brand or product cannibalization and is exhausting for the consumer. Companies need to understand their product consumption patterns and turn rates and adjust accordingly. Rightsizing can offer pricing flexibility, drive brand loyalty and maximize shipping and distribution costs McKinsey & Company, 2009

• U.S. retailers are expected to decrease the assortment of items in their stores by 15% on average over the next year

• It is less about eliminating entire brands but redundant package sizes and unnecessary flavor or feature extensions

• Getting rid of lesser-performing brands helps companies showcase top products as retailers cut inventory Associated Press, February 16, 2009

• Food companies from Sara Lee to HJ Heinz are trimming their offerings to focus marketing dollars on their high-margin, best-selling brands and retain consumers, who are trading down in the recession Associated Press, Feb 2009

• Heinz considers product cuts a key strategy to trim cost and improve performance by cutting between 15 percent and 20 percent of its SKUS within three years, on top of a 50 percent cut from 2002 to 2006 Associated Press, February 16, 2009


2 Affordability

• Provide or meet the cost of something without unacceptable or disadvantageous consequences

• Strike a balance between what consumers desire and can afford and what can be produced for a profit

• Provide a helpful product experience without negative consequences

• Retailers and manufacturers need to truly understand today’s shoppers like never before and respond to their affordability-driven needs and attitudes to succeed in this challenging environment IRI, February 25, 2009


The ability to provide or meet the cost of something without unacceptable disadvantageous consequences


Strike a balance between what consumers desire and can afford and what can be produced for a profit


Provide a helpful product experience without negative consequences


Theft preventive packaging that creates hard to open packaging, otherwise known as “wrap rage”• Meeting the needs of the retailer to enable self-

merchandising compromises the consumer’s ability to open the package and tarnishes the brand experience

• These forms of packaging are predominately in consumer electronics and toys, but also in health care packaging

• Can brands afford the frustration and potential injury their packages cause?

• The irony is that most theft happens through the back door and pilfer-resistant packaging doesn’t prevent that type of theft

• Classic example of selfishly meeting the needs of one (the retailer) and not all (consumer and the brand)


Large size packaging that is cheap per ounce but hard to use• Bulk packaging derives low cost per ounce based on

a large volume purchase

• Many forms of bulk packaging provide inferior handling, dispensing and storage

• The consumer, in most cases is relegated to transferring the contents and immediately disposing of the package

• This is another example of one dimensional packaging where the primary driver of cost compromises the brand and consumer experience


Packaging that is cheap to manufacture but requires tools to open• Many types of food packaging require the package to

be used within the food sterilization process

• The retort-able can is an example of a cost-effective format for product/package sterilization to prolonged product shelf life

• Here the needs for extended shelf life creates a package format that is designed for manufacturing efficiency but not a positive consumer or brand experience

• The consumer is relegated to the use of can openers or subject to the potential of cutting themselves on the sharp metal edges

• The brand is structurally undifferentiated on shelf


We need to understand consumers like never before and respond to their affordability-driven needs and attitudes to succeed in this challenging environment IRI, February 25, 2009


We need to understand consumers like never before and respond to their affordability-driven needs and attitudes to succeed in this challenging environment IRI, February 25, 2009

• We need to ask ourselves if the package we produce is the most affordable…not just in cost…but in consumer experience as well as environmental impact

• This is the new lens of “affordability”


3 Sustainability

• Utilization of natural resources without destroying the ecological balance of the planet

• Elimination of waste and use of harmful materials and processes

• Optimization of the use of materials and energy

• Consumer looking for reciprocal commitment of ecological or “doing good” from brands

• Desire codes, standards, oversights and governmental regulations


Meet the functional and economic needs of the present without compromising the ability of future generations to meet their own needs


Utilization of natural resources without destroying the ecological balance of the planet


Elimination of waste and use of harmful materials and processes


Optimization of the use of materials and energy


Consumers are looking for a reciprocal commitment of “doing good” from brands


Need codes, standards, oversights and governmental environmental regulations


From an Era of Excess toan Era of Thoughtfulness


We’ve come to a tipping point where selfishness and wastefulness can no longer endure


We must smartly design products and position brands that are routed in need, void of excess, and of strong moral character


Thoughtfully designed and positioned brands and products will achieve a leadership position and have longevity and sustainability in the marketplace


Thoughtfully designed and positioned brands and products will achieve a leadership position and have longevity and sustainability in the marketplace

• Those that serve a purpose and contribute to the wellbeing of the global community

• Those without disadvantageous consequence to consumer’s wallets, time, health and the world we live in

• Those that are committed to doing the right thing the right way


Seeing the Value in “Values”


“Perhaps as we start to emerge from this recession, one of the silver linings is that the consumer has been empowered and is able to voice loudly and clearly the brands that they value as having worth and integrity. And to their credit, we are starting to see consumers support the brands which are in alignment with their own personal values and take responsibility for the health and wellness of the global community.” (Peter Clarke 2010)


simplicity, affordabilityand sustainability may prove to fortify brand trust and ensure

brand longevity in the new decade and beyond


Questions?


Design

In Brands We Trust