Current observations at assorted retailers and discussions with numerous beverage producers resulted in a broad scope of interpretations, including some concerns, which prompted a review of the beverage package value issue. In many instances, primarily from the producer’s manufacturing view, it was indicated that the issue of “adding value” was taken for granted with a somewhat subtle acquisition of value occurring as the package was being produced.
The reactions were pretty similar regardless of what beverage category was involved: a beverage package was being produced, manufacturing costs were incurred, and when finished, was shipped out for sale. From retailers’ observations, the primary view was basically executing promotions and special packaging rather than adding any value per se.
However, discussions with manufacturers generated significant questions related to the value of the beverage package being produced:
- Where does adding value start and end?
- What is a “value item?”
- Who decides to add a “value item?”
- How is the value added?
- What costs are involved?
Formally or informally, such questions should be answered because they are pertinent to evaluating the potential value of a beverage package.
From an operations perspective, reference is made to the beverage industry supply chain and the steps where adding value should take place. It is important to start at the beginning of the chain (processing), and end at the step where the package becomes a saleable unit (palletized packages). This range of operations actually defines the area where, realistically and practically, the adding of value to the product or package might be given serious consideration.
The processing step actually is the first place where value can be added. What can or should be done to enhance beverage making to make it more desirable to the consumer is evidenced by actions that have been occurring for many years. These actions include changes to the product and/or any of its component parts, which now are an accepted practice in the beverage industry. Formulations always are changing and the type and amount of ingredients often are varied, creating additional value for the product.
For example, today’s beverage marketplace focuses on flavors, sweeteners, vitamins and minerals, and other ingredients in almost every category. Producers have tracked and analyzed volume trends to help determine upside or downside effects by not only adding value to existing products, but also creating new products or categories.
Although the flavor or any other ingredients might not require additional or different equipment, it is possible that some components could necessitate adding equipment to thereby add value to the product. In addition to possible formulation and equipment requirement changes aimed at value enhancement, the training, operating and maintenance costs required for different and additional equipment could offset the added value.
After processing, the packaging step in the supply chain becomes a high-frequency dominant factor where value can be added (or subtracted) to a package. The area between the filling and storing in operations realistically involves the container, closure, label, wrapper and packer. Beyond that point, little opportunity for adding value exists.
Most container and closure packaging materials for major beverages are reasonably stable compared with those where product changes are requiring new bottle/can and closure/seamer configurations. Nevertheless, adding value via the packaging route can become a complex and expensive project because most production line equipment has a limited amount of flexibility or could require new/additional units depending upon what is being proposed to add value.
From an engineering viewpoint, most packaging line equipment is subjected to modification or alteration to accommodate packaging configurations such as container type, closure, shape, size, label, make-up or package.
For this reason, adding value through the packaging route usually requires major re-engineering of the entire line. This issue has existed for a long time and will probably continue; however, the trend toward flexible manufacturing type machinery for those who have invested in upgraded equipment will make adding value projects easier to comprehend and accept.
Marketers traditionally note that “packaging sells,” and that might be true, but it’s still debatable. Yet, most packaging materials have been designed for consumer appeal and acceptance. Questions like these will continue to arise when considering a value-added project:
- Is there a limit to how much value can be added?
- Should adding value be a significant concern?
- Is there a tipping point between total input cost and eventual selling price?
Remember, cost-effective studies can substantiate whether the adding value project paid for itself or not. BI