Supermarket FRESH FOOD Business: Plastic and corrugated find a fit

Plastic or corrugated? The produce manager's version of the age-old bagger's question had set off a bitter debate among manufacturers of shipping containers. Then last spring, a closed door meeting led to a creative solution accomodating both kinds of containers, thanks to prodding from the chief of perishables at Wal-Mart. The company's Supercenters favor returnable plastic containers (RPCs), while Sam's Club prefers corrugated, and as Wal-Mart goes, so goes ...

For much of the past five years, tensions between makers of corrugated containers and manufacturers of RPCs have run high as both groups have worked hard to create demand and build market share for their respective products among efficiency-minded retailers.

Proponents of RPCs, which led the charge for a standardized packaging footprint in the United States, built a compelling case for their one-touch, display-ready bins based on improved efficiency, durability, and air flow. But with 98 percent of the business and unwilling to relinquish it without a fight, the corrugated industry responded by developing a recyclable configuration that also fits on standard GMA/Euro pallets and provides equally compelling benefits in the areas of driving down distribution costs and enhancing quality.

Ironically, the origins of the debate, as well as the latest chapter, begin and end with Wal-Mart. As the driving force behind RPCs, the world's largest retailer was the first U.S. chain to make the switch from corrugated to plastic, at a time when packaging was going through the pipeline in roughly 450 different sizes and materials.

While tensions between the two groups have been bridged in part by a joint industry committee formed to facilitate dialogue and ease hostilities, sustained progress on the issue of compatibility "had neared a complete standstill—that is until Bruce stepped in," says one produce industry executive. The reference is to Bruce Peterson, Wal-Mart's v.p. and general merchandise manager of perishables, and the meeting he called last May with representatives of both container industries.

Evocative of E.F. Hutton's decades-old commercial that sought to convince its audience that the world came to a stop when the stockbroker spoke, the supermarket industry—indeed the world—has had ample reasons to learn that when Wal-Mart speaks, people listen.

"No one has done more to advance the produce packaging debate than Wal-Mart in general and Bruce specifically," the produce executive says. "The majority are now working together with a totally different attitude, and are no longer looking for the best way to harm the opponent. It's become much more amicable."

Interlocking standards

In addition to imparting—if not insisting on—a spirit of collaboration and attitude adjustments, the best evidence of Wal-Mart's influence is revealed in a recent agreement the two groups reached on compatible interlocking standards for produce items packed in common-footprint shipping containers.

Peterson, current chairman of the Produce Marketing Association's board of directors, has long been viewed as the industry's most vocal advocate of RPCs. "When IFCO approached us six years ago and asked if we were willing to try RPCs, we agreed to test them and have had sustained success ever since," says Peterson, who accepts in stride his portrayal as the bogeyman in the corrugated community.

"But I've always tried to be clear that we've never been solely interested in RPCs, but in standardized transport packaging," says Peterson. "It just so happened that an RPC supplier approached us first."

Beyond the fact that both the RPC and corrugated industries have adopted a standard five-down, 60-cm. by 40-cm. footprint that has obviously made a big difference in user preference, Peterson says the other components, namely column-stacking and cross-stacking, must function in a systemic fashion in order to have unified outbound systems.

"From there, we will accept anybody's container and will let the supplier community decide which container they like best," he says, noting that Wal-Mart will not restrict suppliers to one container or the other. "The standard footprint is what matters more than the material used," he says, although compatibility between materials is the primary goal.

Wal-Mart is waiting for the two sides to come up with a joint announcement on recommended standards. "Once an announcement is made," Peterson says, "Wal-Mart will come out with a position that in effect will say, 'In about two years from now, if you don't ship all applicable commodities in a standardized footprint, you will not be shipping to us at all.'"

Intent on giving all parties advance opportunities to get up to speed, Peterson says he is advising Wal-Mart's RPC suppliers to build obsolescence into their programs "because containers will continue to evolve and improve—that's the underpinnings of what's going on." For those who will be using standardized containers, he says, the argument will ultimately come down to making a choice between corrugated and plastic based on a commodity-specific design.

While Wal-Mart supercenters are nearly 100-percent RPC, the sister Sam's Club warehouse division last February asked produce suppliers to begin shipping apples, pears, citrus, tomatoes, peppers, summer fruit, melons, and mushrooms in common-footprint corrugated containers. Peterson says corrugated was the obvious choice for Sam's "since the case goes home with the customer and we would have had to figure out a way to recover the RPCs back to the store."

Pointing to ongoing tests with corrugated display-ready containers, he says: "Certainly not every product in the department lends itself to a display-ready container. But for grapes, corn, and high-velocity items, I think RPCs are the best possible box you can use, although some items like precut salads may be better served in corrugated because of the weight issue."

Signaling flexibility

Peterson's comments will likely signal good news for produce suppliers, who will now have flexibility to choose a preferred display-ready packaging application. But be it plastic or corrugated, grower-shippers shoulder higher operating costs with display-ready containers, because they are more expensive than traditional bins.

And while acceptance by grower-shippers is certainly necessary, retailers are the key decision-makers when it comes to determining which containers best suit their companies' needs.

PMA president Bryan Silbermann says that, more than anything, the container issue underscores the rapidly changing pace of the industry and the challenges that go with it.

"We are slowly pulling ourselves out of practices that have dogged us for so long—not just on packaging, which has been one very obvious place—but with everything else that goes into getting commodities to the end user," says Silbermann. "It's no longer an issue of plastic versus corrugated, but rather a standard footprint."

Though the transition still finds growers and shippers facing many of the same challenges discussed two years ago, Silbermann says the supply side of the industry has done an admirable job of understanding the need to provide different forms of packaging for different buyers. "The vast majority now realizes it's in everybody's best interest to give retail buyers what they want and need to make their businesses run more efficiently and sell more product of a higher quality."

Philip Hwang, manager of supply chain solutions for Los Angeles-based Rehrig Pacific, a large plastic container manufacturer, says while it's still a corrugated world, "it's been very intriguing watching things unfold."

Looking back on last year's PMA show in New Orleans, Hwang says, "Every box on the show floor was the common footprint as opposed to the year before, when everyone still had their non-standard boxes. In my mind, this signified that even shippers, as well as receivers, are now looking at the common footprint—be it corrugated or plastic."

Hwang, whose company's seven regional U.S. facilities manufacture RPCs for CHEP, Hayes Logistics, and Georgia-Pacific, says that just two years ago, "all we were hearing about was why standardized containers won't work for this or that. Now, everything is being considered."

The executive director of the Corrugated Packaging Alliance is bullish on the outlook for heightened acceptance of the corrugated common footprint, or CCF, whose interstacking features make every CCF compatible with all others, regardless of manufacturer.

"We believe this year's growing season will see a marked increase in the use of corrugated common-footprint containers for certain commodities such as citrus and other high-volume or high-value fruits," says Dwight Schmidt. Adoption is expected to progress on a commodity-by-commodity basis, with those products that are best suited to conversion going first, he notes.

Once the corrugated modularity standard had been set, several commodity boards were interested in determining which supply chain solution would best meet their requirements for processing and protecting the quality of their crops while meeting the downstream supply chain needs of retailers, explains Schmidt.

To that end, the corrugated industry and the Reusable Pallet and Container Coalition commissioned the University of California/Davis to investigate container performance with three very sensitive fruit commodities—grapes, peaches, and strawberries. Each independent study assessed cooling rates, product damage in shipment, and unit-load density, says Schmidt, noting that in each of the test criteria with each commodity, the CCF performed as well as, or better than, the RPC.

Good news for retailers

These and other ongoing collaborations between the RPC and corrugated industries speak volumes about the strides the two sides are making to bring their systems into compatibility, which is certainly more good news for retailers.

Produce consultant Dick Spezzano says the industry "has been well-schooled on the issue and has begun to understand there's room in the marketplace for both systems." So what would the former retail produce veep do today? "I would likely use RPCs for the highest-volume, highest-turn items, but for wet rack, specialty, value-added, and perhaps a few others, I'd still be using corrugated because it's cheaper and the products still need to be unbundled."

David Mezzanotte, president of the container business for Orlando, Fla.-based CHEP, says the trend toward conversion from corrugated to RPCs will continue in view of the "benefits all up and down the supply chain, not solely as they pertain to retailers.

"The grower has the benefit of packing in a more rigid, stable platform that allows the produce to chill faster and more evenly, which promotes freshness and longer shelf life in many cases, while also offering lower incidence of damaged, lost produce in transit," says Mezzanotte.

With well over 20 million RPCs in circulation, CHEP views its role as serving two customers in the supply chain—growers, who rent its RPCs, and retailers, who specify their use. Retailers are also responsible for collecting, palletizing, and returning the containers, a job that's been made easier of late, now that retailers can send various RPC brands to additional service centers.

Making the initial leap to RPCs is "not a snap-your-fingers kind of decision," Mezzanotte continues. "There is an initial acceptance barrier because corrugated is the way we've done it in this country forever." But for those willing to depart from tradition and make a one-time investment required to handle RPCs at store level, he says, "everybody we work with has proved to themselves the cost savings, and they'd never go back."

As retailers and produce suppliers continue to explore all sides of the issue in their fields and offices, it's likely several more chapters will be added to the great packaging debate, says PMA's Silbermann. "I think we've come a long way, and people now realize their cheese has been moved."

Now it comes down to figuring out how to take advantage of that fact.
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