Reusable Packaging from Big Brands: Will Consumers Buy In?

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Wharton's Eric Orts and Americus Reed discuss a new initiative where major brands are partnering to offer reusable packaging.

A novel effort at sustainability by achieving zero waste in consumer product packaging holds big promise, but its success hinges on securing a critical mass of enthusiastic shoppers and participating consumer brands, retailers and delivery/logistics companies.

TerraCycle, a recycling company based in Trenton, N.J., recently unveiled its “Loop” shopping service at the World Economic Forum in Davos, Switzerland. The initiative would deliver commonly used consumer products like deodorant, shampoo and ice cream in packaging that can be recycled or reused. The Loop service, which will be launched in the U.S., Canada and France in the spring of this year, has secured the participation of 25 big-name consumer product makers including Procter & Gamble, Nestle, PepsiCo, Unilever, Coca-Cola European Partners and Clorox. Other partners include UPS, and European retailers Carrefour and Tesco.

Wharton marketing professor Americus Reed called the zero-waste platform a “brilliant” idea. “One of the big things about socially conscious, environmentally friendly consumers is that oftentimes everyone will report that they want to do something, but when they’re asked to do something that inconveniences them then they don’t want to do it,” he said. “This is an interesting way to make it really easy, in some senses, to be able to actually engage in that behavior that could signal … that you are this type of environmentally conscious and aware person.”

The idea behind the Loop service resonates with the concept articulated in a report that Wharton’s Initiative for Global Environmental Leadership (IGEL) published, titled The Circular Economy: From Concept to Business Reality, said Wharton professor of legal studies and business ethics Eric Orts, who is also director of IGEL. The concept of a circular economy is recycling in a larger sense, where products are designed and manufactured to enable the packaging to be recaptured and recycled, he explained. “You don’t have the waste stream at the end; the packaging comes back.”

Reed and Orts discussed the potential for zero waste programs like the Loop service on the Knowledge@Wharton show on Sirius XM. (Listen to the podcast at the top of this page.)

Orts said the Loop service is similar to the “old fashioned milkman” who would go house to house picking up old milk bottles while delivering new ones. New York City-based online grocer Fresh Direct uses a similar concept by delivering products in recyclable bags. “When they come and have a new delivery, you just fold up these very convenient reusable bags and they take them back and it goes back into the cycle.” Amazon’s grocery delivery service uses reusable green totes that customers can return with each subsequent order.

“The beauty of it is in this bundling idea, because you can put together your portfolio of desired brands.”–Americus Reed

Savings All Around

The cost advantages of a circular economy are compelling. “If you think of all the different kinds of packaging that we use in the world, you can make it into a circular loop, and the genius of this is it costs less money, because you don’t have all this waste,” said Orts. “It’s good news from an environmental point of view, and hopefully it will catch on and build some scale.”

“The beauty of it is in this bundling idea, because you can put together your portfolio of desired brands,” added Reed. “If you can scale this appropriately, it’s going to have immense cost benefits on the back end.”

Loop will use a subscription model to sign on customers, who could do their shopping on its websites – loopstore.com and maboutiqueloop.fr – or on the websites of participating retailers. It would pick up emptied packaging from consumer homes, take them to a cleaning and sterilization facility, and refill, recycle or reuse them as needed. “Loop will not just eliminate the idea of packaging waste, but greatly improve the product experience and the convenience in how we shop,” TerraCycle CEO Tom Szaky said in a press release.

“The tipping point would be if Amazon [joins the service].”–Eric Orts

The “Snowball Effect”

With participants like packaging and supply chain company UPS, the Loop service could potentially trigger a “snowball effect,” said Reed. As the idea catches on, “even brands that are watching other brands do it will say, ‘I want to be able to be in play in this game as well.’” The participation of popular brands such as Procter & Gamble, Nestle, PepsiCo and Unilever could help create “a groundswell” of interest among other companies to hop on to the program, he noted.

The program has to scale up for it to have meaningful impact, Orts said. “It will only really matter if you have a sea change, and everybody starts to move in this direction and starts to see it,” he noted. Added Reed: “The momentum piece is huge here.”

“It’s about making it the standard,” said Orts. “It becomes a cool thing to do” for companies that want to be seen as advocates of sustainability. The Loop service could begin to achieve scale if it is able to also rope in companies like Amazon, FedEx and maybe also the U.S. Postal Service.

“The tipping point would be if Amazon [joins the service],” Orts said. With its scale, Amazon could have a significant impact in advancing a circular economy, he noted.

Will Consumers Catch On?

Ease of delivery could “make or break” such services, said Reed. “People want to be able [shop] very easily, and if you don’t have that logistics piece [in place], it’s not going to work.”

“The super green consumers will get the momentum going, and then there will be other consumers on the periphery that will get on board with the train.”–Americus Reed

Orts agreed with Reed that the ease for consumers to participate is the most attractive feature of the Loop service. “The key thing here is that the companies themselves are making it easy for the consumers,” he said.

“The super green consumers will get the momentum going, and then there will be other consumers on the periphery that will get on board with the train,” said Reed.

It helps that the packaging Loop has designed for the products that consumers buy is “cool and aesthetically pleasing,” said Reed. “I could see people carrying around some of these packages and signaling to others, ‘Hey, I’m part of this and I’m a green consumer,” he added. “It’s not always obvious that you can walk around and show that to other people.”

Ensuring ROI

To be sure, it will be critical for such waste recycling programs to ensure acceptable returns on investment. “We have a germ of a great idea and it is starting to move, but is this going to have the scale to reach a tipping point where everyone [participates]?” Orts said.

Recycling Coke bottles, for example, could entail significant costs, but product manufacturers could perhaps win over customers by emphasizing the potential of long-term savings, Orts said. Reed said consumers may be willing to pay a little more for their products in packaging that can be recycled, in exchange for the convenience of shopping. Loop customers will pay a refundable deposit on the packaging, with the amount depending on the size of the container.

If consumers don’t catch on, “it could be a risk that they might lose money on this,” Orts said. “There is a little bit of a burden on the consumer that they have to see that this is worthwhile and get into a new habit,” he explained. On the other hand, many people have already developed a habit of recycling, and all they have to do with the Loop service is “a little bit of a shift in the habit,” he added. “I think it’s feasible.”

The subscription model for consumers will help ensure a revenue stream, said Reed, adding that Loop could refine it as it scales up. Loop could also earn service revenues from participating companies because it takes care of their waste, Orts noted.

One way to advance the idea of zero waste is to use incentive mechanisms such as raising the price of traditional packaging, Orts suggested. Consumers may also be persuaded if they realize the amount of plastic waste that ends up as debris in the oceans, he said.

Orts visualized a day when the circular economy becomes mainstream. “In maybe 10 or 20 years it would be weird to have waste, or you could even make it illegal,” he said. “It would be strange, like you don’t ride a horse to work anymore.”

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