Article by Rebecca Marquez, PMMI
As consumers make more purchases online, the e-commerce channel continues to expand and is forecast to grow at a rate of 10.6% through 2034, according to a report from Future Market Insights (FMI). While the sales growth is good news, e-commerce presents challenges for confectioners because direct-to-consumer (DTC) delivery requires different packaging and handling processes than the retail channel.
According to FMI’s e-Commerce Packaging Market report, packaging must provide functionality and deliver a positive unboxing experience. For cross-border shipments, it also must withstand international shipping conditions and meet regulatory requirements like traceability. Confectionery products also may need to be protected from temperature extremes on their journey to the consumer’s door. At the same time, consumers expect to receive their orders in sustainable packaging.
Successfully serving the e-commerce channel often requires packaging and packaging line changes. Otherwise, throughput suffers and labor costs escalate because products produced on lines set up to serve the retail channel may require more manual handling when shipped DTC.
Changes undertaken to accommodate the e-commerce channel typically involve one or more of the following actions:
- Changing primary and/or secondary packaging to increase durability
- Lightweighting packaging to reduce transportation costs
- Adding tracking and product verification features. (Integrating smart packaging technologies, such as Quick Response codes or radio frequency identification tags, enables interaction with the brand and enhances the overall customer experience)
- Installing new equipment/lines to increase flexibility. (However, this option involves capital investment in machines and infrastructure. It also requires floor space, which often is limited.)
- Automating processes such as changeover, loading/unloading, and warehouse functions
- Adopting Industry 5.0 technology
- Increasing levels of machine integration to coordinate product runs and shipping
- Partnering with a third-party service provider like a multi-client order fulfillment center or a contract packager.
As e-commerce activity has spurred demand for mixed and layered pallets and increased the complexity of warehousing and fulfillment operations, many confectionery companies are turning to warehouse automation solutions such as palletizers and mobile robots, according to Packaging and Automation in the Warehouses of the Future, a report from PMMI, The Association for Packaging and Processing Technologies, the organizer of the PACK EXPO portfolio of trade shows. Although growing rapidly, the penetration of automation in warehouses is still quite low. According to the forecast, only 25% of warehouses will have some form of automation installed by 2027.
An alternative to in-house investment, hiring a third-party service provider, offers a cost-effective way to serve the e-commerce channel. This can be a long-term arrangement or short-term until in-house capabilities are up and running. Working with a contract packager offers many benefits, according to Contract Packaging and Manufacturing, another report from PMMI. Using a contract packager can give brand owners access to machinery/packaging formats not available in-house; streamline testing of new products or packaging; offer a customized product/package, especially for short or limited runs; and supplement in-house capacity to meet surges in sales volume.
Multipacks (multiples of one product, one variety) and variety packs (multiples of multiple varieties) are popular with consumers but require the installation of specialized equipment and/or dedicated lines. Rather than invest in additional accumulation, sorting, cartoning, wrapping, and labeling equipment, brand owners opt to shift production of these formats to contract service providers.
When selecting a contract service provider, confectionery companies should look for a partner that can supply the expertise they lack in-house. This may include:
- Design of custom logos and graphics
- Product development
- Production of desired packaging formats and sizes, potentially including an array of functional features such as easy-open/reclose and/or shelf-life extension
- Design, production, and shipping of point-of-purchase displays
- Order fulfillment (1)
A successful partnership also depends on brand owners and contract service providers working together to:
- Determine the nature and scope of the project.
- Verify there’s a good fit between project needs and service provider experience.
- Ensure proposals contain well-defined Scope of Work, Services to be Provided, and Description of Fees/Fee Schedule sections.
- Be open to suggestions about time- or cost-saving process tweaks.
- Manage the project so each party has the authority, information, and resources to efficiently meet the terms of the agreement. (1)
Serving the e-commerce channel also benefits from adopting automation and Industry 5.0. Advanced automation technologies, such as artificial intelligence (AI), robotics, and additive manufacturing (3D printing), enable confectioners to be cost-effective and efficient while meeting the demands of e-commerce customers who expect products tailored to their needs and preferences. According to another PMMI report, 2024 Transforming Packaging and Processing Operations, tools like AI and advanced analytics can help optimize logistics, increase resource efficiency, and minimize waste.
One of the most exciting aspects of Industry 5.0 is the potential it offers for personalization and an enhanced customer experience. With the integration of advanced technologies, packaging can become an interactive, engaging medium, fostering deeper connections between brands and consumers. Augmented reality (AR) and virtual reality (VR) technologies can transform packaging into immersive experiences, providing consumers with product information, usage instructions, and even interactive games or storytelling experiences. Smart packaging, enabled by IoT and blockchain technologies, can provide real-time tracking, authenticity verification, and personalized recommendations based on individual preferences and usage patterns.
The confectionery segment, contract packaging, warehouse automation, and Industry 5.0 will be well-represented at PACK EXPO International (Nov. 3–6; McCormick Place, Chicago) where brand owners and service providers will find many opportunities to network, participate in free educational presentations, and observe the latest technology innovations. Highlights include the Confectionery Pavilion, sponsored by the National Confectioners Association. It’s located in the South Hall, where the Candy Bar Lounge (Booth S-2682), sponsored by Syntegon, offers a spot to network, relax, and recharge. Another important show floor destination for confectioners, The Logistics Pavilion in the North Hall, brings together the supply chain solutions needed for success in the e-commerce channel.
The latest sustainability innovations will be on display at the new Sustainability Central (Booth W-21020) in the West Hall. Attendees also can identify resources via the PACK EXPO Sustainability Solutions Finder and by looking for the PACK EXPO Green icon at exhibitor booths and in the listings of exhibitors and educational sessions.
As the world’s most expansive packaging and processing industry event in 2024, PACK EXPO International will feature 45,000 attendees from consumer packaged goods and life sciences companies worldwide and 2,600 exhibitors offering solutions to today’s biggest manufacturing needs from an intersection of industries in 40-plus vertical markets. For more information and to register, visit packexpointernational.com.
1. CPA, The Association for Contract Packagers & Manufacturers. Why Use a Contract Packager or Manufacturer, Why Use a Contract Packager or Manufacturer | Contact Packaging Association (contractpackaging.org), accessed April 9, 2023.
About the author
Rebecca Marquez was hired at PMMI in 2016 as a manager of business intelligence, responsible for the execution and analysis of PMMI’s internal market research projects. Due to her proven track record of success in quantitative and qualitative execution and analysis, project management and business development skills, in March of 2021, Marquez was given a leading role in the development and building of PMMI Media Group’s Custom Research initiative, a new offering of proprietary research services for PMMI members and packaging industry professionals. In addition to her responsibilities in PMMI Business Intelligence, she is responsible for the design, execution, and production of PMMI’s market research products for external clients.
Marquez graduated from University of Wisconsin in 2008 with a Bachelor of Arts degree. She has completed the Data Analytics Certification for University Georgia (2020) and the TLP 360 Degree Feedback Program for Leadership Development (2021).
