Packaging reuse: latent need and business opportunity

The reuse of packaging is one of the main aspects of the circular economy – an economic model that values ​​the sustainable production of goods and services, optimizing the use of resources and reducing the waste generated. The term “circular” suggests the concept of reuse, as opposed to the traditionally linear model in which we extract resources, produce, consume and throw them away. Of course, we can recycle materials, and recycling plays an important role, but it is not enough. Even if certain bottlenecks are overcome, the amount of garbage we generate is monstrous. Hence the need for circular solutions, which nip the problem in the bud by changing current consumption patterns and formats.

In 2017, the first global analysis of the production of plastics was published in the journal Science Advances. The study determined that until then we had produced 8,3 billion tons of plastic, and that, until 2015, 6,3 billion tons of plastic waste were generated, of which only 9% were recycled, 12% incinerated, and 79% accumulated in landfills or in the environment. If this trend is maintained, it is estimated that the accumulation will reach 12 billion tons of plastic waste in 2050. If we filled trucks with that volume of garbage and placed them side by side, we would be able to circle the Earth 200 times! It's so much rubbish that, even trying to scale it, it's still hard to make tangible.

Today, most packaging is used only once before being discarded. Thus, the problem of packaging reuse is one of the main points that needs to be addressed in order to build a more sustainable world. However, the theme is not only environmental. In 2019, the Ellen McArthur Foundation estimated that converting 20% ​​of plastic packaging into reusable models adds up to a $10 billion business opportunity.

The subject, whether due to its environmental, social or economic relevance, is not new. One of the ways that the problem has been addressed is through sustainable supermarkets, without packaging and selling in bulk. Recently, Henrique Alvarenga spoke about the German Original Unverpakt, created in 2014. Today, there are around 500 supermarkets in the world that follow the concept of zero waste, and you can consult the database raised by Bepakt.

In recent years, we have seen many initiatives in the market. On August 12, 2020, Nivea announced the test of kiosks for refills of liquid bath soaps. The test is being carried out in Germany in partnership with a network of drugstores, in selected pharmacies. The process involves a machine, a refill station and works as follows: the consumer takes an empty container from the station, fills it with one of the two soap options available, and a label is printed so that payment can be made. In the next purchase, the consumer brings the packaging for reuse, and this refill process can be done up to three times, for sanitary reasons (there is a special bar code to ensure that the limit is respected). When the package reaches the maximum level of reuse, the customer hands it over to the checkout and, in exchange, receives a new package and gets a free refill.

Also in 2020, at the end of May, the Nestle has started testing pet food and soluble coffee refill stations in three Nestle stores in Switzerland. In 2019, we saw the Unilever partnership with Algramo, a Chilean startup that sells food and hygiene products through refill machines and also through mobile units, which circulate through neighborhoods filling reusable bottles with products like OMO. In the same year, The Body Shop (bought by Natura in 2017), also tested a refill station in London. The sustainability factor is especially strong in the beauty and cosmetics industry, especially in the brand's relationship with younger generations, who have already entered a world where information is instantaneous and everyone is interconnected.

Despite the various encouraging initiatives that we have seen, we cannot fail to mention the challenges that these new models bring to the supply chain. As already mentioned by Henrique Alvarenga, the bulk sale format could require a review of storage formats in distribution centers, what equipment is needed for loading and unloading at DCs and POS, the process of replenishing shelves in supermarkets… And all this ensuring compliance with health surveillance standards. In the case of refill stations, there is also the supply chain for the equipment, which are heavy and large machines. Rethinking the stages of supply chains would be essential for these sales formats to become scalable.

There is still a consideration much earlier than adapting the supply chain, which is understanding the consumer's journey. Today's society is indeed more aware and more demanding when it comes to sustainability, but no solution gains mass adoption if it is not convenient or if it does not solve a problem for this consumer. In fact, there are more sides to this equation than just the people, as there is also the figure of the retailer. How many refill machines are enough not to generate queues at the supermarket of people waiting to fill their packages? How many more employees will supermarkets need to deal with any problems with these machines, or to sell in bulk? Which retailers actually have store space available to have multiple machines?

An initiative that approaches the problem in another way is the Loop platform, developed by Terracycle in a nearly year-long effort together with consumer goods giants such as P&G, Nestle, Pepsico, Unilever, Danone and Mondelez. The platform, which started pilots in May 2019, provides a product delivery service in reusable packaging, and also includes the collection and cleaning of containers. The packs are designed for around 100 uses, and the model involves a deposit by consumers, which is returned to the customer's account when the packs are returned. In addition to sustainability, the platform is also winning over consumers for the aesthetics of the packaging. The design aspect has been a great attraction to attract customers.

The platform is expanding in retail and already operates in the US with the Walgreens and Kroger chains, in France with Carrefour and in the United Kingdom with Tesco. Soon, operations will also begin in Canada, Australia, Germany and Japan. The limited portfolio was one of the main complaints from customers in the pilot, which is resolved with the sale at large retailers, because even if there is no Loop product, the customer can purchase the item that they normally would. The startup's vision is for the model to scale in a similar way to what happened to organic products in the US, which started with small sections within markets and were increasingly growing in categories and gaining more space. In this retail model, the consumer brings the packaging to the market, without having to clean it, and already buys packaged products straight from the shelves. With regard to the supply chain, the reverse logistics of packaging and the management of inventories in the chain will be challenging. There are still many challenges, but the outlook is promising.

One of the TerraCycle CEO's speeches at the Personal Care Products Council Annual Conference, held in March 2020, very clearly illustrates why the program looks so promising: “It needs to be as close to a disposable system as possible. It needs to look disposable, but be reusable. So, when you're done, you don't have to clean it, you don't have to separate it, you throw it in the trash and it's collected, but instead of going to a landfill or for recycling, it's reused”. To effectively make a difference, sustainability initiatives need to be scalable, and it is perfectly possible, but not trivial, to build business models that are both profitable and sustainable. However, to be scalable, you need to look at the consumer journey and try to solve their problems, the same way we build our products and services to market in the business world.

Be sure to participate in 26th International Supply Chain Forum, which will take place from October 13th to 15th and will be 100% online. Four themes will be discussed there that have also been stirring the daily lives of logistics executives in Brazil: Reinventing the Supply Chain, the Digital Transformation of the Supply Chain, Transport and Infrastructure and E-commerce and New Retail.