Packaging Matters for Food Safety and Your Brands-Quentin Yan

Packaging Matters: Food Safety and Your Brand Dr. Quentin Yan Director of Strategy & Development China Food & Beverage China Food & Beverage Innovation Forum Shanghai, May 15, 2014

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Good afternoon. Earlier today, you have heard from several distinguished speakers about why food safety is the foundation of the brands, and what the industry and government are doing to raise the bar for improving food safety. Now, it is my pleasure to have this opportunity to talk a little bit about packaging, and why packaging matters in securing the food safety and quality, and protecting your brands.

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Grocery Shopping in China Today “Is it safe?” “Is this of high quality?” “Can I trust this brand?”

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Now, think about a moment when you went grocery shopping long time ago. It used to be fun and worry-free, at least to me. Maybe you worried about forgetting something on your shopping list. Times have changed. The modernization in China has brought growing pains with it, such as pollution, the smog you experience every day, and the increased risk of food contaminations. The recurring food scares in recent years have wilted consumer confidence. Now think about your grocery shopping experience today: This mother doesn’t just take a product off the shelf, put it in her basket, and continue down the aisle. Instead, she will take the time to carefully inspect the product – check the expiration date, read the label, look at the condition of the package – asking herself important questions like: Is it safe? Is this of good quality? and Can I trust this brand? Where she gets clues for answers to her questions? Right there in her hand - THE PACKAGING.

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Packaging Matters™ • Safety

• Quality

• Brand

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In this new era of food safety, packaging matters. It maters to you, and to your consumers. Packaging is playing a more important role in ensuring food safety and quality, and gaining consumer confidence in your brand. It is packaging’s primary job to protect and preserve your product throughout the entire supply chain, and deliver the consistent quality every day. More importantly, packaging provides the first impression of your brand that impacts the consumer shopping behavior and the trust in your brand for food safety and quality. How do I know this? Well, I have been working for a global packaging leader for over 24 years.

MWV—How brands take shape

$5.4 billion total revenue in 2013

100 nations where we market our

products

30% revenue from emerging markets

15,000 employees in 30 countries

since 2004 Dow Jones Sustainability

World Index

4,300 Patents granted and pending

Packaging 82%

Food & Beverage Packaging 58%

Home, Health & Beauty Packaging 14%

Industrial Packaging 10%

Specialty Chemicals 18%

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At MWV, packaging is what we do, and we help brands take shape. MWV is a $5.4 billion company, focusing on packaging business, mostly in food and beverage packaging. We market our products in over 100 nations, with 30% from emerging markets such as China. We have 15,000 employees in 30 countries We have been on the Dow Jones Sustainability Index since 2004, a record held only by the prestigious few that truly cares about sustainability Our innovation is recognized through over 4,000 patents worldwide

Brands we partner with

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We work with some of the best known brands for packaging innovation. While I can only list a few here, we do partner with many of the food and beverage brands around the world. We are recognized as the industry leader with a long track record of safe and sustainable packaging which is supported by a team of professionals and in-house testing capabilities, and our strong commitment to safety, sustainability and product stewardship.

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Our unique approach to innovation

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When it comes to packaging innovation, we use a unique approach called Insight to In-Market. This integrated approach begins with a deep understanding of market and consumer insights which we apply to your brand strategy in the brand engagement step. The results lead to innovative packaging design and solutions using our expertise in materials, converting and automation. The goal is to get your product to in-market faster than your competition. I know that most of you as brand owners know your consumers and your consumers preferences as it relates to your food and beverage products — the taste, the color, the texture. At MWV, the focus on our work is understanding the impact packaging has on the consumer, how it drives purchasing decisions and influences product satisfaction. We consider every point along the packaging lifecycle , and we use these insights to drive packaging innovation and create brand experience through packaging. Individually, each component of this approach is perhaps not unique, but our ability to integrate it all together is very powerful. And I will give you a few examples.

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Insights into China’s consumers

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Over the years, we have conducted several deep consumer research on food and beverage packaging in both developed markets and emerging markets such as China. In one proprietary study called Packaging Matters, we seek to understand consumers’ satisfaction with packaging, and we found there are differences from category to category, and from regions to region. We identified opportunity areas where packaging can help brand owners to increase consumer satisfaction through packaging, particularly in emerging markets like China. In another consumer ethnographic research, we gained insights into consumer experience with packaged food and beverage within store, on the way home, in the home, storing it, using it, and then disposing of it. Again the insights help us uncover consumer’s paint points and unmet needs in various regions of the world that shape our packaging innovation priorities. Now I would like to share a few of our insights that have helped us shape our packaging strategies to address some of the food safety and quality issues that we are all facing today in China.

Source: MWV Third Party Analysis (total of 979 food safety incidents reported in China during 2009-2011)

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31% of food safety issues have the potential to be addressed by packaging.

• Counterfeiting • Fake or poor quality foods • Unsafe packaging material • Tampering • Contaminated foods • Spoiled foods • Expired foods

Consumer insights

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Insight #1: Last year, we conducted a research to analyze around 1,000 food safety incidents reported in China in recent years, with a goal to understand the root problems and what packaging can do to address some of the problems. No surprise that our research showed that the majority of food safety incidents are related to food processing that packaging can not help. However, we feel that 31% of the food safety incidents have the potential to be addressed by packaging. Things like (click here, the bullets appear on the screen): counterfeiting, fake or poor quality, expired, contaminated or spoiled food, use of unsafe packaging materials and tampering, contaminated foods, spoiled foods, and expired foods. These are the problems we are facing today, that packaging leaders should help address through packaging innovations. Take contaminated food as an example. You know and I know that there are so many places throughout the supply chain that food can be contaminated if packaging is not done right – in distribution, during transportation, in storage, stores or even at home. Nowadays, globalization and modern processing/packaging technologies have made that supply chain even longer, across the boarders and time, demanding more on packaging to protect and preserve the safety and quality throughout its long and rigorous journey. Unfortunately I have seen too often that packaging quality did not receive the proper attention it deserves, and its impact on consumer’s perception of your product quality and confidence in your brand is not fully recognized.

Source: MWV Internal Research 9

will not buy damaged packaged product

will switch brands because

of damaged packaging

Consumer insights

36% 75%

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Insight #2: We found in our research that 75% of consumers will not buy damaged packaged product, as consumers are concerned about the potential risk of product inside being affected. They will simply push it away and look for the next one that has no sign of tempering or damage. The consequences are obvious – you have to deal with the economics of unsaleables. To underscore the point further, (click here, the second data point appears on the screen), research shows that damaged packaging causes 36% of the consumer to switch brands entirely. If packaging is not designed to withstand the rigor of the journey and resulted in some level of damage that leads to food contamination, one single reported food safety incident, just one, could cause more consumers to switch brands. In a recent independent (Mintel) research on Chinese consumer attitude towards food safety, about 1/3 of consumers are “panic-stricken” who are always on high alert over food safety, and look for brands to offer food advice. Here is your opportunity to build your brands that are truly trusted by consumers for food safety and quality. That could have long-term impact on growing your top line. The cost of cutting corner when it comes to packaging quality could be more than you think if you only focus on your cost.

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Consumer insights

will pay more for safe food.

83%

Source: MWV Internal Research

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Insight #3: The good news is, that we found through our research, 83% of Chinese consumers are willing to pay a premium for safe food. 83%, that’s significant. A good example is baby formula. The food safety scandal over six years ago still has long-lasting impact on consumer confidence in domestic products, and the level of distrust motivates parents to continue buying imported brands and paying a premium. Here, their food safety concerns override price considerations. I am sure you all have your own stories of the extent you will personally go to for safe food.

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Packaging has the potential to address food safety issues. Packaging must handle the intense rigors of the food supply chain journey. Consumers will pay a premium for safe food.

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Let’s briefly re-cap where we are: 1. Packaging does play an important role when it comes to food safety, and has the potential to address a significant number of food safety issues 2. Your packaging must be able to handle the intense rigors of the long food supply journey, to protect and preserve your product, and 3. Consumers are willing to pay for safe food.

Packaging considerations for food and beverage innovation

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Product Quality Preservation

Material Safety/

Suitable Purity

Brand Protection & Security

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Now to help you develop your packaging strategies for your next innovative food and beverage product, we have created a framework you will find helpful. From packaging’s perspective, success in delivering on your brand promise depends on the execution and integration of three elements. First: packaging material safety – Is it suitable for direct food contact and intended use? Is it going to be in the frozer, used in the microwave, containing hot coffee, or oily product? Second: Does the packaging protect and preserve the quality of the food inside? For the extended period of time? And Third: Does the packaging help enhance the brand and project an image of safe and quality product? A successful packaging design must deliver on all three areas. It is like a puzzle – each piece is important, and all pieces are connected and fit together to give you that final Aha moment. I have a few examples to illustrate these points.


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Material Safety/

Suitable Purity

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Let’s start with material safety. Look at this little boy, as a father, I want to know if the cup my son is drinking from is safe. Is the cup material, both inside and outside, that my son is touching suitable for direct food contact? Because of the recent food scares, there is an increased awareness of potential packaging contamination risk in China. One that comes to mind is the plasticizer incident a few years ago. To reduce that risk, major changes in the food safety law, including regulation on food-related product and packaging standards, are underway that will set higher standards. As a global packaging leader, MWV supplies 100% virgin fiber based cupstock that is compliant with global food safety regulations, and we have a long track record for safe packaging materials. As the brand owner or manufacturer, you need to make sure your packaging partners are not only meeting food safety regulatory compliance, but going beyond to ensure that it will protect the product from potential contamination throughout the entire supply chain.

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The second element focuses on packaging’s ability to protect and preserve the quality of the food inside. Earlier I talked about damaged packaging and the impact on your brand, basically talking about protection. But consumers also expect when they open the packaging, your product is fresh and of high quality. In this photo, here’s a good example of a liquid packaging that will not only protect your safe product, but also preserve its quality, freshness and taste over its extended shelf life. Special packaging materials and aseptic packaging design contributed to its popularity and success in preserving the product quality throughout its complexed supply chain journey and over time. Over the years, MWV has been a key packaging material supplier to the liquid packaging market, and have partnered with some of the best known brands in the world to gain consumer confidence in the safety and quality of the product through packaging.

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Another example of innovative packaging designed to protect and preserve is the Evertain barrier paperboard container from MWV. It was developed based on our insights that consumers are demanding freshness and convenience for snack packaging. The packaging uses innovative food-safe barrier packaging material and converting technologies to create an air-tight container to keep the oxygen and moisture out, and lock the flavor and the freshness in, over an extended period of time. It is also designed to drive shelf appeal to help build your brand.

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That leads to our third point, packaging’s ability to help the brand build loyalty and project an image of safety and security. Your brand has less than seven seconds to engage the shopper in-aisle, also commonly known as the “first moment of truth.” The shopper has to readily identify your package as quality and safe. The best way to do is through graphics, differentiated packaging design, and patent-protected innovation. It could be the dispensing feature on this juice carton, a proprietary blow-molded container for ready meals, or a well designed multipack packaging that uniquely shapes your brand. A well-designed packaging will make it harder for low-cost copycat and counterfeiter to replicate. Advanced packaging technologies are also available to further protect your brand, such as smart packaging, anti-counterfeiting, tamper-evident, and track-and-trace, among others. Consumers want to make sure they are buying the “real thing” and not an imitation. And what happens if the imitation under performs? Your brand image suffers. Packaging has a huge impact on consumers as a communications tool for your brand. It helps your consumer to determine the authenticity of a brand, and gives your consumers a sense of security or confidence in safety and quality. As you can see, packaging plays an integral role in protecting your brand image and building loyalty among your consumers.

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Packaging Matters™

• Safety

• Quality

• Brand

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To conclude, while food safety and quality is a complex issue and no one magic bullet can address all the concerns of the consumers, we believe to secure product safety and consistent quality, day in and day out, packaging matters. Packaging is a key component of your product that protect and preserve your product throughout the long and rigorous supply chain journey – from the farm to the table, to the tip of your tongue. Packaging should be a key component of your brand strategy. When choosing your packaging partner, you want to engage with someone who has expertise in material safety, innovative packaging solutions to preserve your product quality, and the deep insights on the role packaging plays in enhancing brand image and loyalty. We can help you shape and build your brands that are truly trusted by consumers for food safety and quality.

Thank You

谢谢

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Thanks for your attention, Now this picture shows where I live. MWV headquarter is located in Richmond VA near Washington DC. You are welcome to visit us next time you are in the States, or you can visit our Asia Pacific headquarter right here in Shanghai. Now, I’d like to open the floor to questions.

Packaging Matters for Food Safety and Your Brands-Quentin Yan

Food

food beverage packaging

pending packaging

industrial packaging

packaging business

health beauty packaging

global packaging leader

new era of food safety

recurring food scares