Reusable packaging; affects on the fresh produce supply chain of Coles and Woolworths PMA Career Pathways Program Student Report Laura Edwards University of Queensland, Gatton
Table of Contents Executive Summary... 3 Introduction... 4 Reusable packaging... 4 Supplier... 4 Retailer... 4 Consumer... 5 All Stakeholders... 5 Actions/recommendations of the future of reusable packaging in the Coles and Woolworths supply chains.... 5 Improve crate design/pools... 5 Improve crate merchandising in-store... 6 Promote the continued use of crates... 6 Conclusion... 6 References... 7 2
Executive Summary The movement and storage of fresh produce throughout the supply chain is a significant challenge faced by all industry sectors in the fresh produce supply chain. In order to reduce the risks and essentially overcome this challenge, Coles and CHEP (on behalf of Woolworths) have developed and introduced a range of Reusable Plastic Crates (RPCs). These crates aim to streamline the way in which vendors around the country delivery fresh produce into these major retailers. Suppliers, retailers and consumers have all been affected by the introduction of these crates. Supplier Retailer Consumer Improved cooling and ventilation Decrease waste reallocate labour Amount of handling reduced Improved quality Reduced packaging costs Additional costs if rejections occur Loss of branding OH&S benefits Reduced reverse logistics cost Negative response by consumers Prefer traditional green grocer displays All industry sectors Environmental benefits Insufficient crate pools The introduction of the RPCs has overall been a positive approach from the supplier, retailer and consumer perspectives. The main recommendation is that as long as the RPCs remain a viable option, by offering mutual benefits to all industry sectors then they should continue to be used. Although as the major retailers continue to re-design the fresh produce departments, this continued use of RPCs is unknown. 3
Introduction The movement and storage of fresh produce throughout the supply chain is a challenge faced by all producers, suppliers, wholesalers, processors, retailers and other fresh food companies. The logistics of getting highly perishable products from the farm to the consumer involves handling, ripening and chilling processes as well as merchandising of market quality fresh products to enhance the instore shopping experience (CHEP 2012). In order to reduce the risks and essentially overcome these challenges, Coles and CHEP (on behalf of Woolworths) have developed and introduced a range of Reusable Plastic Crates (RPCs) into major retailers. The purpose of the RPCs is to streamline the way in which vendors around the country deliver fresh produce to the major retailers (M McLean pers. comm., 29 June). This method of packaging also aims to reduce the frequency of handling fresh produce, which will assist producers and retailers to deliver fresher, longer lasting fruit and vegetables to customers. So far, there has been mixed reviews in relation to the use and affects the RPCs have on the different industry segments. This report aims to highlight the significant ways in which the different industry segments of the Coles and Woolworths fresh produce supply chain have been affected since the introduction of the RPCs. Reusable packaging Supplier From a suppliers perspectives (this includes growers and packers), the introduction of RPCs have improved the overall cooling and post harvest stabilization of many products. The greater ventilation has also led to more efficient and consistent ripening. Although the cool chain of some product lines such as broccoli fails to maintain the temperature in comparison to the use of Styrofoam. The shift to streamline product packaging in the supply chain has reduced the packaging costs for many suppliers, as glues, ties or strapping is not required and the product can be washed on farm in the crates. The interlocking design of the RPCs has also improved the load stability and transportation of the produce. A major issue faced by suppliers is if a rejection occurs then the product needs to be repacked as the crate is owned by the chain. This presents many challenges for suppliers as they incur additional packaging costs and depending on the quality can suffer price reductions if sold through various other avenues. Consequently, packhouses and suppliers still prefer to use cardboard as it increases the market base opportunities and thus reduces the overall perceived risk by packing into generic packaging (E Townsend. pers. comm., 27 June). Lastly and probably the most detrimental factor in my opinion, is the loss of identity (branding) for growers and packers once the RPCs had been introduced. Retailer The retailers in my opinion have benefited most from the introduction of the RPCs. The retail ready format of the RPCs has been reported to decrease waste and decrease/reallocate the use of labour in-store. For example, employees can now spend less time on crushing and bailing cardboard which provides an opportunity to increase the presence of employees in the fresh produce department. Retailers have also reported improvements in space utilization as there has been an increase in the range offered in retail ready stores. The crate design, with larger handholds and the reduced weights on some lines (for example potatoes from 18kg to 15kg crates) provided Occupational Health and Safety (OH&S) benefits as the handling of the products has been improved (M McLean pers. comm., 4
29 June). This ease of handling and the one-touch approach has also improved the rotation and hence the quality of the stock in-store for customers. The low collapsed profile of the RPCs also reduces the overall reverse logistics costs (CHEP 2012). Although at times the assembling and collapsing of crates can be challenging and may require force which can cause damage to hinges and there is potential for OH&S accidents. Once the RPCs had been introduced, the count and weight of many products needed to be changed to ensure the crate is maximized. This was carefully altered as the stock weight per carton could be excessive in relation to the specifications set by retailers. Consumer One of the key goals of the introduction of the RPCs was to help drive new and existing sales at the retail level. By using the retail ready concept, the amount of handling of the produce is reduced, which avoids damage (usually bruising) and improves the overall quality of the produce offered to customers. The response by customers once these black RPCs were being merchandised in-store was negative, as many customers believed the use of RPCs diluted the overall feel of the produce department (M McLean pers. comm., 29 June). Qualitative evidence suggests that Australian consumers prefer the more traditional green grocer displays (displayed in stacks or in baskets) within the fresh produce department of retailers (E Townsend. pers. comm., 27 June). Hence, this preference by consumers has forced Coles and Woolworths to return these traditional displays rather than the use of RPCs. All Stakeholders From a whole of chain perspective, the RPCs can offer environmental benefits including the reduced waste to landfill when compared to traditional one way packaging (CHEP Australia 2012). According to the Franklin Associates Inc. (2004), RPCs require 39% less total energy, produce 95% less solid waste and generate 29% less total greenhouse gas emissions in comparison to traditional cardboard packaging. A similar study conducted by RMIT University Melbourne on behalf of CHEP, also found the estimated benefits for CHEP customers using the produce crate system on a daily basis are: more than 175 tonnes of greenhouse gas emissions saved, more than 1.2 million litres of water saved; and more than 20 tonnes of solid waste avoided (CHEP 2012). Although these benefits relate to the CHEP system, it is expected that the Coles system would yield similar results. In the Woolworths supply chain alone the RPCs eliminate the need for 26 million cardboard cartons each year (Woolworths Limited 2007). Perfection Fresh is also now effectively using the RPCs to reduce the number of cardboard and waxed cartons being used (Australian Packaging Covenant 2011). A problem which affects all stakeholders in the fresh produce supply chain is the controlling and tracking of crates. The RPCs supplied by CHEP for Woolworths is based on a daily hire system, therefore this account needs to be regularly monitored to avoid large bills. During peak times (e.g. Christmas and Easter), suppliers often have to supplement packaging with fibre cartons as the crate pool numbers don t allow for large spikes in demand (M McLean pers. comm., 29 June). Actions/recommendations of the future of reusable packaging in the Coles and Woolworths supply chains. Improve crate design/pools The issue of the loss of identity/branding in my opinion could be addressed in the future, by providing companies with an opportunity to advertise on the sides and front of the RPC. This 5
recommendation is however only viable on the use of the large foldable bins, where the sides and front is clearly visible. The introduction of the RPCs has been a lengthy process, not only for pack houses with the installation/reengineering of pack lines to suit these RPCs but also for sustaining the crate pools. In the future for the RPCs to remain a viable option, the crate pool needs to be continually increased in order to effectively cope with large spikes in demand (e.g. Easter and Christmas). This will benefit all industry sectors as it will reduce the risk of missed opportunities and the need to supplement with fibre cartons during these times. Improve crate merchandising in-store As previously mentioned, when the RPCs were introduced into retail stores, the overall response by customers was negative. The purpose of these crates should be promoted to consumers (e.g. posters), as a positive initiative which will provide them with higher quality fruit and vegetables. Also unlike, the United States and Europe the sustainability positives of RPCs in Australia are not promoted strongly. Consequently, there is an opportunity here to promote this strong sustainability message to consumers and the media in general. This message could even impact the consumer s perception and use of RPCs. In the future, there may also be opportunities to enhance the appearance of the crates (e.g. change the colour from black to green) to improve the overall feel of the produce department when the RPCs are on display. Promote the continued use of crates As the layout in the fresh produce department of Coles and Woolworths continues to change, the use of RPCs should be continued as long as they remain a viable option for all stakeholders. Recently Coles have moved toward displaying perishables on ice bunks and in black cardboard boxes rather than displaying produce in RPCs ( green grocer displays). Consequently this devalues the use of the RPCs as a retail ready concept, as the produce is being handled more than once. Lastly as the major retailers, specifically Woolworths, move towards increasing the use of RPCs the remainder of the industry still uses the traditional packaging. In order for there to be mutual benefits for all industry sectors in the supply chain of Coles and Woolworths, the use of RPCs needs to be standardised across the entire industry by taking an approach similar to CHEP pallets. This approach also has the opportunity to address the additional costs of re-packaging produce if rejections occur. Conclusion The introduction of the RPCs has overall been a positive approach from the supplier, retailer and consumer perspectives. As retailers continue to shift the focus of its marketing campaigns to the fresh produce sector, the continued use of RPCs is unknown, especially during the recent re-design of this department by Coles and Woolworths. Whilst in theory this approach is logical and provides substantial benefits to the different industry segments, the response by consumers in relation to the use of RPCs in stores will have a significant contribution to the future of RPCs if used as a retail ready format. 6
References Australian Packaging Covenant 2011, Australian Packaging Covenant Action Plan for Perfection Fresh Australia Pty Ltd, The National Packaging Covenant, New South Wales, viewed 20 July 2012, http://www.packagingcovenant.org.au/documents/file/perfection%20fresh%20australia%20pty%2 0Ltd%20AP_11_16.pdf. CHEP 2012, Reusable Foldable Plastic Crates (FPCs), viewed 20 July 2012, http://www.chep.com/rpcs/foldable/. CHEP 2012, Reusable packaging smart supply chain solution, viewed 30 July 2012, http://www.chep.com/resources/case_studies/sustainability/reusable_packaging_- _smart_supply_chain_solution/. Franklin Associates Inc. 2004, Life cycle inventory of reusable plastic containers and display-ready corrugated containers used for fresh produce applications Final Report, Reusable Pallet and Container Coalition, Australia. Woolworths Limited 2007, Doing the right thing Sustainability Strategy 2007-2015, Woolworths Limited, Australia. 7