Club Stores: Show us the value

Although no credible data exists on the growth of contract packaging in the club store market, co-packers who serve the channel say they are thriving. And while experts disagree on how much growth may be left in the channel, warehouse clubs will continue to be among the stores that push the leading edge of packaging strategy. Three primary players—Costco, Sam's, and BJ's—dominate the club store channel, and each is enjoying increasing sales per square foot.

The use of a co-packer for club-store packaging makes sense for two reasons. First, many CPG companies lack enough resources to serve the channel. They see the clubs as “unstable, risky, and too costly,” according to industry newsletter Warehouse Club Focus.

Michael Clayman, the publisher, is a former buyer for Costco. He explains that CPG companies lacking resources still need to track club activities, including merchandising strategies, innovative product needs, and packaging strategies. These efforts have become more difficult as CPG companies downsize and reduce costs while narrowing their focus to creating and marketing products.

The second reason why co-packers should be considered for club-store packaging is that the clubs themselves believe they now know as much about the packaging drivers that produce sales as the CPGs themselves. Clubs are identifying the packaging features they deem important and then specifying them as requirements in their stores.
On both these accounts, contract packagers can advise on current best practices and produce packages that meet or exceed current channel specifications. For example, Sam's wants the 40˝ dimension of the pallet to be the selling face while Costco wants the 48˝ side to face shoppers. But pallets for BJ's can be only 50% of the height of pallets at Sam's or Costco to conform efficiently to BJ's smaller stores.

Production line flexibility is important, too. Co-packers' flexible packaging lines and variable workforces may offer additional value because they don't distract resources away from other necessary tasks inside CPG companies.
On the other hand, Amy Zettlemoyer, director of packaging at Sam's Club, offers this message to contract packagers servicing the club market: “If you've had your filling equipment for a while, it's old and you really should look at replacing it.”

These factors are placing greater emphasis on secondary and tertiary packaging, with more printing on corrugated. The rise in rapid inventory turnover and visual impact is becoming more evident through the emergence of the display pallet, which has become the shelf in a typical club store.

Packs create exclusivity for a warehouse club and intensify the “thrill of the hunt” for consumers. Sam's Club's Zettlemoyer offers another perspective on the treasure-hunt philosophy: “Continue to refresh and have excitement in your packaging,” she says, stressing that packaging is the only communication with a Sam's Club shopper. “We want to fulfill this idea that if you don't buy it now, it may not be here the next time you come in the store.”

The Wishbone Limited Editions salad dressing three-pack also delivers on this tactic. Unilever worked through an undisclosed contract packager to bundle two varieties of salad dressing into a corrugated sleeve that secures the bottles in a corrugated tray. The packaging configuration—two bottles of Cranberry Walnut dressing flank each side of a bottle of Rosemary Lime—is exclusive to club stores. Both the sleeve and the tray extend Wishbone's green and yellow colors from the bottle labels.

Six Wishbone multipacks fit into a die-cut master display case. The front panels on the sleeve and display case invite impulse purchases with the message “Special Flavors for a Limited Time Only!”

Zettlemoyer recommends that CPG companies that work with contract packagers examine other packaging configurations for club stores besides bundling several retail-size packages into a multipack. “Otherwise, it's hard to show consumers the value.”

The rise of sustainable packaging   Warehouse clubs are also looking to maximize value for their members with packaging that addresses end-of-life issues. The term broadly associated with this movement is “sustainable packaging.” However it is defined, the goals include material and waste reduction, material substitution, renewable and recyclable resources, and eco-friendlier package-production processes. Contract packagers will figure prominently in meeting these objectives.

Club stores are logical early adapters to sustainable packaging objectives because they carry larger packages, thrive on display pallets, and require packs that provide theft deterrence. It all adds up to a lot of disposable packaging material. Following are recent sustainability initiatives in the club-store channel: • Wal-Mart Stores Inc. has the ambitious goals of being supplied 100% by renewable energy, having zero material waste, and selling products that sustain the earth's resources and environment, all by 2025. Wal-Mart is striving for those goals with the creation of Sustainable Value Networks to serve both Wal-Mart and Sam's Club. Packages that fit Wal-Mart's sustainability mission will be those that remove, reduce, reuse, renew, and recycle packaging, and that also achieve a cost savings or are cost-neutral. Here's a tip: Wal-Mart and Sam's Club will reconsider a package they previously rejected if a CPG company can show that the package either reduces materials or shelf space. As Sam's Club's Zettlemoyer observed above, initiatives that are driving club store packaging may require contract packagers to consider different equipment to handle emerging packaging materials. Next-generation shrink wrappers are among these machines, and the new Bio-Wrapper from Polypack (www.polypack.com) is one of them. Polypack describes the Bio-Wrapper as a shrink wrapper created for multipacking products using polylactic acid, a biodegradable film that's beginning to draw interest from club stores. • Costco is answering the call for a materials reduction in security packaging by replacing some plastic clamshells with Natralock™ a, paperboard-based product from MeadWestvaco (www.meadwestvaco.com), for products that require protective packaging. Paperboard, a renewable resource, is the key component in the new packaging. Products are sealed in an amorphous polyester “bubble” between two pieces of paperboard. The paperboard is printed with bold graphics and wording to create an attractive “billboard.” The packaging's flat surface can be safely opened with scissors without the frustration of cutting through welded ridges common in clamshells.