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Pira International examines the key factors driving demand for RRP and explores the impact that technological developments have had on the market and their likely future effects.
Developments in retailing, distribution and handling have altered traditional boundaries between secondary and primary packaging in the retail environment. The introduction of reusable plastic containers for short shelf life applications and the emergence of hard discounters have seen secondary packaging play an increasing role as an in-store display material.
Retail ready packaging (RRP) is a system of packaging and merchandising that allows goods to be moved direct to shelf with minimal handling, enabling products to be displayed effectively within the secondary packaging medium.
Key driversThe key benefits in utilising RRP lie in the following areas:
On-shelf availability
Out-of-stock situations represent a perennial concern for retailers because they are both a lost sales opportunity and an inefficient use of sales space. Introducing RRP can address this issue, facilitating replenishment via improved identification in the warehouse, easier opening and shelf filling, improved stock rotation and reduced spoilage of fresh products.
 Table 1. Impact of retail ready packaging.
Faster replenishment enables retailers to benefit from improved efficiencies through lower wage costs, improvements to code rotation and reductions in out-of-date product losses.
Presentation
The use of imaginative designs enables RRP to complement the primary pack to facilitate display and improve product recognition in both the warehouse and the store, while retail ready solutions for bulk products such as dollies and metal cages also improve display. However, badly executed RRP and poor housekeeping can prove a hindrance to customers.
Environmental impact
Retailers are also keen to exploit the environmental credentials of ready packaging solutions. While these are relatively easy to demonstrate when using reusable packaging, the appearance of 'extra' packaging on the shelf requires a broader argument based on overall supply chain efficiencies and emphasis on the recyclability of corrugated.
Standardisation
Greater standardisation of shelf design and dimensions could allay manufacturers' fears of rising costs, but will require greater co-operation between retailers, who are anxious to differentiate their offer. Impact of retail ready packaging
Although retailers have been the main drivers behind RRP, all parties should benefit from improved efficiencies throughout the whole supply chain, enabling sales growth and improved consumer choice (Table 1). Key technology trends The most significant developments in recent years have resulted in improvements to product quality, providing a new generation of corrugated board grades with improved strength-to-weight ratio, superior printability and better protection. While further improvements are anticipated, future developments are more likely to be centred upon improvements in handling and logistics, utilising new technologies such as RFID.
Microflute
Microflute constructions comprising E, F and G/N flutes are estimated to have grown by more than 5 per cent per annum in Europe since 2001 and now account for more than 10 per cent of total usage. Retailer pressure for smaller packs is likely to lead to further growth for microflute grades that can offer print and cost benefits over conventional flutes and folding cartons.
Lightweight container boards
One of the most interesting technological developments over the past few years has been the development and use of lighter weight liners and flutings. Improved papermaking technologies have ensured that the overall structural properties of the corrugated container can be maintained when introducing such lightweight materials, of 100gsm and below, to produce economic and environmental benefits.
Given retailers' drive towards smaller transit packs and RRP solutions, such benefits are likely to be well received and should ensure the widespread adoption of lightweight corrugated materials in fast-moving consumer goods (FMCG) markets.
Improved print capabilities
The rapid appearance of corrugated on to supermarket shelves as a consequence of trends to RRP has significant consequences for print. The vast bulk of the FMCG market will remain conventional flexographic print, although greater numbers of colours are expected with increased usage of white outer liners, to maximise on-shelf impact.
High-quality flexo post-print, direct litho printing on to microflute and digital printing are expected to play a greater role in RRP solutions in future.
Pack design innovation
Retailer interest in RRP has necessitated significant investment in design for corrugated manufacturers, to provide smaller packs that are easier to open and can be converted from a transit pack to an on-shelf display tray in seconds. Greater collaboration at each stage of the supply chain should ensure that steady progress can continue in developing RRP solutions that benefit all parties.
Radio frequency identification
Radio frequency identification (RFID) is emerging as a key technology, with the potential to change existing delivery models in the packaging industry. A number of retailers and brand manufacturers are already utilising the technology, and its use is expected to develop rapidly over the forecast period, as companies continue to strive for greater efficiencies in logistics. The speed at which this occurs is to a large extent dependent upon cost. Although significant strides have been made recently - the cost of the chip is around a tenth of that of five years ago - further reductions and technical amendments are likely before widespread adoption is achieved.
Material markets and forecastsPrimary pack demand grew by nearly 2.5 per cent per annum over the five years to 2006. Further growth is forecast, but the prospects are very different for the main types of packaging (Table 2).
While substitution trends between individual primary pack types are relevant within the context of each end-use market, RRP considerations are based on the relative integrity of the primary pack, which can be split into three broad categories:
- Rigid packs, with a high degree of structural rigidity, such as glass and metal;
- Semirigid, with some inherent strength but also requiring a degree of protection for the secondary pack - typical examples include folding cartons;
- Flexible, with little inherent strength, requiring a significant amount of protection from the secondary packaging material.
 Table 2. Trends in broad pack types 2001-11 (%).
Corrugated will continue to account for the vast majority of secondary packs in use, although the share of reusable outers will increase slightly over the forecast period. The main developments are expected in Europe, while usage of reusables is lower in the US and Asia. A higher proportion of wood and other traditional materials are used in less developed markets, but these represent a declining share of European markets (Table 3).
 Table 3. Trends in secondary packaging materials 2001-11 (%).
Demand for RRP will grow by more than 5 per cent per annum, well above anticipated growth in total corrugated usage. Although retailer demand for retail ready solutions involves significant substitution from regular cases to die-cut packaging, the overall impact in terms of volume is less clear. Improved design can often result in board economies that act to depress volume growth in tonnage terms, but this can often be offset by moves to smaller secondary/transit packs.
End use markets and forecasts Fresh food accounts for more than 30 per cent of all usage in the end use markets under review. Other important markets include milk, cheese and other dairy products, baked goods, confectionery, dried goods, carbonated soft drinks, and beer and cider. RRP penetration is higher in Europe, reflecting a much more highly concentrated retail sector than in the US and Japan. Furthermore, the vast transport differences involved in distributing within the US, coupled with the country's tradition in specifying higher strength materials, ensures that greater attention will continue to be given to protection rather than display performance as in European markets.
RRP usage in China and India will continue to be restricted by the underdeveloped retail sectors in these countries, but penetration is forecast to increase strongly as Western influences continue to take hold.
In Europe, demand for RRP is highest in Germany and the UK, which together account for almost half of total usage. Both have enjoyed strong growth over the past few years, and although the future trend is expected to slow, it will remain well above the trend in overall food consumption and primary pack usage. RRP consumption in France, Italy and Spain is bolstered by strong demand in fresh food applications, notably fruit and vegetables (see Table 5).
UK
The UK's usage of die-cut corrugated containers has traditionally been well below the European average, with Fédération européenne des fabricants de carton ondulé (FEFCO) data even reporting a reduction from 33 per cent in 2001 to 30 per cent in 2005. However, retailer demands for RRP solutions are set to generate significant growth in die-cut applications, which are expected to increase by more than 5 per cent per annum. While such growth is lower than in other European countries, it should be set against an overall reduction in corrugated demand of more than 1 per cent per annum. Table 5. Retail ready packaging consumption by country 2001-11 ('000 tonnes).
Germany
RRP usage in Germany is spearheaded by the hard discounters, Aldi and Lidl, where the appearance of transit packaging on the supermarket shelf or in bulk displays has been commonplace for some time.
France
France accounts for 19 per cent of overall RRP usage in Europe, with relatively high usage recorded in wine, toiletries and personal care, household, and milk, cheese and other dairy products.
Italy
RRP usage amongst ambient products is lower than other European markets, but overall usage is boosted by demand for decorative die-cut trays for fresh fruit and vegetables.
Spain
RRP usage in is broadly in line with the country's share of overall food and drink consumption. Die-cut containers (including produce trays) represent slightly less than half of total usage, ahead of plastic, while usage of simple shrink wrap trays is slightly higher than the European average.
US
Retail concentration in the US is lower than the major European markets, with the top five food retailers controlling around one-third of the market. While the industry is consolidating, the US consumer is being faced with far greater choice as the variety of retail formats continues to expand.
The US corrugated market is mature, although food and beverages have grown at a faster pace than other end use markets. RRP opportunities have been boosted by the success in developing the corrugated common footprint (CCF) for fresh produce packaging, which has successfully defended single-trip packaging against returnable plastic containers (RPCs).
China
Since joining the World Trade Organization (WTO) in 2001, China has seen a number of foreign businesses entering its market, with entrants able to operate wholly owned subsidiaries in China since 2004. Foreign investment is almost certain to increase as China continues its transition towards a modern, sophisticated retail sector, and RRP demand should grow rapidly, albeit from a very low base. It is estimated that RRP solutions will account for less than 12 per cent of all secondary packaging used by 2011, compared to more than 40 per cent in Europe.
India
Retailing is an increasingly important part of the Indian economy, contributing around 10-11 per cent of India's GDP. It remains highly fragmented, with the organised sector representing just 3 per cent of the total market, as restrictions of foreign direct investment have prevented major multinational retailers from entering the market. Consumer markets account for in excess of a third of all corrugated usage, but RRP opportunities are currently limited by the fragmented nature of the retail market. Nevertheless, with the organised retail sector forecast to reach 10 per cent of the market by 2010, there are good prospects for growth in percentage terms.
Japan
The Japanese retail market is largely dominated by domestic groups, with the sluggish growth of the 1990s having kept most leading global retailers out of the market until Wal-Mart's move for Seiyu in December 2005.
Although processed food and drinks account for more than half of Japanese corrugated board consumption, demand for RRP is not expected to be a strong as in Europe, where the retail sector is far more concentrated. |
According to a Pira report, RFID and printed electronics will have a big impact on the printing and publishing industries 
A little longer than 80 days perhaps, but UV-cure inkjet is circumnavigating the globe at its own accelerating pace. 
