Plastic Packaging Replaced by Recyclable Materials
The authors are analysts of NH Investment & Securities. They can be reached at mj27@nhqv.com, jack.baek@nhqv.com and kyeongkeun.kang@nhqv.com, respectively. – Ed.
1. Present: Use of recyclable packaging materials on the rise
In the global consumer goods market, the trend of replacing plastic packaging and container materials with recyclable materials such as paper or colorless PET has been rising. According to EUROMAP’s report on the use of plastic packaging materials in 63 countries, Korea’s per capita consumption of packaging plastics stood at 61.97kg in 2015, ranking second highest following Belgium (85.11kg). Of note, the figure for the US and China stood at 48.7kg and 24kg, respectively.
Amidst the explosive growth of the online shopping market, F&B companies have been seeking new packaging methods and materials that can keep their products fresh throughout delivery to end-consumers. At the same time, with demand for take-out orders and food delivery services soaring due to Covid-19, environmental pollution caused by food packaging has emerged as a major environmental issue for the sector. Meanwhile, consumer awareness of more eco-friendly packaging is also on the rise, alongside the recent introduction of more stringent regulations on single-use plastics. And, the heightening environmental awareness among consumers has played a positive role in directing F&B players’ attention towards the adoption of eco-friendly packaging and greater use of recyclable packaging materials.
Replacing plastic packaging materials with more recyclable materials should have the benefits of protecting the environment, promoting resource recycling, and bringing about health benefits for consumers. And, a reduction in packaging size should contribute to lowering logistics costs at F&B companies and retailers. Against this backdrop, we note that many firms have already made efforts to increase their use of eco-friendly materials for packaging, as well as reducing the size of overall packaging.
2. Future: Smart packaging era
F&B players are increasingly focusing on smart packaging—a packaging method based on cutting edge IT technologies such as NFC, IoT, and sensor technologies. The global smart packaging market is forecast to expand to US$46.2bn by 2025 (CAGR of 5%), according to research agency MarketsAndMarkets. Of note, smart packaging is aimed at fulfilling active functions beyond the inert passive containment and protection of goods.
Smart packaging can be roughly divided into two categories—active packaging, which aims to minimize food degradation, and intelligent packaging, which communicates changes in product conditions and other information. In detail, intelligent packagingmaterials can monitor the condition of either the packaged food or the food environment inside the package (including temperature, pH, etc) and transmit this information by means of sensors coupled to the packaging. Once changes are detected by the sensor, they are indicated via a color change in the packaging, with the level of product condition indicated by different colors.
Meanwhile, active packaging materials aim to extend the shelf-life or maintain/improve the condition of packaged food by protecting the food from bacterial contamination using special coating materials—which, in turn, should contribute to minimizing food waste. To control oxygen levels in order to reduce bacterial activities that cause food degradation, antimicrobial compounds and antioxidant agents are incorporated into packaging materials. Unlike intelligent packaging, active packaging does not transmit information regarding changes in food quality, but it is beneficial in that it minimizes food contamination.
3. Company cases
Of late, many domestic F&B and retail companies have made efforts to adopt more eco-friendly and recyclable packaging. For instance, Market Kurly, Korea’s leading food ecommerce player, announced its ‘All Paper Challenge’, under which it will replace most of its packaging materials with recyclable paper. We note that paper is a representative eco-friendly biodegradable material, and in Korea, the paper recycling rate is as high as 90%. According to the firm, using paper packaging will reduce its consumption of vinyl by 750 tons and of styrofoam by 2,130 tons annually.
Under its 3R (Redesign, Recycle, Recover) concept, CJCJ has been making efforts to develop more environmentally-friendly packaging, and reduce its plastic consumption for packaging purposes. For example, package optimization for Hetbahn (cooked rice product) that is designed to reduce the thickness of Hetbahn containers while keeping the containers’ protective features intact is known to have cut annual plastic consumption by 340 tons and carbon dioxide emissions by 550 tons. In addition, with the Thanksgiving holiday fast approaching, the company has announced that: 1) it will launch a new SPAM (CJCJ’s processed ham brand) packaging design without its signature yellow plastic lid; and 2) the entire packaging for its European Oil Gift Set (a premium cooking oil gift set) is to be made of only paper. We also note that CJCJ plans to minimize the sizes of its Chuseok gift set packaging and use only the by-products of its Hetbahn production lines to manufacture inner-containers for gift boxes. At the same time, the firm is increasing its use of paper, while reducing its use of non-woven fabric. It is estimated that all of CJCJ’s efforts regarding its Chuseok gift sets will reduce its plastic consumption by 86 tons, carbon dioxide emissions by 80 tons, and non-woven fabric consumption by 1mn sheets.
Lotte Chilsung has traded its signature green PET bottles with colorless PET bottles that are more easily recyclable, and it has also removed vinyl labels for some of its beverage products. For example, the firm began using transparent PET bottles for Soju products, and it was the first bottled water company to release a bottled water product with no label (ISIS 8.0 Eco). In 2020, Lotte Chilsung targets selling 1.8mn boxes of bottled water, and the inclusion of no-label products should allow the firm to significantly reduce label materials consumption and packaging waste (14.3mn fewer labels and 9 tons less packaging waste).
Adoption of smart packaging on the rise
Notable cases of adopting smart packaging include Frito Lay’s packaging for its tortilla chip snack Tostitos. The company has developed Tostitos bags (for use in special settings such as Super Bowl parties) with built-in LED lights and alcohol sensors—if the sensor detects alcohol, the LED light turns red. The packaging also features NFC chips, which help people summon an Uber with the tap of a smartphone button.
Another notable example is Insignia Technologies’ smart label, which is designed to change color over time to show how long a packet of food has been open. The firm’s smart label transmits information regarding the freshness of the packaged food, using technologies that respond to changes in oxygen and carbon dioxide levels.