The Triple Bottom Line Blog

Shortly after we wrote this post commending Wal-Mart for moving to all-compact detergents in its stores, our friend Dennis Salazar alerted us to a story he'd recently written about the same phenomenon. After shopping for detergent and buying the new compact bottle, Dennis's take on the change wasn't quite so positive:

The [old] 200-ounce bottle, which sells for $9.99, promised it was good for 64 loads. The new 100-ounce bottle, the one that was double strength so only half the usual amount was now needed, also sells for $9.99--but promised only 52 loads.

The bottom line for my sustainable purchase? A load of laundry which used to cost my family 13.2 cents in detergent now, thanks to the new sustainable design, will cost 15.6 cents per load. That, my co-consumer friends, amounts to a price increase of 18.2 percent--a splendid windfall for the manufacturer by any standard.

Of course, these calculations do not even take into account that we are all creatures of habit. No doubt, the manufacturer realized and even projected that most of their customers would use more than the recommended "half" of their more expensive product, despite the new concentrated formulation and labeling. Hmmm . . . sell the consumer more product at a substantially higher profit margin? You've got to love this sustainability. And incidentally, the big-box store where I shop, the one that took credit publicly for driving the package design change, isn't complaining about the windfall, probably because they are participating in it.

We asked Dennis whether this apparent windfall applied to just one one detergent brand or had affected many brands. He told us that, without doing an exhaustive survey, he noticed that several detergents seemed to exhibit the same kind of unannounced price increase (most smaller than the one he wrote about).

Dennis also told us he'd written his article with two lessons in mind:

1. For the businessman--to help dispel the misconception that green always costs more. The fact is that going green usually reduces costs and re-sizing is a marvelous opportunity to re-price your product.

2. For the consumer--Don't take everything at face value. Do the homework it takes to determine the best value.

Both are good lessons, of course. But the first lesson makes us a little nervous. If clever business people start regularly using green initiatives as an opportunity to reap windfall profits through "re-pricing," the already significant cynicism many people feel about green propaganda will surely get a lot worse.

One more point. Wal-Mart's own original blog post about the switch to compact detergents drew a number of comments, some of which raised the issue of price. The most substantive of these, by "Sunny," read as follows:

There are two reasons why the cost [of detergent] isn't going to go down, and neither of them really have much to do with the cost of oil.

First, believe it or not, smaller containers are quite a lot more expensive to product than the bigger ones, because the ratio of empty space per unit of plastic is much lower in a smaller bottle. In other words, it doesn't take four times as much plastic to make a one-gallon bottle as it does to make a one-quart bottle. The cost difference isn't as drastic with cardboard cartons, but it exists--and small boxes aren't cheaper per bottle inside than big boxes.

Second, the only thing being taken out of the formulation is water--for which the manufacturers' cost is negligible. It's the surfactants and cleaners and other things that make up the cost--so eliminating the water doesn't change the price enough to be able to mark it down.

So . . . it will take less packaging (but not as a direct ratio to the smaller package size)--and less cardboard--less space on the shelf--less effort to stock the shelves (and carry it home!)--and will allow the manufacturers to load more in a single truck--and the empties will be easier to recycle or will take less space in a landfill.

So--the tangible benefits are many, but the cost savings directly to the consumer really won't change that much.

Realistically, we all know that prices tend to rise, and it's no great shock when the unit cost of an item creeps upward at the same time that a new package, new product formula, or other change is introduced.

But we hope manufacturers and retailers who are trying to earn "green cred" will be very careful about how they handle those increases. The last thing they want to do is besmirch the concept of sustainability and inspire a consumer backlash against it.

Labels: compact detergents, Dennis Salazar, Packaging, Wal-Mart

It's a hopeful sign when eco-friendly initiatives by business are becoming so numerous that it's possible for a relatively important one to come in under the radar, producing social and economic benefits without a lot of fanfare. That seems to be the case with the shift to compact detergents. As reported by the WBCSD, compact detergents save water, energy, space (in shipping containers and on store shelves), and even significant amounts of petroleum (since smaller packages require less plastic).

Now Wal-Mart has announced it will be selling only compact detergents in the future. It's noteworthy, as most policy shifts by Wal-Mart are, because of the company's sheer size. Anything Wal-Mart does is, by definition, mainstream. And it's encouraging to note that Wal-Mart is evidently doing a good job of training its employees to explain the benefits of compact detergents to customers (see the reader comment to this effect on the company blog we linked to). That's important because, in the absence of such explanation, it would be easy for customers to get the wrong idea: "I'm paying the same amount for a smaller package?! What is this, some kind of rip-off?"

Labels: compact detergents, Packaging, Procter and Gamble, Wal-Mart, Waste

Little did we know there is an entire website devoted to sustainable packaging! Now that we've discovered it (and added it to our blogroll), we can recommend this amusing post--couched in the form of a report from the Housewares Show at Chicago's McCormick Place convention center--titled "Sustainable Packaging, the Housewares Show, and the Five Stages of Grief."

Blogger Dennis Salazar shows how consumer products companies confronted with the new demand for sustainable packaging are passing through psychiatrist Elisabeth Kubler-Ross's famous "Five Stages of Grief"--Denial, Anger, Bargaining, Depression, and Acceptance. You'll have fun reading his post and figuring out which stage you and the companies you work with are currently passing through.

Labels: Dennis Salazar, Packaging

In the aftermath of a conference on sustainable packaging, a group of us were presented with this question:

While Wal-Mart stil obviously lurks as a key driver of many sustainability goals, I'm wondering whether companies have progressed beyond Wal-Mart's directives. In other words, if Wal-Mart were to abandon its Scorecard tomorrow, would brand owners and packaging suppliers continue to move forward with their sustainability goals or would they jump off that bandwagon?

One of my fellow observers commented:

If Wal-Mart were to abandon its Scorecard tomorrow (which it won't), it would have little impact on the sustainability movement overall because manufacturers--large and small--are coming to realize that the principal driver of sustainability is economic.

I agree--with the following proviso. While there's a powerful economic logic behind less-wasteful, sustainable packaging, it is obviously the case that Wal-Mart's packaging edict has dramatically increased the interest in it and accelerated the progress being made on this front.

If Wal-Mart abandoned its initiative, or went in a different direction, it would have a huge impact on packaging simply due to its direct economic clout with its suppliers. When Wal-Mart sneezes, 60,000 suppliers catch cold.

Wal-Mart's packaging guidelines are like a private regulation, the issuance of which has something like the effect of law. It's one thing to acknowledge that pollution equals financial waste, but very few companies would move forward (at least to the degree they have) without the pressure exerted by regulation.

What's interesting to me about Wal-Mart's guidelines, and about the sustainable packaging movement in general, is that they require the active cooperation of the entire value chain, more so than most sustainability issues I have encountered. Wal-Mart is very far down the chain which, in addition to its size and clout, is why its action has the potential to be game-changing, not just for its direct suppliers, but for theirs and theirs and theirs.

Now if the Sustainable Packaging Coalition could figure out how to get Wal-Mart one step further down the chain--to consumers--that would truly change the game. The retailer has just announced that it reached its goal of selling 100 million low impact fluorescent bulbs, and ahead of schedule at that. Imagine if they could figure out how to get customers into the stores around recycling!

Labels: Packaging, Supply Chain, Wal-Mart

An interesting article from a New York Times series on business and "The Energy Challenge" about how some companies are rethinking their packaging practices to reduce waste, cut shipping costs, and improve recyclability. There is certainly plenty of room for consumer companies to do a better job of making their packaging eco-friendly. But one key issue that is sometimes overlooked is the competitive marketing aspects of packaging.

Suppose you are selling an item that will end up on the health care or cosmetics or housewares shelf in your local discount store. And suppose the product itself is quite small--for example, a tube of something that is two by five inches in size. It may seem like a no-brainer to re-design the tube using stronger, more rigid materials that enable you to get rid of the bulky cardboard box surrounding the tube. It's certainly a wise environmental move.

But what if none of the competing companies follows suit? The result could be that your product ends up looking a lot smaller, taking up less space on the store shelf, and therefore attracting less attention from customers. Unconsciously, customers may even think, "Package A looks bigger than Package B, yet they cost the same--so Package A must be a better bargain." And the fact that the fine print discloses that the tube in both cases contains the same 3 ounces of product may not register with busy, harried shoppers.

Thus, an individual company's well-intentioned move toward more sustainable packaging may end up hurting its own business--not a desirable outcome, to say the least.

(In a funny way, I've seen this phenomenon at work in the industry I happen to know best, book publishing. During my years as a publisher, I had a number of marketing and sales managers who told me, "Please don't publish any books that are just 150 pages long. They look skimpy and get lost on bookstore shelves, especially when they're displayed spine-out." The result is that publishers ask authors to expand manuscripts so as to get the books up to 250 pages or more and thereby make them more noticeable--and saleable. Which helps to explain why so many books read like "glorified magazine articles" that someone has padded with fluff: They are.)

These competitive pressures are why a crucial role is played by the Wal-Marts of the world, as discussed in the Times article. By creating and enforcing across-the-board packaging standards for their suppliers, the big retail chains can encourage companies to move toward more responsible packaging without fearing they will be losers in the shelf-space wars. It's a great example of how supply-chain interconnections are one key to reshaping the world of business along more sustainable lines.

Labels: Packaging, Supply Chain, Wal-Mart, Waste