How much should packaging cost as a % of the total product cost? It depends on product needs. Rather than think of packaging as a supply cost, we think of it as an essential marketing asset that increases the value of the product.
Your packaging serves many roles that enhance, protect and communicate your product attributes. It is crucial that great care is taken when choosing the materials and structures and costs need to be controlled and minimized.
Low quantity equals high cost which is always a challenge with new product launches. We recommend that you choose standard packaging materials readily available in the market. Source from a reputable packaging distributor or manufacturer that can guarantee the availability of the packaging as your volume grows.
Find a common structure or style of package. Unique, custom materials and structures may be difficult to source as you grow. Packaging is an essential supply item – you cannot sell your product without it.
There are a number of steps you can take to manage your packaging costs. You can reduce your costs in the development phase by incorporating these basic practices:
- Start with off the shelf common stock packages. Before you invest in custom primary packaging, test the market to get feedback. You can expect to redesign your packaging a few times before getting it exactly right for your product so now is the time to minimize costs. We recommend that you use branding and label design to market your product rather than launching with a unique package structure.
- Use common materials. You can take advantage of your packaging suppliers’ volume buying. If a supplier has to bring in special material just for your packaging or label, you will experience higher minimum order quantities and/or higher costs.
- Standardize your structural design by using one size of package across your product line. Each unique structure could incur up-front costs for tooling and design as well as set-up costs in the manufacturing process. Packaging is produced on automated equipment so every time a machine is set-up, the set-up cost is in addition to material and labour. One package could run over several pieces of equipment so reducing the number of set-ups is worth investigating. An example of this is cereal boxes. You will notice that many boxes are a common size despite the volume inside. A product line such as this will be designed to accommodate the highest volume so that regardless of the type of cereal, there will only be one set up on both the packaging and filling machinery.
- Ask your supplier if they have tooling in stock that is suitable for your product. This reduces the tooling cost and may allow you to combine your order with others reducing the set-up costs. Stock tooling is often available for packaging that requires high machine setup times such as craft beer open carriers and point-of-purchase displays.
- Stack the product efficiently on pallets to reduce shipping costs and optimize storage space. Avoid overhang to keep the product within the edges of the pallet to reduce damage.
- Optimize the case pack. Get your suppliers together to ensure the inner package fits nicely into the shipping container. Designing the inner package in concert with the shipping container will ensure you are optimizing the case pack and ultimately the pallet pack.
- Design cost-effective graphics. Graphic designs can be expensive to create but you can minimize this cost by using one common design that allows for simple and easy revisions to print. Work with a packaging designer who understands both your needs and those of the printer. Design for efficient production at the lowest cost.
- Use “in stock” ink colours. Common ink colours will be less expensive than special orders. Metallic inks can often be very expensive. While this may not be necessary depending on how the package is printed, it is important to understand the cost impact of using special inks.
- Combine ‘like’ products when ordering to achieve the highest volume price breaks. Work with your supplier to develop the most cost-effective solution.