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ENTRY - Unsaleables Innovation Awards 2005 Submission by MeadWestvaco Coated Board Contact Information: Michael Moshell 334-448-6410 phone Marketing Analyst 334-448-6482 fax MeadWestvaco Coated Board 1000 Broad Street Phenix City, AL 36868-0520 I. Overview of Innovation For years, it’s been retailers vs. food manufacturers in the unsaleables mêlée. This ongoing—and rather heated—debate centers around just who is responsible for frozen foods at the point the majority of product damage occurs. Once the food manufacturers’ trucks leave the store loading docks, those manufacturers assign responsibility to the retailer, citing their then lack of control over handling and/or refrigerator and freezer temperatures, both of which contribute to packaging and freeze-thaw damage. However, retailers disavow responsibility until the product reaches supermarket shelves. Bottom line – collapsed, crushed and torn frozen food cartons do not sell, substantially affecting both the food manufacturer’s and the supermarket owner’s profit. Well aware that this industry debate affects many of its customers, global packaging company MeadWestvaco Coated Board (MeadWestvaco) decided to examine its role in the process. What, if any, difference did the use of its paperboard or any paperboard product make in the percentage of unsalesables? And, if the paperboard did make a difference, was it significant enough for the food manufacturers to consider a change? If the answer was yes, it was time to advocate for a potential solution – a packaging approach that would help protect frozen food products from the food manufacturer’s packing line to the retailer’s supermarket shelves. Determining paperboard’s significance in the frozen food fray, however, required the input of objective, third-party experts. This was an unusual path for a packaging company to take and, according to industry leaders like Mike Ghassali, Sr., Vice President of Pittsburgh-based Unsaleables Innovation Awards 2005 Page 2 Genco Damage Research (Genco)1, an innovative, responsive and responsible step for MeadWestvaco. In fact, according to Mr. Ghassali, this was the first time he had ever been approached by a paperboard supplier to examine the manufacturer-to-retailer process and assess product responsiveness. What did MeadWestvaco stand to gain? Information that could help set a standard for innovation in frozen food packaging. Compression strength also had to play a role in the examination process. Changes in temperatures from truck to dock to supermarket shelf cause warming and cooling of the carton. The water generated by thawing can interact with the fine hair-like fibers that compose the surface of the folded frozen food cartons. When these fibers absorb too much moisture, they begin to push away from each other and the carton collapses. Therefore, to factor compression strength into the assessment, MeadWestvaco also approached Michigan State University’s School of Packaging, Center for Food and Pharmaceutical Packaging Research (MSU).2 Both Genco and MSU agreed to participate in this unique research endeavor that stood to benefit all the industry players. Plans were drawn for three studies to be conducted. The first study would track frozen food packages from manufacturer to store shelf. The other two studies would assess paperboard performance – one in retail shopping environments and one in the laboratory. In each case, comparisons would be drawn between MeadWestvaco’s Coated Natural Kraft® (CNK) folding cartonboard, SBS (bleached board), poly-coated SBS and CRB (coated recycled board). The results, detailed below, substantiate that the paperboard packaging used for frozen food cartons not only makes a difference in performance, but also can dramatically decrease the number of unsalesables in the packaging-to-sales cycle. a. Challenges Addressed To understand the industry’s ―pain,‖ MeadWestvaco first had to be well versed on where product damage occurred from the food manufacturer to the store shelf. Well-reputed damage research company Genco would study frozen food cartons across the cycle to establish where the damage took place and if there was, indeed, a role for paperboard to play along the way. Once it was determined the paperboard’s compression strength and packaging performance did matter, Genco was asked to provide an objective statistical assessment of whether the numbers of crushed, torn or collapsed cartons reflected a difference in paperboards. 1 Genco Damage Research contributes to the annual Unsaleables Benchmark Report jointly sponsored by the Grocery Manufacturers of America and the Food Marketing Institute. 2 Michigan State University’s packaging schools is a recognized laboratory for testing, research into new technologies, and product evaluations for the packaging industry. Unsaleables Innovation Awards 2005 Page 3 Meanwhile, Michigan State University’s School of Packaging, Center for Food and Pharmaceutical Packaging Research (MSU) applied the laboratory perspective to possible compression strength variances across paperboard. b. Approach Genco’s initial three-month study tracked over 6,500 frozen food products from manufacturer to supermarket shelf. First, Genco conferred with MeadWestvaco to establish a target list of products packaged in CNK (Coated Natural Kraft), SBS (bleached board), poly-coated SBS and CRB (coated recycled board). Genco then studied 12 items, tracking a total of 3,500 cases from the frozen food manufacturing plant to leading supermarket chains’ distribution centers on both U.S. coasts. The environmental temperatures of plants, facilities and trucks storing inventory as well as the condition of the packages were monitored at each step. From MeadWestvaco’s vantage, if the damage took place after the goods reached the retailer, the next logical step in setting a standard for innovation was assessing the packaging materials themselves. Consequently, the company turned its attention to identifying differences in paperboard compression strengths and performances in the market place, and confirming if those played out in the freezer/refrigerator sections across America. For a laboratory evaluation of compression strength, MeadWestvaco approached MSU. Former MSU Director Dr. Bruce Harte and, under his supervision, graduate student Koushik Saha agreed to the proposal. The project they designed — Determination of Factors Affecting Compression Strength for Packages Subjected to Multiple Freeze-Thaw Cycles — ensured a high level of probability in replication in supermarket cases. In these tests, Saha compared carton samples of CNK, SBS, CRB and polyethylene-coated SBS. Fifty cartons of each sample were filled with frozen peas and hand glued closed, then subjected to one-hour of freezing at 0º F followed by 30 minutes thawing at 72º F. Cartons were run through the freeze/thaw cycle a total of five times to reproduce exposure in distribution, and their compression strengths were assessed at each stage. Relative rankings measured the compression resistance of each package type. At the same time, MeadWestvaco asked Genco to track paperboard performance in the retail setting. To that end, Genco evaluated 21,160 cartons across a list of 30 competitive products packaged on different substrates. Over a two-month period, researchers visited 212 supermarkets, measuring the outside temperature and humidity, and taking similar readings in three locations within those stores. The researchers then checked the freezer sections and conducted the same readings closest to the target product packages. Unsaleables Innovation Awards 2005 Page 4 c. Success Criteria To demonstrate industry impact, MeadWestvaco was searching for statistically significant, third-party proof that packaging substrate choice reduces unsaleables. That statistical proof could generate a demand for innovations in substrates. On a corporate level, MeadWestvaco recognized that just a minor difference in cartonboard performance would garner only minimal industry response. The savings offered across paperboard alternatives would have to be dramatic enough to motivate food manufacturers to change. MeadWestvaco and Genco determined, based on industry knowledge and polls, that food manufacturers would have to recognize between 20-30% reduction in damage to consider changing paperboard substrates. Taking a 25% reduction in damage as a standard, the researchers calculated that 21,160 cartons across a list of 30 competitive products on different substrates would have to be evaluated. II. Results and Benefits a. Achievements Genco’s initial study, tracking frozen food products from manufacturer to supermarket shelf, demonstrated that virtually all package damage occurs after the product reaches the supermarket loading dock. In fact, until the pallets arrived at the supermarket loading dock, there was little if any damage to the frozen food cartons. This meant MeadWestvaco’s advocating for a paperboard that offered better performance could allay some of the unsaleables dilemma. But did the paperboard make a difference in compression strengths? According to MSU’s Dr. Harte, the kind of board the food manufacturer uses definitely impacts long lasting product packaging. MSU compression strength study results indicated: Unsaleables Innovation Awards 2005 Page 5 Genco was also proving that paperboard performance varied in the retail environment. Assessments of the 21,160 cartons showed: Paperboard SBS SUS CNK Total Samples 8,488 2,533 10,700 21,721 Damage 235 59 166 460 Rate 2.77% 2.33% 1.55% 2.12% Unsaleables Innovation Awards 2005 Page 6 i. Original Expectations Like any paperboard manufacturer, MeadWestvaco had conducted its own internal testing and its anecdotal evidence showed a large difference in frozen food packaging performance. The company hoped a more rigorous, third-party assessment by subject-matter experts would bear that out. Further, MeadWestvaco recognized the differences in performance had to be substantial enough to capture attention. A small difference between alternative paperboards would not be enough to motivate industry attention, much less change. Genco and MSU, which saw the assessment as an important industry benchmark, placed even more rigorous demands on testing and results by levying their own standards on the process and expanding the sample size. ii. Unexpected Benefits By completing the initial studies tracking products from manufacturer to store shelf, the participants now understand wherein the supply chain damage occurs. Ideally, all the supply chain players would heed the results and, together, motivate changes that could spell improvement to their bottom lines. However, given how loud this debate rages between the food manufacturers and retailers, and the stakes involved, this benefit may or may not be realized. For MeadWestvaco, which expected to rate high in the comparisons, CNK’s statistically significant difference over the most direct rival’s paperboard SUS exceeded all expectations. Overall, for the industry and for all paperboard manufacturers, these studies now provide a focus for innovation as they demonstrate the ―real world‖ effect on frozen food cartons. b. Benefits This research proves that a food manufacturer could reduce product damage by making a conscious choice of paperboard substrate — despite the fact that the actual paperboard substrate is a very small percentage of the overall cost of product sold. In a cost conscious and highly competitive industry, any reduction in unsaleables is a worthy goal. When a product choice that can make 20 to 30% reduction in unsaleables is available, it is time for the industry participants on both sides of the aisle to take notice — and demand that product innovation. Unsaleables Innovation Awards 2005 Page 7 c. Measurements For damage assessment, MeadWestvaco worked closely with Genco to develop a list of paired competitive SKUs where each company chose a different type of paperboard substrate, yet the product had the same size, weight and shape. Paperboard substrates included CNK, SUS, SBS and CRB. (CRB is not reflected in the tallies as only a low number of samples were available.) For example, Genco was to compare packaging between companies who offered 8 ounce ice pops: one packaged in CNK and a competitor using SBS. To achieve statistical significance with relatively small damage rates, Genco researchers analyzed 22,638 such samples. Auditors visited stores in various regions and literally counted the paired SKUs on the shelf, recording the number of damaged cartons found. Damaged cartons were defined as those that were crushed, torn, dented or opened — in short, generally damaged in a way that might influence a customer to bypass that product. This information was entered into handheld scanning units. Auditors also captured the temperature and humidity outside, in the store, near the freezer, and in the freezer as well as the style of freezers used in each stores. Measurements for the MSU studies were based on comparisons of compression strength as substantiated by readings made by Lansmont compression tester and rankings run through a statistical procedure – Analysis of Variance (ANOVA), which looks at the variability within the sample numbers. d. Pitfalls and Remedies Manufacturers typically ship to all areas of the country and need to consider the extremes that their packages may encounter when defining specifications. Laboratory paperboard testing is typically performed at 73º F and 50% Relative Humidity (the measure of moisture content in the air). Yet the National Weather Service’s average data of 33 years and 273 cities throughout the U.S. demonstrates an average morning relative humidity is 80%. Therefore, ignoring variations in climate would have been an error since packages showed less damage in cold, frigid environments versus hot, humid climates. To remedy this, MeadWestvaco and Genco pinpointed supermarket locations that would reflect a variety of climates: Texas, Louisiana, Georgia, Florida and Pennsylvania, during the months of June and July of 2004. Unsaleables Innovation Awards 2005 Page 8 III. Applicability and Relevance to Other Organizations a. Lessons Learned and Shared More than half the returns in the supermarket industry – 57% – are due to damage coming from packaging, handling, shipping, receiving and stocking. The ability to make a significant reduction in this challenge to the frozen food product stands to benefit everyone involved. However, as indicated by Genco’s Ghassali, few food manufacturers know what they are looking for when they determine paperboard selection. Instead, packaging specifications tend to be set on static laboratory tests in controlled conditions. These tests and results substantiate that there is a difference, and food manufacturers need to assess how much the paper they use is costing them in damages. b. Implementation A carton is not just a carton. Industry players would be well served to draw their own comparisons, set standards for best practices and demand product innovation that decreases unsaleables. The improved performance available can spell differences in bottom lines, customer satisfaction and even our environment. c. Mirroring Success For food manufacturers and retailers, this innovative approach underscores the importance of coming together to find potential solutions to a problem for which no one wants to take responsibility. For paperboard manufacturers, a new standard set for performance could herald a drive for product improvement that would benefit established customers and the industry as a whole. About MeadWestvaco Corporation MeadWestvaco, headquartered in Stamford, Conn., is a global packaging company that delivers high-value packaging solutions and products to the world’s most recognized companies in the food and beverage, media and entertainment, personal care, cosmetic and healthcare industries. The company also has market-leading positions in its Consumer & Office Products, Specialty Chemicals and Specialty Papers businesses. MeadWestvaco, with operations in more than 29 countries, has been selected for the Dow Jones Sustainability Indexes, and manages its forestlands in accordance with the Sustainable Forestry Initiative®. For more information, please visit www.meadwestvaco.com.
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