Market Study: eCommerce Breaths New Life into Mature Markets

By Jennifer Mapes-Christ, Manager of Consumer and Commercial Goods Freedonia Industry Studies at The Freedonia Group

Ecommerce is breathing new life into mature markets, including, notably, food and beverage packaging. In contrast to the overall food and beverage market – which is large but relatively mature – eCommerce presents novel challenges as packaging must ensure that foods and beverages arrive to the customer fresh and intact. Moreover, as more consumers grow frustrated with the amount of packaging they receive with each order – and concerns about the environmental impact of packaging waste continue to mount – sustainability is increasingly key when it comes to eCommerce packaging. Hence, companies are looking to innovative packaging solutions for these and other problems associated with online sales in order to better compete in the eCommerce market, which has seen rapid developing in the U.S. in the last decade due to:

• Cultural preference for convenience;
• A highly developed network of order fulfillment infrastructure; and
• Consumer tendency to spend significant amounts of time online.

Food and Beverage eCommerce Takes Off

Online sales of food and beverages in the U.S. totaled $16.9 billion in 2018. The combination of three elements helped create a suitable environment for growth between 2013 and 2018:

• Increased mobile/smartphone usage;
• Improved website and mobile app interfaces; and
• Expansion of crowdsourced business models to delivery and shopping.

Consumers have been slower to the uptake with online grocery shopping than with eCommerce for consumer goods – such as apparel, books and electronics. Only 15 percent of survey respondents report that they shop for food and beverages online. This resistance is due to several factors:

• Many consumers are less willing to pay extra for convenient access to essentials like groceries;
• Some consumers do not trust employees to pick out items, particularly fresh produce and meat, the same way they would; and
• Consumers worry that perishable items could spoil, or that food products could spill or become damaged in transit.

However, the market is ripe for rapid expansion as consumers are expected to become increasingly comfortable with ordering food and beverages online.

Vendors such as Kroger, Walmart and Amazon (via Whole Foods) have a leg up because consumers can easily “click and collect,” or buy online and pick up in-store (BOPIS), due to their wide brick-and-mortar presences. This retail strategy allows consumers to avoid having to pay extra for shipping and handling, and see their orders and swap out any undesirable choices before leaving the store.

Addressing the Challenges of Food and Beverage eCommerce with Packaging

U.S. demand for eCommerce packaging in the food and beverage market is projected to expand to $1.2 billion in 2023. Fundamentally, eCommerce packaging presents must be:

• Effective – the items arrive undamaged;
• Low cost – be at a price point vendors and consumers accept; and
• Sustainable – excessive packaging remains a top concern for consumers, environmentalists, and packaging producers alike.

While brick-and-mortar vendors relying on the curbside pickup or BOPIS processes do not require specialty packaging for their food orders, vendors using home delivery face additional challenges. The need for specialty packaging to prevent spoilage of perishable foods will promote strong opportunities for higher value products, particularly as consumers increasingly opt for home delivery rather than curbside pickup of their e-commerce grocery purchases.

Opportunities exist in packaging that addresses the challenges brand owners face in fulfilling eCommerce food and beverage orders. Those challenges include:

• Increased handling by more people;
• Preventing breakages and spills;
• Reducing weight for shipping; and
• Exposure to wider range of temperatures.

To meet these challenges, eCommerce companies and packaging producers are increasingly calling for a holistic approach that entails looking at the entire packaging and supply chain.

As e-grocers explore high-tech solutions such as delivery drones and cashierless stores to entice consumers, food and beverage brands are looking to packaging to enhance consumer convenience and confidence in the online grocery orders they ultimately receive. For example:

• Reducing packaging weight and right-sizing packages so they take up less space help lower shipping costs, whether to a physical store or direct to a consumer;
• Active and intelligent packaging components such as antimicrobials, biosensors, smart labels and gas scavengers – widely used in meal kits – can both help to preserve freshness, quality, and taste, and serve to monitor and track inventory; and
• Advances in film technology are driving a shift from heavy, rigid materials like glass to flexible ones such as recyclable polyethylene or biodegradable polylactic acid, which can improve efficiencies while also boosting sustainability.

Reusable Packaging: What’s Old is New Again?

Reusing food and beverage containers at the brand owner level has the potential for greater sustainability benefits, though such programs require significant infrastructure and capital investment. Before the ubiquity of versatile low-cost plastics, reusable containers were commonplace, most recognizably for milk and other beverage containers. Because of the potential long-term shared growth opportunities, third parties have been active in facilitating this (re)innovation. This trend is ripe, particularly for eCommerce food and beverage items where the containers can be collected again when the next shipment is delivered.

For example, the Loop initiative – a subscription home delivery service for food and household goods made by participating companies – allows consumers to return empty packaging via mail to be cleaned, refilled and reused. Spearheaded by global recycling organization TerraCycle, Loop is comprised of a consortium of brands that have committed to innovating reusable packaging solutions.

In January 2019, Loop brand Häagen-Dazs debuted a reusable double-walled steel ice cream container that keeps the ice cream at optimal conditions during transport and consumption. The canister is designed to ensure that, when opened, the ice cream melts more quickly at the top than at the bottom, while allowing for multiple uses.

In May 2019, Mars Petcare’s Perfect Fit Cat Food joined the Loop initiative with a new container designed to eliminate waste. The round, white container is made of stainless steel and is sturdy enough to withstand many cycles of reuse, cleaning, sterilization, and filling.