Next-generation retail

As the UK retail environment sees massive shifts in consumer purchasing behaviour, expanding convenience shopping and uncertainty over Brexit, how can brands and their retail partners remain relevant on the shelves? Dave Howell examines where current trends will lead in the future, and what this means for packaging designers.

For brands and their retail partners, the environment in which their businesses trade is constantly changing. Today’s shoppers are technologically inclined, have little time to linger in stores and have strong views about brands’ responsibilities to the environment. If brands – especially in consumer packaged goods – are to engage with this new kind of consumer, their packaging must speak to all these elements.

 “From a design perspective, we have had to make packaging much more interactive,” begins Simon Wright, managing director of Greenwich Design. “One obvious tactic is the use of QR codes, but we have also investigated a number of ideas that give packaging a life post-purchase: bottles that include practical tools for consumer use, for example, or garden products with built-in dispensers.  We’ve also looked at the use of near-field communications (NFCs) for limited promotional use.”

Like Greenwich Design, many others are rising to the challenge of the new consumer, but David Luttenberger, global packaging director at Mintel says that retailers, brands and packaging designers need to do more. “There’s a revolution happening in mobile-engaged packaging. Mobile interactions will account for 64 cents of every dollar spent in retail stores by the end of 2015.

“Unlike the previous generation of mobile-enabled packaging, however – which included clunky QR and text codes, and often-disappointing augmented-reality experiences – brand-owners are now tapping into NFC and Bluetooth low-energy (BLE) as primary engagement technologies to deliver on the promise that so many first-generation mobile engagements either didn’t or couldn’t follow through. As brands clamour for innovative ways to engage and connect with shoppers, the mobile environment will become the new front line in the battle to win their hearts, minds and wallets."

From a brand perspective, Stu Conroy, founder of leading supplier and manufacturer of phone and tablet accessories Activ8, says, “We are working with retailers and distributors to meet the demands of the modern consumer and retailer, to bring them together. Space – particularly in the more heavily populated urban areas – is at a premium, and our logistics plans cater to this. We still believe the consumer experience should meet the expectations of the consumer, and it is a balancing act in terms of ensuring you have an eye-catching product on the shelf, a product the consumer needs and packaging that meets the target market requirements.”

 Design for attraction

Research has indicated that millennial shoppers, in particular, tend not to venture far into a store, instead staying on the periphery. They also often feel overwhelmed by the sheer volume of products on display; the wide arrays of products available need to be addressed by retailers and packaging designers. Gaining the attention of this lucrative group of shoppers means rethinking how products are presented.

Bemis, in its report into the changing shopping habits of millennials in the US, states, “Grocery-store retailers that seek to reinvigorate the centre of the store are not necessarily turning to new merchandising techniques or alternative store layouts. Rather, they are looking to CPG marketers to create new types of packaging that appeal to the millennial shopper.”

Brands and their packaging development partners have already begun to implement such packaging transitions. Rigid plastic, cans and glass containers are all moving to flexible pouches, which millennial shoppers perceive as less wasteful and more in line with their lifestyles. However, brands are also innovating in traditional packaging, keeping an eye on the consumers that are attracted by novelty. One example of this, now entering production, is Klear Can from Milacron, which will be on retailer’s shelves in Q1 2017.

“The Klear Can is fully recyclable,” Milacron president and chief operating officer Ron Krisanda said about the launch. “After consumer use, only a small amount of metal remains on the can’s upper rim; the residual ring on the flange will separate during the grinding phase.”

The need for physical packaging to attract and hold the attention of younger shoppers was one of the key findings from research conducted by iModerate that revealed 74% of respondents believe it is important for brands to have a physical location rather than solely selling online. Interestingly, 80% of Generation Zers and 82% of millennials agreed, dropping to 69% with the older Generation Xers and 65% with Baby Boomers.

“One of brick-and-mortar’s greatest advantages over other channels is that there’s an opportunity for shoppers to interact with products, and that gives them the confidence they need to make a purchase,” says iModerate CMO Adam Rossow. “Retailers can take small steps to capitalise on these exploratory shopping habits, such as creating close-up experiences with new styles, providing samples and demos, and ensuring there are ample mirrors and fitting rooms.”

The beverages sector, in particular, has been highly active, releasing a number of innovations over the past few years. The trend of wine in cans, seen by brands such as Infinite Monkey Theorem and Presto Sparkling wine, has been joined by a plethora of small craft beer brands, tapping into an exciting and explosive market. Research from Nielsen concludes that nearly three quarters of younger consumers say that convenient packaging options such as wines and spirits in cans are highly attractive to them.

The expansion of convenience foods and convenience shopping is also clearly driving more innovation in packaging form factors.

“There’s been a big rise in scratch cooking, which brands are responding to with meal kits that provide step-by-step meal-time inspirations,” says Nicola Thomson, account director at creative branding agency Hornall Anderson. “These sort of kits offer the complete dinner solution at no cost to quality. The ingredients are showcased, the recipe is presented in a quick-to-read format, and the photography is really enticing – styled in a more ‘gastro’ way – to capture the hungry consumer on their way home from work. By conveying authenticity and fresh ingredients, these new ‘scratch’ kits feel a step up from ready meals, which are still bound up in stories of hidden salt and sugar.”

 Changing landscapes

How the UK’s exit from the EU will impact on packaging, brands and retailers in Europe remains to be seen. The ‘red tape’ that Brussels is perceived to impose on the UK has often been called out as burdensome, but how this might change in the coming years is an unknown factor.

The need to maintain standards and include consumer information on labels, for instance, could mean wholesale changes to how regulation and legislation relates to this information. And, as the EU accounts for over half of all UK exports, packaging regulations would surely need to be maintained.

“It’s safe to say that the basic principles of labelling will probably remain the same,” says Phil Dalton, head of regulatory at Sun Branding Solutions. “The Food Information Regulations we currently use, which are specified by the EU, will likely remain in some shape or form if we leave the EU. This could either be through legal measures adopting the text of the EU regulation even if we set out on our own, or reproducing similar rules exclusively for the UK’s requirements. Over time, if we choose to introduce an entirely new list of labelling requirements, it is likely to be similar to that of FIR, with some details added and some removed.”

Brand-owners will also need to take a wider view of how their key brands could be impacted by Brexit. Lianne van den Bos, lead analyst at Euromonitor International, says, “Quantifying the impact of Brexit is highly speculative due to the many political variables involved. However, the reliance on the UK as a single market by the food sector does show which companies are more prone to feel the effects of Brexit.

 “In sweet and savoury snacks, Unilever generates two thirds of its global sales in the UK and is therefore likely to be more impacted by Brexit than Nestlé in the same category. The UK is also an important market for Mondelez, with its Dairylea Lunchables ready-meal brand worth $32 million in 2015. The same can be said for several of Mondelez’s confectionery brands, such as Green & Black’s and Maynard’s, for which the UK is a core market.”

The Kantar Retail’s UK and European analyst team also notes, “Tesco has strong interests in Central Europe (Poland, Czech Republic, Slovakia and Hungary) and Brexit will impact cash inflows and outflows, as well as the company’s ability to invest.  Sainsbury’s may reconsider its current Netto business in partnership with Dansk Supermarket. Morrisons is well-situated as its processing plants are based locally in the UK. However, it will be more exposed to commodity price fluctuations due to its membership in the European buying group AMS. Marks & Spencer sources most of its products locally, but its French supermarkets will be exposed to the Brexit changes.”

 Touch base on shelf

“The retailers, brands and products that are already effectively targeting these consumer trends are now best placed to deal with the fallout of Brexit,” is Canadean’s view of the changes that will be sparked by Brexit. “On the flipside, those who have failed to adjust effectively to prevailing consumer trends are likely to fall further behind.”

Sam Ellison, managing partner at Redshoe Brand Design, also comments, “There are so many things impacting brands today – empowered consumers, increased competition and uncertainty – all of which mean that brands are having to work harder to stand out while also having to push for more impact from their budgets. Where I can see this having an effect on packaging is among those brands that understand the importance of integrating brand messaging across all brand touch points, reflecting it along the whole customer purchasing journey, shopping experience and on shelf.  The in-store experience where a consumer is faced with the product on shelf is the point when a brand has to live up to its reputation.”

“While there are some clients who want to investigate trendsetting design, many follow the same formulas that have been used for a long time,” says Wright.  A plastic bottle with a label on it – be it paper, plastic or printed directly on the bottle – has changed little. What has changed is the content. From a design perspective, we have to be more aware of this, not just in terms of regulatory information, but also social media technologies and globalisation requiring multiple languages.”

Packaging will play an ever larger role in coming years, developing relationships with future shoppers. What began as appealing to the millennial group will then move to younger Generation Z consumers, who have their own sensibilities. Retailers and brands will have to evolve to meet the new demands that consumers of today and tomorrow will demand of them.