What is Reusable Packaging?
The concept of reusable packaging is not new. Over the past century, reusability systems were in place for commodities such as milk and wine, among others. It is likely the oldest packaging solution still in play. Since the emergence of single-use packaging, it has been widely displaced as the focus has switched to other areas, such as brand differentiation needs, convenience, and cost efficiency. Today, reusable packaging is mostly used in selective segments within a few countries: for example, refillable beverage bottles. However, global sustainability pressure from regulatory authorities and consumers is leading to renewed interest in reusable solutions within the packaging value chain. Several new start-ups and pilot solutions have been launched, but we have yet to see any significant scale beyond a specific segment or country. Without a change in trajectory, the global market will barely reach only 5 percent penetration or less by 2030
Why is reusable packaging failing today?
Reuse is being taught to us since our early childhood but unfortunately we have rarely seen it being implemented across business models. While in theory, the model makes commercial and logical sense, it has far too many moving parts for it to work out. There are some moments in life where everything needs to come together for something to happen — This is one of them.
For reuse to solve the plastic problem globally, it needs to compete with single use in price. And at the moment, this looks like a distant dream.
Virgin Packaging Unit = Raw Material + Conversion (Labour, Overheads, Machinery, Amortisation, Other Costs & Gross Margin)
Reused Packaging Unit = Reverse Logistics + Cleaning (Machinery, Labour, Overheads, Other Costs & Gross Margin)
On paper, both the units have similar cost structures but the biggest difference is in the maturity of the industry.
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Virgin HDPE Raw Material trade betweens 80–100/kg in the entire year. (Depending on credit period, quantity and frequency) This rate has reached a maturity point due to economies of scale. HDPE packaging market in India is worth $5BN+ alone. Apart from International factors, the industry will not see a sharp rise or fall in the prices due to the stability provided by consistent demand and supply.
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Conversion rates differ from the quality set up needed. A local manufacturer might charge 50% conversion (if RM is 100/kg, manufacturer will charge 50/- for all of its costs). So if a packaging unit weighs 100gms — the price of the unit should not be more than 15/-. But as you work with international brands and FMCG players, they require stringent checks which requires heavy investment in quality systems + treatment plants and certifications which increases the conversion price to 100–150%
The packaging industry has not seen a disruption since its inception. The moden manufacturers are now designing products and investing upfront in innovation rather than it being trickled down by the brand and copied by the industry.
The competitors are notorious for copying something which works in the market, rather the brand themselves want to create multiple suppliers so end up creating the competition. The accessibility and availability of manufacturers along with raw material and subsidies provided by the Govt make the price of packaging so low.
Alternatively, the reuse packaging industry does not exist today.
The only parallel which exists is the water jar industry. They work on a system called Deposit Refund System (DRS). Each 20LTR water jar has a deposit of 150/- in addition to the cost of water (usually 2–3/- a LTR depending on the brand and geography). Barring this, the infrastructure for reusable packaging to work just doesnt exist. Let me explain
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Cost of reverse logistics — Reverse Logistics in our context is defined as the collection of units from its end source to the clean hub. Retail reverse logistics is extremely expensive and unviable at the moment. Eg — Collecting only specific bottles or units for each customer household. If last mile delivery costs are 50/-, reverse logistics costs are also similar. Spending that amount for a packaging unit which costs 10–20/- at max does not make sense yet. Reverse logistics works out the best at closed environments — Cinemas, Events, Stadiums, Airports, Corporates etc. The model is based on collecting maximum packaging units per collection trip. At events, our reverse logistics cost for cups is lesser than 1/-. But events can not be the generic comparison point. For a business model to be viable cost of reverse logistics should always be lesser than the Virgin RM cost to sustain and grow.
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Cost of cleaning — Cost of conversion can be compared to the cost of cleaning or reprocessing. Traditionally, these costs have usually been hidden — A caterer doesnt charge you to clean the plates separately. It is included in the overheads itself. Depending on the packaging unit, scale and frequency, the unit cost should be always be <5 (being gracious at the moment). In cutthroat FMCG industries, the average cost of cleaning should be less than <2.
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Cost of logistics — One can argue that this last mile cost will be considered for virgin packaging units as well but not really. If you are working with the biggest brands, they ideally optimise the logistics cost by setting up or working with a manufacturer closest to their facility. This is the reason why most of the industries are in Vapi or other industrial hubs. This forward logistics cost is usually which kills the industry at the moment. Eg — We collected used packaging units from Chennai which were cleaned in Chennai but need to be forwarded to Nalagarh in Himachal Pradesh (1000KMS+). If the packaging units are not stackable and optimisable — the cost soars over >10/-+ per packaging unit
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Cost of Infrastructure — Reusable packaging is years away from maturity. As we dont have the economies of scale yet, the cost of all the parameters are much higher. In an ideal scenario, none of the packaging units were sent back to the manufacturer, they would be refilled in dark manufacturing and clean units but because that’s not possible, there is an infrastructure cost gap. This gap will be reduced over time when legislation enforces brands to adopt reusable packaging. By infrastructure — we mean the CAPEX costs, dark reuse and refill centre and maturity costs.
So how do we bridge the gap between Single use and Reusable Packaging?
To be honest, I wish I had a formative answer. At this point it looks like a shot in the dark. A mirage where everything needs to come together. Its like building a lego tower, if one pc is also not in the right place, the entire industry might collapse. There is this term which we have started using recently — “Cascading Miracles”. it’s basically that many things have to go right and if any one of them doesn’t, the venture fails. It’s a math equation where you multiply a bunch of outcomes and if any of them goes to zero, the whole expression goes to zero.
While its a long road, we need to hope for all of our stakeholders to align: Brands, Customers, Legislations and us.
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Brands — We need the polluters to invest and believe in the solution. All CPG companies are liable to change. Making audacious press announcements do not do justice to the harm being done. While I understand, the solution needs to be convenient and cost saving for the brands — the willingness to bet on reusable packaging is really low across the globe. Brands would rather invest in new technologies which have a really low chance of succeeding than invest in reusable infrastructure. Commercial feasibility will come with scale. Think of any new innovation — Did the telecommunication cables in 1970s make economic sense? Did the EVs in 2004 make commercial sense? Did Amazon and Flipkart make commercial sense? Brands need to share the responsibility and help startups with resources and permission to pilot — Thats all we ask for.
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Customers — These can be retail customers or corporate clients. The general awareness of reuse and return needs to increase. We need more campaigns and action points for customers to jump on the bandwagon. Sustainability is yet not convenient or cool enough to be the topic of the water cooler conversation. Additionally, there is not enough value to offer to the customers. In Bangalore, corporate clients pay for their waste to be collected, segregated and managed, whereas in most of the countries it is still the responsibility of the Municipal Corporation. Closer to our Industry, for us to collect cleaning cans from Corporates — We need to engage with the manufacturing brand, their client, their facility management company, their housekeeping staff onground and their admin team to eventually collect barely 20 packaging units. If any of them do not align to our vision, our project gets derailed immediately. Awareness and value creation for customers is really low today. Though, it is changing, not at blistering pace but slowly.
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Legislation — The executioners of the carrot and stick model. Extended Producer Responsibility single handedly changed the face of the waste management industry in India. Without EPR, No Material recovery facility is yet profitable. Managing Waste is a negative cashflow business but yet in the past 7 years, we have seen 100s of startup scale in this sector. The reason — EPR implementation. While the Govt, did certain things right to make recycling mainstream, we can hope the same happens with reuse too. They took a bold step with mandating reuse in the updated Plastic Waste Management rules. With the can being already kicked down the road from 2023 to 2025, The govt needs to ensure it doesnt happen again. Additionally, we have seen way too many regulations failing or being ahead of its time due to the lack of infrastructure and feasible solutions. Reuse can fail if the Govt doesnt support startups. Each Industry — Telco, EVs, Aviation, all were given subsidies as they were changing the face of the world. Here we have a shot on solving the single use plastic crisis but we are yet not looking at the bigger picture.
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Startups — It is our responsibility to invest in the infrastructure for the brands. Historically, no brand knew what they needed or what was next. An outlier company tried to make a difference and if succeeded they changed the face of the industry. This is relevant in the technology industry with the introduction of Internet, Blockchain, AI models or infrastructure industry. Bounce Infinity went a step further to make battery swapping possible, Ather ensured sustainability was not the selling point but the design of the bike, 1000s of startups are changing how we percieve of things with first principles thinking, Unfortunately, most are not solving the hard world problems. Social Entrepreneurship needs to become the standard OS for the new generation. With climate change preceding over all issues and being the crux of majority changes we see today, it is more important now than ever to see the rise of real world problem solving startups.
Trends which gives us hope for the future
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Single Use Packaging is no longer as cheap — The cost of all materials have been steadily increasing since 2004 (averaging at about 7% year on year for glass), however over the last two years we’ve seen a 23% spike in the cost of material alone. When added to the rising cost of energy, labour shortages and material scarcity, some of our customers have seen 80% increases in the price of packaging. Additionally, with the uncertainty of oil, we have seen the price of plastic fluctuate by over 50% during the pandemic period. Manufacturers are trying to offload their dependency on Ethanol and focus on other materials.
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Global EPR Execution — EU has introduced an additional tax on single use packaging for brands. Eg — If as a customer you opt for take away, you will be charged more for the single use packaging. Various countries across the globe are implementing demographic specific packaging laws. There is clearly an uptake on reuse models and with the right support of Govts, there is a chance of reuse to succeed at scale
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Collection Rates — One of the major points for Packaging As A Service models across the globe has been the pilferage rate — the amount of packaging lost or not being able to reuse. The more we collect, the lesser the pilferage rate is. Eg — If we use 100 cups at an event and are able to collect 80. The 20 cups lost will the incremental cost we will have to bear for the next events once again. If we are able to reduce the pilferage rates, we have a very profitable model on our hands. Through Cupable, we have seen events with collection rates of 90%+ but our steady average is closer to 75%
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Reuse Pilots — Though most of the brands will miss their reusable packaging targets, they have started piloting reuse models across the globe (with little success) but its a start for the industry! The more startups try to solve the problem and nudge brands, the more viability and interest is shown by brands throughout.
> So the real question is will Reuse undercut Single Use by 2025?
We believe, yes! Through Refillable, we can already show 20% savings to our FMCG clients in the B2B industry.
This rate can be further optimised based on scale! For us, its time to accelerate rather than slow down.
About Cupable and Refillable
We help brands move to reusable packaging and circular supply chain to eliminate single use packaging from our lives. Our aim is to make our solutions convenient, affordable and accessible for mass adoption. We are working with ABinBev, PVR, Diversey, JLL and many more to make reuse the new norm.
References
We collected and cleaned 5LTR cans of cleaning brands for reuse. After conducting multiple PH tests and even speaking to the officials at Indian Institute of Packaging (IIP) — all of these cans can be reused. Each reuse translates into saving 830gms of CO2, 250gms of plastic and 23.5LTRs of water.
By 2025, all brands are mandated to reuse 70% of packaging above 4.9LTRs/KGs. We are building the future of reuse. Join us and help us build the infrastructure of tomorrow
