Rabobank researchers call for stricter US packaging regulations in line with foreign markets

17 Oct 2022 --- In its Bakery Bites edition, Rabobank’s RaboResearch looks at the current situation of environmentally sustainable packaging solutions in the US bakery sector. Last month, RaboResearch visited the International Baking Industry Exposition in Las Vegas, US, to view the latest industry trends and found few developments in packaging material changes.

Besides the pandemic and demand shifts in the bakery aisle, supply chain issues and “galloping inflation” were on everyone’s minds and a part of their discussions, say the analysts who wrote the RaboResearch edition, Xinnan Li and JP Frossard.

PackagingInsights speaks to Li and Frossard, about the differences between US and European environmental policy regulation for packaging, and how the US could profit from European innovations.

“Though modification may be needed, taking a successful packaging innovation from the EU could save significant costs compared to developing from scratch,” they say.

Aggressive European policies
Baking industry members’ increasing options of environmentally sustainable packaging continues to be an opportunity to capture the attention of more demanding and affluent consumers.

The RaboResearch analysts suggest that US players can look beyond their borders in search of initiatives and suppliers. A lot of innovation is coming from Europe, and Canada is at the forefront of adoption.

Xinnan Li, analyst at RaboResearch. “European regulators are more aggressive with environmental policies. This pushes the brands to make changes, sometimes to higher costs but more sustainable packaging materials. It’s also more often discussed in the media, and consumers are more aware and thus pay for it in the end,” the researchers explain.

When asked what challenges the US encounters when implementing foreign innovations, they highlight the following issues:

Cost is the biggest barrier. Cost for a packaging product may be appropriate in the EU due to all the “taxes and incentives” but not in the US in the absence of these.

More education is needed for US consumers to understand the benefits of environmentally sustainable packaging and make a purchase decision.

Waste collection infrastructure is a challenge in the US. For example, compostable packaging may never end up at an industrial composting facility because there are only ~200 around the US.

Furthermore, consumer demand for environmental sustainability also varies across regions. Consumers in Canada (38.1%), as well as in Germany (45.5%) and France (38.9%) indicate that environmental sustainability is among the packaging-related factors that influence their purchasing decision the most, whereas in the US the number only amounts to 27.4%.

Acting proactively
Li and Frossard continue by saying the current and potential upcoming regulations on single-use plastic packaging will push the industry to evolve. Canada and California signed into law single-use plastic reduction by 2022 and 2032, respectively.

“Though neither specifically targets bakery packaging, we believe they serve as guidance for the category and might gradually drive other states to follow suit. Potentially extended producer responsibility mandates may also help re-prioritize companies’ sustainability initiatives. Hence it is crucial to be proactive rather than reactive on [environmentally] sustainable packaging.”

The fresh baked category and its short oven-to-table cycle requires less barrier performance from packaging compared to shelf-stable items. It is ready for environmentally sustainable packaging innovation and the increased consumer appeal it can generate.

JP Frossard, analyst at RaboResearch. Environmental sustainability focus
The researchers say they observed showcases of new packaging materials, including wraps, trays, and bread clips at the International Baking Industry Exposition. “Overall, the amount of packaging innovation was underwhelming compared to other industry trade shows (ExpoWest, for example), and the emphasis on sustainable packaging material was far and few between.”

“Players mentioned the challenge of adopting these often more expensive materials in an industry already facing higher prices for commodities, ingredients, energy, transportation, and labor.”

“A lack of global brands with European exposure (and thus exposure to more strict environmental regulations) and startups that often use environmentally sustainable packaging as a brand differentiator also contributes to the current state,” they continue.

The analysts say they observed that environmental sustainability is “clearly” on the companies’ minds.

“In addition to the partially fiber-based bakery bags with a clear plastic window, we saw bread bags made of bio-based plastics and post-consumer recycled content. We even saw plastic bags with printed fiber patterns to look natural.”

How to move forward
Bread clips are likely the next packaging items to go green: Kwik Lok and KLR brought samples of their fiber and compostable plastic-based bread clips as an alternative to the traditional single-use plastic. Some came in at a higher cost, while others were at cost parity, Li and Frossard observe.

On top of the material cost, switching out packaging machinery also presents a barrier to adoption. Nevertheless, a case can still be made for its use on premium products such as organic bread, considering their higher margin and relevant consumer appeal.

There were also examples of environmentally sustainable, functional bakery packaging, including ovenable baking trays that are also compostable. The development of new coatings allowed the fiber-based trays to be both ovenable (withstanding temperatures up to 420 degrees Fahrenheit) and industrially compostable.

Novacart has supplied these coatings to the European market for years and has only now brought them to North America. Natrellis, a joint venture between Sonoco and Tellus Products, manufactures ovenable and microwaveable trays from sugarcane fiber in the US.

By Natalie Schwertheim

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