The promise of digital packaging has been talked about in the packaging space for years. Yet companies are only just now beginning to realize the many benefits as well as the challenges and technical hurdles to make digital printing mainstream in their businesses.
The opportunity is certainly there – the market is forecast to grow to nearly $300 billion by 2024, according to Smithers Pira’s article “The Future of Digital Printing to 2024” in Flexo magazine. Certainly the number of digital printers targeting packaging materials continues to grow every year. However, even the most optimistic market studies suggest that digital is not likely to top 6 percent of the packaging market any time soon. Of course, some areas have seen more effect than others. Other estimates by Smithers Pira in “The Future of Digital Print for Packaging to 2018,” suggest that approximately 90 percent of the digital packaging work that is being done today is label printing.
This is not surprising, given the basis of competition in a large segment of the packaging industry today – delivering high quality at a near-commodity price. A particularly telling observation is that while a majority of packaging firms hold inventory for their customers, less than half feel able to charge for that service.
Many large package printing companies continue to job their digital work out to specialist subcontractors or partners. This can be a very successful strategy because digital technology is still evolving rapidly, and choosing between alternative technologies for some applications requires special expertise. After having chosen a technology, often more expertise is required, and in some cases, special, environmentally controlled areas must be created to house the new equipment. This is a lot of trouble to go through just to pick a new printer.
Printing, of course, is just the beginning of a digital-enabled work flow. Although the vast majority of packaging companies have developed great expertise in production planning, management processes and digital packaging in their front end, true digital finishing still lags. Digital cutters are integrated in some wide format printers that target prototypes and labels.
Frequently, discussions about digital packaging stop at the level of the package. The common wisdom is that digital packaging is only applicable to a few market segments and is costly to implement. In the cases of short runs and prototyping, for instance, the higher marginal unit costs of digital printing are traded off against the make-ready, inventory and obsolescence costs of traditional methodologies. In a time in which average run length is decreasing and the number of SKUs per run is increasing, the strengths of digital seem well matched to this portion of the packaging industry’s dynamics.
Value of digital
An oft-discussed sweet spot for digital packaging is personalization. The power of personalization is profound. It can dramatically increase how much consumers value an item and hence are willing to pay. One of my favorite examples is My M&M’s® -- an international success. As with any new-to-market hit, there is considerable competition. A recent check on Walmart’s web site gave the price of its plain candy as about $6.55 a pound. With a person’s name and monochrome picture printed on it, the cost to the consumer jumps to nearly $39 per pound! That simple personalization increases the price four-and-a-half times.
What other sort of modification increases a product’s value that much? There have been many firms experimenting with how to convert this into their own category. Personalized packaging fits right into one of the biggest marketing trends in this uber-connected world. There have been experiments with personalizing the labels applied to catsup, mustard and Nutella, cookies and pastries. There has been an explosion of event-related packaging. Very few have approached the success of M&M’s. If personalization is so powerful, why aren’t we surrounded by products packaged especially for us?
A number of factors are at play in the adoption of digital print in packaging. On the plus side is the ability to produce short print runs economically, to dramatically reduce inventory and obsolescence, and to make personalization possible as a value-add and profitable service, a differentiator in a very competitive market.
However, there are challenges, as well. One of the fundamental problems is implementing digital into an already established process. This as the pea in the straw problem. Let’s say that the straw in this analogy is the personalized digital production process, and process speed is the flow through the straw. You can imagine that each step in the process is part of the straw. The input to the straw is the accumulation of personal data. You must have personal data to produce a package that is personalized.
Next might be design. Here the personal data is merged with fixed or common content to produce the final artwork. Printing might be the next step. Then comes cutting, folding, gluing and assembly. You can take this farther or choose different steps, but the point will remain. Making one step much easier doesn’t actually make more product pass through the straw faster.
When finishing is fast, there may be a pea in the straw in the printing step. When printing speeds up, the pea just moves, now perhaps in the final print file creation section. When easy, cheap and fast methods of generating personalized image files appear, the pea moves to the collection of personal information. As long as there are steps that are slow, speeding up any one doesn’t mean that the flow through the straw will increase.
Despite these challenges, a few major consumer companies have conducted experiments that demonstrate the potential and opportunities digital packaging offers. For example, Coca-Cola’s “Share a Coke” market experiment with this has been remarkably successful. Starting with several hundred (now 1,000 in the United States) of the most common names in a variety of countries, they produced personalized cans without requiring personal information.
Supported by a marketing strategy and a significant advertising expenditure, Coke gave its consumers ways to use and play with its product that had not existed before. You Tube offers many examples of how people created on top of Coke’s innovation. One is a marriage proposal put together with cans of Coke. This is a fundamentally different way of exploiting the kernel of personalization. In this case, the personalized good isn’t distributed to the person – rather, it is the consumer who personalizes by their selection. Another important aspect of this program is its scale. We think about digital printing for short runs – here the run lengths were hundreds of thousands.
Coke has learned from this experiment and recently announced a new Share a Coke marketing program that adds an additional degree of personalization by allowing consumers to order personalized individual or six-packs of glass contour bottles. The company anticipates the need based on the creative examples of consumer adoption mentioned previously – including creating a personalized product for use in everything from wedding proposals to baby announcements – without having to scour the aisles of local stores to find specific names.
Two other experiments in digital packaging also are changing the view of what is valuable and what is possible. The ability to print a large number of unique packages only makes sense if there is an easy way of designing them. This has mostly been accomplished by treating the variable component of the package as an element that is dropped into a template. This works but limits the extent of the personalization.
Both Coca-Cola and Budweiser have constructed campaigns that highlight the variation from container to container. Employing computer software, they have launched programs that produce hundreds of thousands of packages, no two of which are alike. These programs rely on consumers to add the personalization by selecting among the available containers those that most match their aesthetic. In at least one case, consumers collecting containers with specific design attributes created a secondary market for the containers. Individual bottles were resold for five to 10 times their original purchase price.
The majority of personalized package market entries or experiments stop short of the ultimate theoretical capability of digital projection in that they rely on customization of a common form factor. Whereas design creation is just becoming easily scalable, real-time customization of cutting, creasing, gluing and erecting lags. Laser-based cutters exist, but they remain expensive for the most part and are not widely adopted. The situation for the rest of finishing is even more underdeveloped. Only a few digital creasers, coaters and assemblers even exist. When they become more widespread, the power of digital packaging fabrication might be unleashed.
This raises the fundamental challenge that digital presents. Digital packaging means more than adopting digital composition, adopting a new printing technique or a new finishing technology and more than new production control systems. It is an entirely new way of doing business.
The customer for digital printing may not be the buyers a company currently is serving – they are more likely to be the marketing department. The number of customers to be managed is likely to increase. The very source of the value deliver to customer changes. A company may need to change not only what it sells but to whom. This broader capability will more likely be developed for marketing departments instead of print buyers, who are a traditional constituency for printers.
With the opportunities and challenges that digital packaging presents, companies might wonder whether to avoid digital or jump in. Everyone will make that decision for themselves, but digital will become increasingly important, and the advantage will go to those who are experienced with it.