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Supermarket rivalry keeps suppliers focussed

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The past year has been a tough one for all players in the Australian packaging industry, not least because of the intense rivalry among the major retail chains, particularly the supermarkets, which has meant pressure to keep costs down.

This major influence was noted by the chief executive of CHH Packaging Australia Jim Snelson, who was an executive with Amcor before joining Carter Holt Harvey and has a broad industry perspective.

He said he saw more of the same next year along with an increased focus on the environment as the industry sought to renew the Covenant. The other major challenge in 2005 would probably be RFID, he predicted. Another big challenge for Snelson will be integrating the Wadepack business if the takeover bid announced late November goes ahead, as seems likely given Wadepack board support for the offer.

Looking at 2004, Snelson said: “There’s no doubt that the past year has been a tough one for players in the Australian packaging industry. There wouldn’t be a packaging business in the land that claimed it had an easy year, and yet every single business would predict increased competition next year.

“But like an elite sports competition, this environment hones the skills of the best companies and provide s them the experience necessary for future success.”

“Without question, the single biggest influence on the industry during 2004 has been the battle for revenue and market share fought out among the major retail chains.

“These companies are seeking more from their FMCG companies, who are in turn seeking more from their suppliers. All suppliers, including those of us in the packaging industry, are being asked to work a little magic. And as a result, a number of us are doing just that!”

“I’m sure CHH Packaging isn’t alone when we say we’re producing some fantastic packaging solutions in less time with fewer people. Our customers are asking the question and our industry is responding.”

For CHH Packaging, 2004 had been about focusing on the fundamentals, he said.

“At a business level, we’ve continued to improve our sales product mix and have delivered a lower cost structure. This is something that our shareholders require, but also something our customers demand.”

“The standard measures of delivery performance, quality and cost competitiveness continue to receive unprecedented attention, but the real excitement is coming from the innovation that’s been flourishing in the competitive environment.”

Snelson said 2004 had been an award-winning year for CHH Packaging Australia. In addition to numerous customer honours, the company was part of one gold, two silver and four bronze awards at the recent Australian Packaging Awards.

“Our customers have been saying that the fundamentals of delivery and service are important, but the real differentiator is packaging design innovation. A gold and silver award in this category shows we've heard this message and are delivering what’s important to our customers’

He said that 2005 probably would not vary much from this year, except that the game would get more and more competitive.”

“As the major customers and retailers focus on cost competitiveness and value through their supply chain, it will be the job of packaging suppliers to find answers to hard questions.

“Driven by factors of cost and innovation, 2005 may be the year that sees RFID technology enter the mainstream. The industry is already whispering about the possibilities, but full blown discussions aren’t far away, especially as the technology matures, the cost of ownership drops and the supply chain benefits come within reach.

“The major retail chains are those most likely to drive adoption of RFID, but the packaging industry already has a strong body of knowledge that will aid its implementation.”

“Other developments will include an enhanced focus on the environmental impact of our products and services. The Covenant already encourages the collection and reporting of environmental performance, but increasing integration of the value chain will ensure this remains a hot topic

Our industry will appropriately be challenged to set benchmarks against other industries and measure the impacts of our packaging through its entire life cycle,” Snelson said.

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