Determining Criteria for Choosing Packages in the British Foodservice Supply Chain
Table of Contents
Foreword______i
Abstract______ii
1Introduction
1.1Background
1.2Problem Statement
1.3Purpose
1.4Objectives
1.5Limitations
1.6Project Assigner
2Definitions
3Methodology Study
3.1Qualitative and Quantitative Methods
3.2Research Tools
3.2.1Literature studies
3.2.2Experiments
3.2.3Measurements
3.2.4Case studies
3.2.5Observations
3.2.6Interviews
3.2.7Questionnaire technique
3.2.8Information quality
3.3My Methods
3.3.1Literature study
3.3.2Field studies
3.3.3Observations
4Theory Study
4.1What Is Foodservice?
4.2The European Foodservice Market
4.3The UK Foodservice Market
4.4Collaboration in Supply Chain Management
4.5Packaging Systems
4.6Roles of Packaging
4.6.1Flow requirements
4.6.2Market requirements
4.6.3Environment requirements
4.7Package Replacement
4.8Packages for Increased Quality of Life
4.8.1Infra-structural issues
4.8.2Internationalisation
4.8.3Food industry including functional foods and ready-made meals
4.9The Package’s Effects on Costs
4.10How Can a Package Add Value to a Product?
4.11Packaging Demand Trends
4.11.1The consumer in focus
4.11.2Product image and branding
4.11.3International trade and transportation
4.11.4New networks
4.11.5Environmental issues
4.12Packaging Foresight in the UK
4.13Food Safety
5Empirical Study
5.1Important Criteria when Deciding on a Package
5.1.1Important characteristics and roles of packaging
5.1.2Problem areas that may be opportunities for packaging
5.1.3Concrete examples of good and bad packaging
5.2Different Influences on Packaging Decisions
5.2.1Influences depending on supply chain characteristics
5.2.2Manufacturers’ basis for deciding on how to package their products
5.2.3Who has a say when manufacturers choose packaging solution?
5.2.4Marketing makes internal packaging decisions
5.2.5The package’s influence on purchase decisions
5.2.6According to the consultant’s opinion
5.3Communication of Packaging Issues
5.3.1Expressed wish for cooperation within the supply chain
5.3.2Communication channels
5.3.3Barcoding in foodservice
5.3.4Frozen food guidelines
6Analysis
6.1New Characteristics of Packaging
6.2Packages Solving Problems and Catching Opportunities
6.3Who is Prioritized in Packaging Decisions
6.4Communication of Packaging Issues
7Conclusions
7.1First Objective
7.2Second Objective
7.3Third Objective
8Suggestion for Future Studies
9References
9.1Literature
9.2Electronic Sources
9.3Personal Interviews
9.4Lectures
10Appendices
10.1Appendix A: Interview Plan
10.2Appendix B: Packaging Materials
10.3Appendix C: Frozen Food Guidelines
10.4Appendix D: Visit to a Cash and Carry
10.5Appendix E: Food Safety
Determining Criteria for Choosing Packages in the British Foodservice Supply Chain
1Introduction
1.1Background
The proportion of meals the Europeans eat outside their home steadily increases. We take coffee breaks at work, eat lunch in the office canteen, we order take-away, we go to cafés or pubs to spend time with our friends, we easily grab a snack in vending machines and we eat on airplanes and trains to just mention a few examples.
Looking at the longer terms, consumers’ willingness to eat out of their home has increased. Higher disposable incomes, new lifestyles, greater choice of eating-out and lower price per meal are factors that have contributed to this.[1]
Today, about 35%[2] of the money end-consumers spend on food in Europe is spent in foodservice outlets. According to a Tetra Pak analysis those numbers are probable to reach 43%[3] in the year of 2010. The growth is predicted to be approximately 2% per year in real terms[4].
The US food service sector value of today stands for 48% of the food market, i.e. an even higher share than in Europe. That is a fact that may further strengthen the belief that the food service market will grow stronger in Europe.[5]
Key drivers for consumers choosing to eat more and more meals outside their home are in addition to extensive marketing from major operators, changes in lifestyles:
-One example of a change in lifestyle affecting the foodservice market is the increased number of women in the workforce[6]. Eating out is a convenient solution when both parents are working hard outside their home.
-Also the increased number of single and two person households tends to increase the number of visits to foodservice outlets[7]. One reason could be that their economy allows eating out and another that their motivation for cooking for themselves is low.
-The average age when having children is getting higher which also is believed to affect the foodservice market positively[8]. One explanation is that older mothers and fathers normally have a better economy and therefore can afford to eat out.
-The average disposable income increases which makes eating out more affordable[9]. The increase in the size of the time-poor and cash-rich population affects the foodservice market positively[10].
-Commuting, possibly hours a day, make eating on the run necessary, which also contributes to foodservice’s growth in market share[11].
-People’s increased interest in travelling raises the interest for ethnic food, which favours the foodservice market.[12]
-There is a decline in cooking skills.[13]
Consistent with lifestyle changes, the average amount spent on a meal has decreased, however, the frequency has increased[14]. In other words eating out is nowadays more of an everyday activity than a luxury event.
The consumer demands change according to the trends mentioned above[15]. The fact that the number of outlets, as well as the variation in type and location has increased is an example of a market response on lifestyle change[16]. More or less, no matter when or where you are you can get hold of a prepared meal.
1.2Problem Statement
Brody[17] states that: “In the good old days when HRI (Hotel/restaurant/institutional industry, author’s comment) was a mere and steady 20% of food value, HRI foods were a secondary bulk outlet for off-quality product the food manufacturer dared not offer to retail consumers”. Some might argue that that is an exaggeration; nevertheless, it is unquestionable that the foodservice industry has, and will continue to undergo immense development influencing all foodservice players.
Backman[18] claims that there are a lot of well-known facts available, for example, sizes of different sectors, number of meals served in different kinds of outlets, growth rates etc. The problem is only how to interpret and use these numbers.[19]
An underlying fact to the difficulty in interpreting the information about the foodservice market is that in addition to the higher number of outlets, the foodservice market is also more dynamic and fragmented than the retail market.[20]
Besides, the foodservice supply chain is a long chain and involves more players compared to the retail chain. The level of organisation, concentration, player size and relationships vary greatly from country to country within Europe.[21]
Domestic players have historically dominated but now globalisation drives consolidations also in the foodservice industry. This implicates in fewer and larger customers, increase in global supply agreements, and increase in large scale and multinational marketing campaigns.[22]
Backman[23] argues that the growth rate in foodservice in the UK has been approximately zero in recent years. Although, he also says that he believes that the growth will continue[24].
Backman[25] means that customers have tried all eating out alternatives by now and have become bored by eating out. Therefore it is crucial for operators to change and offer something new and innovative in order to re-attract consumers and obviously this have to be done in a profitable way.[26]
One obvious example of change is in the major sector; contract catering. The change visible in contract catering is that it is changing from being canteen operators to companies offering high street eating experience.[27]
The contract catering industry is experiencing more and more competition from the high street and adapts to this by increasing the quality of their food offer. Naturally the contract caterers hope that this will make it possible for them to charge prices closer to prices on the high street.[28]
Eating out has become a fashion activity. This further complicates the situation for operators because trends change rapidly resulting in reduced loyalty among operators’ customers. This further emphasises the need for operators, in whatever foodservice sector to offer quality, value, choice, and other advantages over their competitors.[29]
As an inherent consequence of the increased competition in the foodservice market, actors in the foodservice market pay more and more attention to cash flow management. Cost awareness brings up questions about logistics optimisation, for example through minimising of storage levels and portion control.[30]
Ross[31] points out that the shortage in skills is common for the whole foodservice industry. He believes there will be an increased need for suppliers to give culinary support and move food preparation upwards in the chain.
The tendency to hire unskilled people among operators is an attempt to reduce costs. The deskilling of the workforce might lead to a lower quality of the food served due to inadequate handling of the food. The deskilling of the workforce also results in a higher turnover rate, which in turn leads to difficulties in developing, establishing and maintaining a work system in the workplace.[32]
A possible lower quality of the food, due to deskilling brings up the food safety issue. Recently a number of food scares have upset people around Europe. Food safety is certainly something the foodservice actors have to take into account.[33]
Companies’ attempts to reduce costs also affect the staff restaurant in that they are keen to put the space to more profitable use. Contract caterers respond to this has been to introduce smaller snack bars, deli/café outlets and specialist branded bars as a replacement of large restaurants with traditional menus.[34]
That satisfying, or even better, surpassing customer expectations is a key success factor in business is no news. The consumer behaviour has to govern all decisions through the supply chain. This means that all upstream actors in the foodservice supply chain will be affected by the lifestyle changes described above. Moreover, the requirements will vary greatly depending on the type of foodservice consumer[35].
Someway or the other, when competition increases new ways to add value to customers has to be found. The package is one way to add more value to a product[36]. The package can make the value chain more efficient[37].
There is an opportunity for packaging suppliers to identify downstream needs and offer appropriate packaging solutions[38]. Furthermore, improvements and new innovations in packaging is a way for packaging suppliers to assist their customers in adjusting to the evolving foodservice industry.
1.3Purpose
With this study, I want to enlighten the meaning of an appropriate package solution. The purpose is to gain knowledge and understanding of each step in the foodservice supply chain. This knowledge and understanding will be useful in trying to better foresee how future foodservice packaging can benefit the foodservice market.
1.4Objectives
My first objective with this study is to identify for each step of the chosen supply chain, the determining criteria when choosing a certain product in a certain package. I also aim to clarify why those criteria are important. Furthermore, I aim to take the study one level higher, in trying to identify problem areas in the foodservice supply chain that can be solved by improved packaging solutions.
Secondly, I aim to point out which step in the chain is prioritised the highest when deciding on a packaging solution.
My third objective is to find out how packaging solutions issues are communicated, downstream as well as upstream in the supply chain.
1.5Limitations
This study is geographically limited to the UK foodservice market. The supply chain that I have studied is from food manufacturers via distributor to contract caterers. I have not made any limitations regarding products because many times the same type of packaging is used for many types of products.
Trends in what the foodservice consumer packaging related demand are gathered from an operator perspective. In other words, no consumer research is done within this study because I preferred doing more thorough interviews, with fewer actors.
1.6Project Assigner
The project assigner is Tetra Pak. Tetra Pak is a global company providing integrated processing, packaging, and distribution line and plant solutions for food manufacturing.[39]
The foodservice market is an exciting market under constant development. Tetra Pak wants to be able to foresee how future foodservice packaging can benefit its customers, and in turn its customers’ customers. This explains why Tetra Pak initiated this study.
2Definitions
In this chapter I present how I have defined different terms used throughout the report:
Back of house: Back of house means the area where the food is prepared.Back of house products are used by operators in the food preparation area. A typical example of back of house products are flour or ready made packaged sauces.
Cash and carry: A cash and carry is a wholesaler where foodservice operators go and buy goods that they bring home themselves. In common with retail is that goods are displayed on shelves but in cash and carries goods are bought in bulk. A cash and carry looks similar to a warehouse. Independent operators frequently use cash and carries.
Catering: Catering means the same as foodservice (see ‘foodservice’).
Consumers: Consumers in this report is defined as the operators’ customers.
Contract catering: Contract catering is performed by an operator who provides food to a limited consumer group within the clients’ premises. The consumer group is for example all employees in a particular company.Business is conditioned on a contract basis, stipulating various parameters; opening hours, menu variety, selling price etc.
Contract distribution: In contract distributionthe distributor only gets paid for transporting no matter what products are in the boxes. The price distributors charge is based on weight or volume.
Customers: In this report customers can be food manufacturers (e.g. Food manufacturers’ are packaging manufacturers customers), distributors (e.g. distributors are food manufacturers’ customer), or operators (operators can be both distributors’ and food manufacturer’s customers and also packaging manufacturers’ although not directly.) Who the customer is in each case is determined by the context.
Disorganised operators: Disorganised operators mean the same as independent operators, (see ‘independent operators’).
Distributor: A distributor is an intermediary who receives the food from the food manufacturer, stores it and distributes it to operators. Another word is delivered wholesale but I will use the word distributor in this report. In some instances the distributor provides solutions for menus, concept and themes as a way for loyalty and sales tools.
Food manufacturer: Food manufacturers process food into food ingredients or ready to eat products. Food manufacturers also package their products. Food includes drinks.
Foodservice: “All food prepared or sold for out-of-home consumption.”[40]
Front of house: Front of house is the area in front of the cashier where the food is exposed to the consumer. Food is not prepared in this area. A typical example of a front of house product is drinks.
Independent operators: Independent units are those that do not have 10 or more outlets or a branded formula.
Logistics:“Logistics is that part of the supply chain process that plans, implements, and controls the efficient, effective forward and reverse flow and storage of goods, services, and related information between the point of origin and the point of consumption in order to meet customers' requirements.“[41]
Manufacturer: In this report, manufacturer always refer to food manufacturer.
Operator: Operatoris the last step in the supply chain, i.e. where the food preparation is finalised and the food is sold to be eaten, e.g. a restaurant.
Organised operators: Organised operators perform chained operations, often branded and central purchasing is the norm.[42]
Outlet/Unit/Site: All these terms mean the same thing. It is the place where the operator operates.
Primary package: In this report primary package means the package that is closest to the product, or in other words holds the product. Consumer package, sales package and primary package are used interchangeably. In this report I will keep to primary package.
Retail: Outlets where people go and buy their groceries for eating at home. A typical example is a supermarket.
Secondary package: In this report a secondary package is a grouping of a number of primary packages. The secondary package can be removed from the product without affecting its characteristics. Grouped package and secondary package are used interchangeably. In this report I will keep to secondary packages.
Note that sometimes there is no tertiary packaging, which means that the secondary package’s role is extended to include the role of transport packaging. Note also that in cases where the secondary packaging is outer case during transports the secondary package may be referred to as transport package.
Tertiary packaging: The tertiary package groups a number of secondary packages. When the tertiary package is outer case during transports it will be referred to as transport package.
Transport packaging: Transport packaging is simply the outer case during transportation that facilitates handling and transport and prevents from physical handling and transport damage.
3Methodology Study
Naturally I want this study to rely on and reflect the real situation in the food service business. My findings ought to be reliable and valuable. The only way to assess the reliability is to review the methods[43] and therefore I present my methods here. In this chapter I start by briefly describing different methods in general, which is a requirement from my school. Having done this methodology study increases my ability in doing professional research.
3.1Qualitative and Quantitative Methods
A common differentiation in methodology is the one between qualitative and quantitative methods. If the research work has to do with some kind of frequency or in other words aims to answer questions like “how many…?”, “how often…?” or “how commonly…?” the quantitative method is the most advantageous one. However, if the objective of the research is more to understand how people reasons, acts or reacts the qualitative method is the recommended one.[44]
Complex relations become possible to understand when using the qualitative method.[45]
3.2Research Tools
3.2.1Literature studies
The purpose of the literature study is to gather information on the subject of the research up to the day where the research starts.[46]
3.2.2Experiments
The purpose of experiments is to clarify the connection between causes and effects. You vary the independent variables (causes) and determine how that affects the dependent variables (effects).[47]
3.2.3Measurements
The idea of measuring is that subjective approximates will be replaced by independent measures in specific units in a standardised way. This requires some scale that not necessarily has to be in meters or grams or alike, but can range from “bad” to “excellent”. Nevertheless, difficulties appear when you want to put values on these subjective words.[48]