Why Sustainable Packaging Should Be at the Forefront of Private Brand Thinking

Globally, private brand sales are soaring. According to Nielsen IQ, in the U.S. alone these brands now comprise 17 percent of all retail sales.

But when it comes to sustainability, particularly for packaging, the picture is a little murkier. Retailers’ private brand product managers tend to focus on the bottom line for differentiation to steal market share from national brands. Sustainability is rarely even on their radar.

And yet, retailers desperately searching for differentiation in those products have the answer right in front of them, particularly if they’re targeting younger shoppers: 90 percent of Gen Z consumers globally are willing to pay more for sustainable packaging, while 39 percent in the U.S. cited environmental impact as a very/extremely important factor when making purchasing decisions.

The Need for Data

Simply put, disregarding sustainable packaging is losing retailers sales. The historic growth of private brands has been due to price, but now quality is becoming a growing influence.

The question becomes if retailers want to solely differentiate on price vs. the national brands, or whether other distinguishing factors — such as recyclability — should come into play.

Largely, what’s stopping retailers from doing so is a lack of accurate data. They assume a more sustainable plastic bottle would be more expensive than its traditional counterpart, but they don’t know for certain. It could be the same cost per unit. It might even be cheaper!

After all, lightweighting and resizing bottles to use less and/or recycled plastic can positively impact logistics and fuel costs. Not to mention that 30g of plastic will obviously cost more than 25g.

Data is the key to understanding the total cost of goods and having some control over it. Only when retailers have the baseline of what packaging currently costs across all their private brand SKUs will they see the scale of the challenge — and reap the rewards.

Avoidance Tactics

Retailers are, understandably, also worried about perceptions over sustainability. They see national brands setting challenging targets for themselves and then being criticized when they don’t meet them. The U.S. historically has had little legislation to force them to change their ways.

In some cases, it leads to avoiding the issue entirely. They leave it to the supplier of the private-brand products to decide what packaging is used and it’s rare for anyone to instruct product managers to pay more to ensure the packaging is recyclable.

But that's changing fast. The Extended Producer Responsibility (EPR) legislation already in place in states like Maine and California — with more coming across the U.S. — means retailers could face six-figure fees if their packaging isn't suitably sustainable.

The impact is even greater for retailers with a global footprint. Stringent EPR legislation is either in place or coming in nearly every country in Europe. Many territories require labelling to tell consumers if the packaging is recyclable. And even in the U.S., the How2Recycle label may not be mandatory but is still a recognized industry standard that can increase both brand recognition and loyalty.

Leverage the Differentiation

It comes down to the fact that retailers’ private brands are fighting for shelf space with the big national and global brands. Packaging is how they stand out from that crowd — not just its design, shape and color, but also its sustainability credentials.

The stick may be EPR and other legislation, but the carrot is that there are real benefits to be gained. It manages risk, it drives efficiency through the value chain, and it delivers sustainable packaging to help the environment.

Therefore, maybe it’s time to think about packaging not just as a cost but as a value-add. Retailers just need accurate, transparent data and the willingness to use it to gain a competitive advantage.

Trevor Yong is client services director at packaging consultancy Aura.