Microsoft PowerPoint - 1.45pm C Hartwell Presentation 05.05.2011.pdf

Chris Hartwell
Packaging Innovation and Development Manager
Packaging – it’s impact on
the Dairy Industry
Plastics New Zealand Conference – Rotorua – 5-6 th May 2011

Scope of the presentation
Food Sector Packaging
• Global Food Retail Sector is worth some
US$3 Trillion annually (excludes beverage)
• Produced by some 2.6 billion farmers.
• The Food Sector is one the world depends
upon heavily
• 70% of packaging is food related, and
plastics are the largest food contact
materials
• But the world is changing and growing at a
staggering pace
Page 2

Chinese middle-class helps Fonterra set new export
record
• Wednesday 27th April 2011
The world's biggest dairy exporter, Fonterra, says demand from aspiring middleclass
consumers in Asia - particularly China - has underpinned recorded the
cooperative's record level of monthly exports: 229,000 tonnes in March.
"The real driver for the export record is the ongoing strong demand from China,
South East Asia and the Middle East," said the company's managing director of
trade and operations, Gary Romano.
The record shipments were part of continued growth in global demand for high
quality dairy products from New Zealand.
"Our supply chain team were effectively closing the door on an export container
every 2.6 minutes," Romano said. "That's equivalent to 560 containers a day".
"We expect the record month will inject around $1.2 billion into the New Zealand
economy," he said.
The cooperative has indicated that a surplus of around $8/kg milksolids is likely to
result in an average of $900,000 being available for each farmer: its current
forecast range for the 2011 season is $7.90-$8.00kg milksolids (before retentions)
to farmers, unchanged from the levels announced in late February.
Page 3

Picture of Dairy Exports
Page 4

Global Dairy Trade
Page 5

Fonterra Global Trade Flows
Source: AAG Center for Global Geography Education
Page 6

New Zealand Exports
New Zealand’s
Top 10
Exports
(millions of
NZ dollars)
Dairy, eggs, and
honey
YE Dec 2009 YE Dec 2010
8,115.92 10,413.93
Meat 5,141.73 5,089.39
Wood 2,318.94 2,948.96
Mineral fuel and
oil
1,893.02 2,067.56
Machinery 1,658.29 1,722.31
Source: Statistics New Zealand
NZ$19.5bn or 67%
of New Zealand
export revenue is
food related
Confidential
items*
Edible fruit and
nuts
1,374.90 1,635.10
1,600.77 1,471.03
Beverages 1,197.56 1,312.39
Fish and seafood 1,262.08 1,307.06
Aluminium 882.83 1,212.67
Source: Statistics New Zealand via the World Trade Atlas.
* Coal is likely to make up most of the confidential exports. Coal exports are classified as confidential by Statistics New Zealand.
Page 7

Global Trend Analysis
People trends
Economic trends
Tech trends
Environmental trends
Underlying Trends
Underlying Trends
Underlying Trends
Underlying Trends
• Healthcare spending
• Changing age profiles
• Urbanisation
• Time compression
• Migration/Ethnic Diversity
• Trading up/down
• Product safety concerns
• Globalisation
• Rise of Emerging powers
• Consolidation
-Channel
-FMCG
-Ingredient processing
-Production
• Technical advance of
modern biotechnology
• Computing/AI
• Human genome project
• Emerging technologies
-Nano-technology
-Smart devises
-Advanced materials
• Water Scarcity
• Energy & power
• Regulatory response to
potential climate change
Uncertainties
Uncertainties
Uncertainties
Uncertainties
• Organic/Natural/Ethical
• Obesity and diet
• Sports and Fitness
• Wealth Disparities
• Cost vs Convenience
• Increased Government
regulation of
food/packaging
• Leisure spending
• Infrastructure blockage
• E-trade
• Off-shoring/outsourcing
• Move from products to
services
• Islamic Finance
• Neutraceuticals /
Functional Foods
• Consumer acceptance of
GM
• Consumer demand for
sustainability
• Climate change
• Food scarcity (link to
consumer acceptance of
GM)
• Food for energy
Page 8
Moody’s Investors Service is forecasting the market for Islamic financial products to surpass US$1 trillion this year. The market for Halal products
is expected to exceed US $2.3 trillion this year

Global trend analysis – People Trends
Urbanisation
By 2015 the world will have 23
mega cities, 19 of them in
developing countries
• 70% increase in food demand
• 86% of consumers are in developing countries
Source: UN
Page 9

Global trend analysis – Economic influences
• Globalisation
– Simplification of the value chain to produce affordable products
– Safe, affordable nutrition
• Average Indian can spend double what he did in 1985
• India is expected to be 5 th largest consumer market by
2025
• Middle class currently 50M people
• By 2025 – 583M people or 41% of population will be
middle class
• Income will be 11x today
Page 10

Global trend analysis – People Trends
Healthcare spending/Changing age profiles
– Total Global Population Growing
– Life Expectancy Increase
– Birth rate declining in developed countries
– Unaffordable healthcare burden
• Less Infant Formula demand
• Package opening designed for elderly
• Elderly more likely to recycle
• Different spend habits
• Labeling for elderly – smart communication technology
• Food used for health benefits
Requirements in
developing countries
are vastly different to
those of developed
countries
Page 11
Source: US Census Bureau

Global trend analysis – People Trends
Sustainable/Organic/Local/Ethical
– More of a concern in the developed world
• Rise in Ethicurean -SOLE food
• Bio materials, renewable materials
• Low carbon footprint vs. renewable
• Carbon footprint / Food miles
• Environmental waste
• Demand for less chemicals/additives
• Ethical sourcing and manufacturing
• Don’t compromise performance and
must be at same cost
• Low carbon foods –
exclude meat and dairy
from diet
Page 12

Global trend analysis – People Trends
Product Safety Concerns
– More of a concern in the developing world • Cow to consumer traceability
• Extending shelf-life
• Demand for less chemicals/additives
• Ambient distribution
• Active packaging – biocides, colour, light
blocker, scavengers
• Improved barriers
• Intelligent packaging – smart sensors
- In-pack detection
- Shelf life as function of quality not predetermined
date
• Chemical migration through packaging
• Modeling of shelf life
Page 13
Packaging protects and
preserves the product.
Product preservation
underpins our business

Consumer and Retailer demands
• Food tastes and looks like it’s fresh
– Low salt/low acid
– No preservatives or chemicals
– Low/no heat treatment
– Available all year round
– Food must be safe
• Low supply chain costs
– Ambient distribution
– Longer shelf life
– No damage/waste
– Low cost to serve
• Packaging seen as the “Magic Bullet” by
manufacturers
• Lobby groups see packaging as “the” major
environmental problem
Page 14
Conflicting demands

Packaging has a bad image
Consumer perception
• Mountains of packaging
• Biggest waste contributor
– Visible litter
• Not enough materials being recycled
• Over-packaging is a major problem
Facts
• Amount of packaging used per person alters
by 200% across developed world
• Amount of packaging recovered exceeds the
amount being recycled by approx 20%
• Packaging is not our biggest waste problem
Page 15

Packaging impact on the environment – A picture from
the UK
• Each UK household buys 3,000kg of products per year
– Protected and contained by 200kg of packaging
– Packaging is 18% of household waste
– Household packaging waste is less than 1.5% of solid waste
• 60% of packaging materials from all sources are recycled
Household
Household
Landfill
Page 16
Source: Advisory Committee on
Packaging – Packaging in
Perspective

Packaging Reduction
Waste items that continue to grow
• Food
• Magazines
• Unsolicited Mail
• Clothing
Page 17

Impact of packaging over-under engineering
Source:
Page 18

UK Findings - WRAP
1/3 rd of food brought is thrown away
• 61% is avoidable
• 19% unavoidable
• 20% avoidable if prepared differently
© copyright WRAP
This equates to
• Grapes (4.8 billion a year)
• Potatoes (1.9 billion a year)
• Apples (1.6 billion a year)
• Slices of bread (2.6 billion a year)
• Tomatoes (1 billion a year)
• Bread rolls (775 million a year)
• Yoghurts and yoghurt drinks (424 million a year)
• Sausages (440 million a year)
• Chocolate and sweets (259 million a year)
• Rashers of bacon (200 million)
• Meat-based meals – mainly ready meals and
takeaways (120 million a year)
Source - WRAP
Page 19

Today’s Focus is often on impact of environmental
issues
Page 20

Global trend analysis – Environmental influences
• Water Scarcity
– 40% of the world will live in water-scarce regions by 2025
– 70% of available fresh water is used for irrigation
– 140 litres water for 1 cup coffee
– 5000 litres of water for 1 litre bio-fuel • Increased consumer awareness of
water use
• Increased cost and lower availability /
quality
• Bio materials are large users of water
- PLA
- Paper production
• Reduce water usage / recycle in
factories
Page 21

Global trend analysis – Environmental influences
• Energy & power
– Increased food to energy
– Described as “A crime against humanity”
– 34% of corn grown in USA in 2008 was for ethanol
• 40% electricity used in Florida is for
cooling – 15% in UK
• Increase in oil costs is reflected in
plastic resin costs
• Increase in ethanol use pushes up
PLA and food costs
• Some renewable packaging
sources often have worse over-all
impact
• Minimisation of materials
irrespective of source
Page 22

Packaging Function Reflects Market Segment
Packaging Role
Commodity
Ingredient
Food Service
FMCG
Product Safety √ √ √ √ √ √ √ √ √
Product Protection √ √ √ √ √ √
Shelf Life √ √ √ √ √ √
Supply-chain Effectiveness √ √ √ √ √ √
Environmental Impact √ √ √ √ √ √
Economics √ √ √ √ √ √
Convenience/Functionality √ √ √ √ √ √
Communication √ √ √ √ √ √
Commodity
Ingredient – Cost
and Quality; No
choice (contracted supply)
Food Service –
Product Choice
FMCG – Product
and Brand choice
Legislation √ √ √ √ √ √ √ √ √
Shape and Design √ √ √ √ √ √
Page 23
√ - Not important
√ √ - Some importance
√ √ √ - Very important

Global trend analysis – Technological influences
• Emerging technologies
– Nano-technology
– Smart devises
• Nanochromic displays
• Thermochromic inks
• Smart supermarkets
- smart trolleys
- smart shelves
• Smart labels
- spoilage indicators
- communication
- shelf life indicator (temperature)
• Tamper evidence
• Counterfeiting – etched nano particles
• Traceability
- 2D/3D barcodes, RFID, single fibre
• Conductive polymers
- injection moulded electronics
• Nano clays
Page 24

Food Safety Concerns for Dairy producers
• Pathogens (two levels apply for general population and infants, old,
pregnant, immuno compromised)
– Salmonella
– Listeria monocytogenes
– Coagulase positive staphylococcus aureus
– Bacillus cereus (infant formula)
– E-coli
– Enterobacter sakazakii (infant formula, special medical purposes)
Principle: Packaging
should not be an
innoculator of our food
• Foreign Matter
– Very wide range
• Chemical migration from packaging or the storage environment
– Will be covered in more detail
Page 25
Principle: Consumers
don’t want your
manufacturing plant
Principle: Packaging
should not leach
unsafe levels of
residues

Global trend analysis – People Trends
Increased Government Regulation of Food and Packaging
• Globally more people are concerned about food safety
– Asia
• Melamine in milk has been the key driver in packaging regulation updates
• Food Safety is prompting a review of regulations globally
• Packaging issues including
- Phthalates
- Acrylamide
• Increase in monitoring
– Additional resources
– Improved limits of detection
• More chemicals are being banned
– e.g. BPA
- ITX in Tetra Paks to Nestle
- Azodicarbonamide in baby food
- Benzophenone / 4-methylbenzophenone in
cartonboard
- Bisphenol A in baby food
- Melamine
- Mineral Oil
• Major issue in the eyes of consumers which is driving regulators
• Can become non-tariff barriers to trade
• Becoming more costly to comply, increased focus on compliance, tighter regulations
Page 26

Consumers - Chinese Packaging Regulation GB9685-2008
Now includes
-Leather protein
-Nitrites
Page 27

Market regulation of New Zealand’s $20bn Food Industry
Countries with food contact plastics regulations
Australasia – VCM, Acrylonitrile, Colourants. Comply USA or EU
Canada – Food and Drug regulations Div 23
China – Positive list GB9685 , resin, finished product testing
USA – Chapter 21 parts 109 – 189, FCN, some finished product testing
Europe – Positive list 10/2011, finished product testing, partial agreements,
national legislation
India – BIS standards for polymers, pigments, migration testing
Indonesia –Similar to USA, 604 substances approved for food Contact.
Solvents and pigments and heavy metals regulated
Japan – Food Sanitation Law, resin and finished product testing,
colourants, industry guidelines – JHOSPA, JHPA, JHAVC
Korea – Similar to Japan
Malaysia – PVC 1mg/kg, heavy metals
Philippines – USA or Japan recognised
Saudi Arabia – SASO standards for finished article, including inks exclusion
list
Singapore – PVC 0.05ppm
Taiwan – Sanitation standards
Thailand – Sanitation standards
Venezuela – Global migration, resins, inks
Vietnam – positive list, testing required for PE,PP,PET,PVC, colourants
regulated
Page 28

Food Recalls due to Chemical Contamination in Packaging -
Europe
Year
No. Notifications
Chemical
No. Notifications
Lowest level Reported
2006
3
Phthalates
79 400ppb
2007
12
ITX 7 7ppb
2008
34
Benzophenone/4-methyl
benzophenone
17 110ppb
2009
33
Excess total migration
8 23.8mg/dm2
2010
29
ESBO
11 3.7ppm
2011
13 YTD
Majority of rejections of
non-packaging FCMs –
kitchen utensils from
China
Page 29
Increasing surveillance

Summary
• World Population
– We will need to feed another 3 billion people by 2050
• Packaging Industry size
– 70% of packaging is used by the Food Industry
– 67% of New Zealand Exports are Food and Beverage – NZ$19.5bn industry that rests on your shoulders
• Food Safety
– Food safety is paramount – pathogens, foreign matter and chemical migration from packaging
– Food contact legislation is growing – how many markets are you either unaware of the regulations or non compliant
• Supply chain
– Smart technology to take complexity out for supply chain and deliver affordable nutrition to the consumer
– Market growth for food will be in third world countries
– Simplification of the value chain to produce affordable products
• Packaging’s impact on society
– Environmental impact – need for a balanced view
– Good selling story
Page 30

Amount of packaging for products used on a daily basis
Source: Advisory Committee on
Packaging – Packaging in Perspective
Before you have that beer
tonight look at how it’s
packaged
Page 31

Thank You