Sustainable Packaging – At What Cost?

A group I belong to recently had an interesting online debate on why sustainable packaging was "always" more expensive. The reasons and theories cited included freight and transportation costs, greedy manufacturers, a shift from some materials to others creating shortages, etc. Most of the wide variety of comments posted were accurate to some degree, but I was surprised no one mentioned the first rule of business, the one even non-business people often quote.

Sustainability and the Law of Supply and Demand

If more people were buying any specific green packaging product, more companies would manufacture it and eventually, probably sooner than later, the market price would be reduced due to increased competition. In addition, whether you are talking about tape, boxes, or void fill, short runs of a green packaging product for any manufacturer are always substantially more expensive than a long run of a similar "non-green" product because of costly changeover time and related costs. We need to understand that companies have spent decades and millions streamlining and automating their manufacturing processes to be able to produce volume efficiently. Once you realize and accept these facts, the solution is fairly obvious.

How Can Brown Boxes Turn Green?

Our company recently introduced a line of 100% recycled post consumer content corrugated boxes with the objective of making them price competitive with "standard" boxes that usually contain 25 to 35% recycled pre-consumer, in plant waste content. Our approach has been rather expensive in terms of time, initial start up costs, inventory buildup, etc., but essentially we helped design the product, enlisted the help of a visionary company to help make the product we were confident the market wanted and needed, and then took it to market. By combining volume of numerous smaller users, we were able to secure the support of a major corrugated manufacturer by providing them the volume that they need to be efficient in the production of our product. Much to our pleasant surprise, we discovered that our boxes are not necessarily much higher in price, in most cases we are within 10% of the current supplier and in some cases we are even less expensive!

Market Response

What has been fascinating to us through the launch and introduction has been the wide range of potential customer expectations and perceptions. Many of the people we speak with expect our product to be outrageously priced and they initially respond with "I want to be green but I can’t afford it". They have been convinced that green will always cost double or more than standard products and we are happy to dispel that misconception.

We have also been surprised by the number of people who believe our product should be less expensive since it is not made of virgin material. They obviously do not understand that saving consumer waste from landfills is more expensive in many ways that cutting down a tree that is genetically engineered to grow back in a relatively short five to seven years. I think we can all relate to high fuel prices and what it has done to freight and transportation costs.

The only prospects that we have not been able to help have been inquiries for highly unusual sizes, custom printed boxes in very small quantities. For all the reasons cited above, they usually discover there is little we can do to make their unique box be price competitive with standard construction, common size, stock box pricing.

Market Reaction by the Environmentally Focused

One fully committed lady told me she understood what we were attempting to do short term as well as long term and offered to help support our program during this initial costly phase. One incredibly eco minded prospect quickly stated that he could justify paying up to 50% more for our product because he was certain it would help him make his environmental message to his customers more consistent and more obvious. I instantly admired him for his environmental commitment and swore not to take advantage of his eagerness and openness. I am pleased to say our pricing was very competitive to what he had been paying to his former vendor.

Full Steam Ahead!

Despite the erratic price perceptions and inconsistent manufacturing costs, we are fully committed to bringing green products to market; in fact, we are about to roll out several new items in response to our customers’ growing sustainable packaging needs.

We are confident market pricing will eventually stabilize at very attractive and competitive levels as supply catches up with the slow but steady increase in demand. Unfortunately today’s weak economy has put the spotlight on price and to survive, companies are looking anywhere and everywhere to reduce cost but we remain optimistic. We are counting on the fact that the environment will not be where companies decide to make compromises.

Dennis Salazar is the president of Salazar Packaging, Inc., a certified MBE (Minority Business Enterprise) company specializing in packaging products, equipment and solutions. With over thirty years in the packaging industry, he is known for his tongue in cheek sense of humor as well as his sustainable packaging passion and expertise.   

To contact Dennis, please visit his web site: www.salazarpackaging.com

 

Comments

[ECOshore]

I can't manufacture green boxes, but I reuse and recycle all that I have.

[Kirsten]

While I agree with most of the information provided in this post, I would like to point out that there are some packaging companies that already offer prices similar to, or even less than, traditional packaging options. The company that I currently work for just recently launched a line of green products using sustainable materials. These products are already at those "stabilized" and "competitive" prices that you mention. The packaging industry certainly has to abide by the old economic law of supply and demand and I do believe that this is a point that is not brought up often enough in response to new "green" packaging products that are generally sold at a higher price than their traditional alternatives. However, another point that is not often recognized is the existence of "green" packaging products that are already at the price level of traditional packaging products.