In this interview with The Packman, Sanjay Gupta, vice president – corporate procurement and packaging development, DS Group, speaks about packaging innovations, procurement challenges, and the four pillars of sustainability. Gupta also shares his view on the increased raw material price and its impact on the packaging industry.
Mahan Hazarika: What are the key influencing factors that drive innovation in packaging?
Sanjay Gupta: The pandemic has changed the socio-economic-political-constitutional-environmental-globalization-consumer landscape of business. The Indian packaging industry, pegged at around USD 70 billion, is agile and resilient enough to counter this kind of sudden disruption – the secret behind is the continuous innovations in this industry. India is one of the fastest global economies, home to a fifth of the world’s youth with a 50% population below 25 years of age and nearly 560 million internet subscribers. These are some strong fundamentals to pave way for new things.
Since the pandemic, consumer landscape concerning preferences, choices, expectations, desires, brand loyalty, price point, consumption pattern, buying method, shopping experience, repeat buying – everything has changed. In addition, sentiments and awareness towards sustainable packaging have also increased manifold. It is important to note that manufacturing, logistics, storing, warehousing, inventory norms, aging, credits, supply chain ecosystem have also observed a significant transformation. In this complete ecosystem, packaging plays a vital role, and innovation is the key towards achieving these goals and a successful and sustainable business model having a win-win situation for this ecosystem.
Time-bound commercially viable speedy innovation and investment in R&D are the key to existence. As per the latest survey of GII, India has been ranked as 48th Innovation Index, among 131 economies of the world
In packaging innovations, the topic of sustainable finance is of extreme importance. There are implications of divesting from fossil fuels that affect the economy. However, some questions need answers: 1. It is not clear about the physical possibility of having an industrial global economy for nine billion people without fossil fuels. 2. There is no evidence of the production/distribution of renewable, at any scale, entirely without fossil fuels. 3. Should this be scaled up? 4. What sort of economy it would be that is based on renewable energy?
2. What are the key procurement challenges in bringing out an innovative package format successfully into the market?
Sanjay Gupta: This is an era of unpredictable and extreme volatility where you need to develop tools, knowledge bank, skillset, technology, and human resource to predict the unpredictable outlook scientifically since a single mistake can land you up in a complete business knockout situation or ruin your brand image.
Just to emphasize, globalization which was an engine of prosperity to global economies has suddenly started working against the basic principles during a pandemic due to closure of borders which led to serious supply chain disruptions or rather complete breakdown of the supply chain ecosystem impacting both demand and supply side.
Besides, the Indian packaging industry is heavily dependent on China and European Union countries for its infrastructure to technical know-how, machines and equipment, raw material to value engineering formats. It’s high time we accepted that apart from manufacturing scale and capabilities, we need to invest a sizable pie in R&D.
To become more competitive, the packaging industry is focusing more on reducing costs. Instead of importing innovations from Europe or the USA, planned investment in R&D collaboration with our premier institutes like IIT, IIM, ISC, ISRO, DRDO and others are required.
3. How do you strike a balance between innovation and cost?
Sanjay Gupta: It is a hen and egg story. This is a real dilemma that affects the industry in emerging and poor economies in striking a balance between cost and innovation without compromising on product quality and organizational goals and objectives while keeping the consumer at the center in this competitive environment.
Innovation in packaging has to align as per marketing which has evolved from the Production Era to the Product Era to the Selling Era to Marketing Era to finally the Holistic Era wherein it encourages customers to purchase a business’ products or services rather than going to its competitor.
It is very important to understand the DNA and architecture of your organization, brand, consumer, competition and extend a strong hand-holding with your channel vendor partners, develop skill sets, knowledge, acquire technology, invest in R&D, be ready to pay more in the beginning and optimize as it matures. I have seen that innovation in packaging can be done not at an increased cost, rather when the cost goes down over a while.
Hence, cost management is the fabric of a company’s operations and innovation efforts. In brief, the following areas need to be observed very minutely – complexity reduction, lean configuration, design interface management, product modularity, collaboration and cultural changes, and finally, cost management for the ‘new normal.’
4. How is the increase in raw material price impacting the packaging industry?
Sanjay Gupta: As I explained earlier, for a variety of exogenous and endogenous variables right from trade barriers, global and domestic political volatility, violations of intellectual property, crude oil price, currency fluctuations, de-globalization, severe and fragmented logistics and supply chain issues, sentiments against China, development of China+1 strategy, sustainable and climate change issues, cartel formations, there has been a very steep surge in raw material prices which is affecting the packaging industry. But if you have already developed a skill-set to predict these unpredictable factors and are ahead on R&D front, you can mitigate this increased cost credibly.
Both India and China are in the elite club of the 10 fastest growing economies in the world whose nominal GDP contributes around 67% of the world’s economic growth. However, India has fallen behind China in the last three decades and this pandemic has given a lesson not to be dependent on China but to fast track the China+1 strategy to combat import issues which ultimately will pull India up in productivity and economic growth.
There had been challenges in managing global supply chains. Over the past 20 years, the business environment has been continuously responding to the pressures of globalization to lower their costs, increase their profits and improve productivity in a highly competitive global marketplace. A paradigm shift has occurred in which companies that were once built domestically to sell internationally now look globally. This shift is happening because of reduced barriers to trade and investment, lower transportation costs, ease of information flow, new enabling technologies and the emergence of economies such as China and India. But post-pandemic, entire business models have changed.
5. Is this a myth or reality that sustainability drive in packaging has got a boost due to the pandemic – or was it bound to get accelerated irrespective of the pandemic?
Sanjay Gupta: There are four pillars of Sustainability – Human, Social, Economic and Environmental. While all of these are independent of each other, the first three pillars – Human, Social and Economic – are responsible for the destruction of the fourth pillar – Environmental – which has been just realized as the most important one for human existence.
The industry is looking forward to having mass scaled, economical, global supply chain friendly packaging solutions such as multi-functional barrier coatings for paper, film, and foil which can eliminate the need for complex, expensive, and unrecyclable multi-layer structures, making it possible to create packaging that is recyclable, repulpable, and industrially compositely compostable using homogeneous mono-material structures towards a circular economy.
COVID-19 is a live example that nature punishes humankind excruciatingly when we keep on abusing our planet. We must admit that the pandemic has forced mankind to think on a serious note that whether the conventional yardstick to measure the economic performance of an economy by GDP-based growth model is leading to a fast depletion of natural wealth and resources, and present pattern of growth adopted by society is not sustainable.
It is also evident that we are heading towards an ecological credit crunch and humankind is under severe ecological debt as we are over-utilizing natural resources without replenishing and this crisis is far worse than all the financial crises we have ever faced.
This is a good time to think about whether it is wise to invest all of our resources in creating a financial wealth of a nation without creating value chains to save the ecosystem and when nature punishes us after a while, we invest this wealth to save our race.
Further, there have been various government regulations on waste management systems on a fast track. The industry has also understood that India is one of the youngest nations globally with the Y and Z generations who are going to rule the market till at least 2040 believing in green businesses.
So, heightened consumer awareness and environmental concern are indeed changing consumers’ perception and expectations for quality and safety. This is linking social good to business good.
It has become important in terms of social, moral and ethical responsibilities to fast track eco-friendly initiatives such as conservation of natural resources like water, use of solar and renewal energy, reduction of carbon footprint in the entire supply chain right from packaging, manufacturing, logistics, housekeeping, construction and settlement of plastic waste generated from packaging material through EPR model to facilitate circular economy. These initiatives will also help in social and economic transformations.
There is a saying that if we sweat more in peace, we will lose less blood in the war. So, it is high time for all of us to set our house in order so that we and our next generations can see a better, cleaner, safer and healthier tomorrow – it will be one of the best gifts we can pass on to them.