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Home Products Our experts uncover key changes in consumer lifestyles and product development shaping the global home products market landscape; looking across home care, home and garden and pet care.

Home Care Packaging on the Verge of a “Recycling” Revolution

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The times are changing for the home care industry with the growing emphasis by major manufacturers on their own environmental footprint. Examples, such as Unilever’s #brightFuture global campaign, which highlighted its wider corporate sustainability initiative, could signal a growing importance and relevancy of sustainability in its brand strategy as well as its broader corporate image. It partly highlights the use of smaller packaging in its home care portfolio that speaks to the wider concern of such companies around sustainability, mainly the “triple-bottom line” (3BL) ie people, planet, and profit.

The leading home care manufacturer, Procter & Gamble, announced in 2015 that it is looking to widen its concern in this regard beyond compaction and more toward packaging material. It is seeking to reduce its environmental footprint by packaging 230 million bottles of its key home care brands with up to 50% recycled materials (largely plastics)  as part of its 2020 goals. Yet, the uses of sustainable materials, at least more recyclable or biodegradable ones, have been available in developed markets for some time. The Belgian-based company Ecover has been a pioneer of sustainability in home care products and packaging with its biological concentrated formulations and bio-based packaging since the 1980s. Therefore, one question is why are major global home care players now showing a greater emphasis on their sustainability initiatives packaging.

Arguably, it can be said that it is because of the increasing commercial viability of bio-plastics in a more volatile petro-chemical market. Second, companies are looking to broaden margins through cost-cutting exercises of which reformulation, compaction and packaging evolution are all part of this process.

Commercialisation of Biological Plastics

In 2014 petro-chemical feedstock, or crude oil, prices have increased extensively with companies being forced to seek more competitive alternatives, at least in terms of pricing. Natural alternatives proved to be the go-to alternative for many, boasting the dual benefit of reducing cost pressure from (petrochemical) raw materials allowing for margin growth, while also portraying an environmentally-conscious image.

The prices of bio-plastics were in general much higher than petro-plastics meaning that only a small number of “environment-centric” home care manufacturers, such as the Belgian-based Ecover or the US-based Method, use bio-feedstock in their packaging, at the expense of narrower margins. They do so not just for the environmental benefits that align with their wider corporate goals and brand positioning, but also to encourage the development of a broader ancillary bio-plastic industry. The development of this industry will be capable of being more competitive through technological development, capacity growth and ultimately economies of scale. It is therefore an if-you-build-it-they-will-come approach to commercialisation of bio-plastics so that price differentials against petro-chemical continue to narrow. To date, the chemical industry is already witnessing strong growth in demand for bio-based surfactants as the price of bio-feedstock is becoming commercially more attractive relative to petrochemicals.

Feedstocks, such as palm kernel oil or sugar cane, have already become commercially viable due to the relative high price of crude oil in 2014 and the relative price competitiveness of bio-feedstock. Yet it can be debated that the 2015 drop in petroleum prices retracted some of the advantage along with the surge in fracking that made the cost of adopting alternative solutions somewhat less commercially viable.

According to Dr Randy Bernhardt of Stepan Co chemical manufacturing, the competitive cost of biochemical feedstock and the conversion process for surfactants in 2014, relative to petrochemicals, have already caught up with crude oil. Palm kernel oil, for example, is already competitive with crude oil on a cost basis, indexing the price of the former to the latter at US$1.5 in early 2015, which dropped from US$5.5 in 1996. The same dynamics can be applied to the packaging feedstock market where starch-based plastics, such as sugar cane, have become more prominent.

Concentration and Compaction Support Margins

Home care formula concentration has been a prominent strategy in the laundry care category over the 2010-2015 period. Use of formulation concentration has simultaneously shrunk packaging sizes. Concentration via the reduction or removal of water from the formula in terms of liquids has served to cut costs in shipping. Compaction in packaging has brought about tangible cost savings that rippled along the supply chain all the way up to the retailer, bringing margin expansion.

Here the sustainability strategy seems effective up until the point of purchase, and it can be argued that there are limits to the strategy in the post-consumption stage. Brand owners should invest in the end-users’ or consumers’ education in the use of their product to ensure efficient dosing and recyclability of packaging. The post-consumption responsibility of the brand owners will lie in the design and material composition of their products. This is especially in packaging where recycling rates in developed markets, such as the US, reach as high as 34%, according to the US Environmental Protection Agency (EPA).

The times are changing in the home care packaging industry as it witnesses a commercial shift toward bio-feedstock and profitable recyclable strategies and designs. Pushing for biodegradable-packaging in addition to compact sizing and greater use of recyclable materials will build on manufacturers’ sustainability goals.

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