Nestlé in the U.S.—strategically consumer-centric

Nestlé S.A. marked its 150th anniversary this year, so what packaged goods company could possibly be more suitable for this year’s VIEW FROM THE TOP discussion?

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Nestlé in the U.S. has a diverse portfolio of food and beverage products providing nutritious options for every member of the family, including not only infants, toddlers, teens, adults, and mature adults but also dogs and cats. There are eight main businesses: Nestlé USA, Nestlé Purina PetCare Co., Nestlé Waters North America, Nestlé Nutrition, Nestlé Professional, Nespresso, Nestlé Skin Health, and Nestlé Health Science. Together, these companies operate in more than 120 locations in 47 states and employ over 51,000 people. The U.S. is Vevey, Switzerland-based Nestlé S.A.’s largest market with combined product sales in the U.S. totaling more than $26 billion in 2015.

Conversations we’ve been having with David Strauss, Head of Packaging at Nestlé USA, led us to select Nestlé in the U.S. as the subject of our annual VIEW FROM THE TOP profile. Picking the brains of all eight businesses is hardly practical, so we focused primarily on two: Nestlé USA and Nestlé Purina PetCare.

Strategic framework
In his role as Nestlé USA’s Head of Packaging, Strauss describes himself as driver of the overall strategic alignment where packaging is concerned. Flying under the Nestlé USA flag are such iconic brands as DiGiorno®, Stouffer’s®, Coffee-mate®, Lean Cuisine®, Carnation®, Libby’s®, Edy’s®, and Haagen-Dazs®. Across all of them, says Strauss, optimizing the cost of packaging is a high priority. But he emphasizes that “optimizing” is a balancing act and is definitely not synonymous with “cost cutting.”

“We are in an environment of high competitive intensity, so we must be competitive when it comes to packaging. Where cost is concerned, this means being neither too high nor too low. The minute your packaging spend gets too low, you risk losing operational efficiency, and what once looked like a cost advantage can quickly become a disadvantage.”

When asked about technologies that are relatively new kids on the packaging block, like printed electronics and digital printing, Strauss says printed electronics is probably better suited at this point to non-food areas where price points are higher. Electronics, pharmaceuticals, and cosmetics, he says, will probably adopt it sooner than mainstream food. As for digital printing, he says, it’s squarely on his radar screen, though it, too, is still at the start of its development curve where Nestlé USA brands are concerned. “Right now where it is useful is primarily in short runs for customization,” he observes. “But as it evolves, it will expand past that, and I expect it to present some real opportunities in streamlining workflow and serving as a tool for manufacturers like us to lean out their packaging supply chains.”

Another bedrock philosophy at Nestlé USA, just as it is throughout Nestlé global, is transparency. And an important subset of transparency, Strauss points out, is a commitment to sustainable packaging.

“In years past we’ve been what you might call a silent leader when it comes to the sustainable packaging movement, but lately we’ve gotten more vocal and visible, also in the U.S.,” says Strauss. “Last year, for example, we joined Ameripen and the Sustainable Packaging Coalition (SPC). On some of our brands you’ll now see labels that show our participation in SPC’s How2Recycle program [launched in 2008, it aims to reduce confusion by creating a clear, well-understood, and nationally harmonized label that lets industry help consumers understand how to recycle a package].”

Strauss says that biopolymers are a part of the sustainable packaging conversation, but applications by Nestlé thus far have been limited. Aside from cost and performance issues, part of the problem with some of them, he says, is that they don’t necessarily deliver the lowest overall environmental footprint when viewed from a true Life Cycle Assessment (LCA) perspective. But that doesn’t mean Nestlé isn’t interested in biopolymers. “In our research centers we’re exploring a number of options, though mostly in what’s called Generation 3 biopolymers,” says Strauss. In other words, biopolymers derived not from corn or beets or potatoes but rather from non-food sources such as wood, agricultural waste, drought-resistant plants, and algae.

Larry Baner, Packaging Research Scientist at Nestlé Purina, is among those who are involved in the research Strauss mentions. “Nestlé’s road map for packaging sustainability includes finding appropriate uses of biopolymers in packaging, which is why we are a member of the World Wildlife Fund Bioplastic Feedstock Alliance,” says Baner. “That membership demonstrates our long-term commitment to be involved in finding ways to use non-food sources to make packaging out of renewable resources. Nestlé also has its own global sustainable packaging network. We meet regularly and offer webinars on biopolymers where we talk about which ones are available, which ones meet our LCA requirements, and which ones are or aren’t appropriate for use.”

Three platforms
Diane Herndon, Senior Manager, Sustainability, Nestlé Purina PetCare Company, summarizes the company’s view of sustainable packaging this way. “We’re active on three platforms. First is what we do in-house, which revolves around light weighting and finding new materials or configurations. Second is raising consumer awareness around recyclability, which is why we adopted the How2Recycle label. Consumers want to know how they can recycle our packages, so we think this is a step in the right direction. And third is a matter of trying to push the evolution of the recycling infrastructure at the Materials Recovery Facility, or MRF. Are these facilities optimally organized to handle flexible packaging materials, for instance? PET water bottles and HDPE milk jugs they know how to handle. But too many pet food bags that make it to the MRF get pulled off at the front of the material flow into the MRF and are sent to the landfill. There is a lot of resin in those bags that could be recycled and reused.”

Nestlé Purina and Nestlé USA are both members of a collaborative called Materials Recovery for the Future (MRFF), which recently announced the findings of research showing that automated sorting technologies in use today can be optimized to capture flexible plastic packaging material. The group contends that with adequate screening and optical sorting capacity, flexible plastic packaging can be efficiently captured in a single-stream MRF. The American Chemistry Council, also a MRFF member, issued a press release September 22 announcing the survey results, and in it research scientist Baner had this to say: “We now know how flexibles flow through a MRF and that the technology already exists for separating flexibles out of the materials streams. Although there is still a lot of work to be done to define the best way to separate flexibles from single-stream recyclables, this research moves us closer to solutions.”

New usage occasions
Using the power of packaging to break into new usage occasions is a strategy that smart CPG companies use whenever the opportunity presents itself. Nestlé USA pulled it off recently when it introduced Stouffer’s Cups: single-serve 6-oz portions of classic macaroni and cheese sold two per paperboard sleeve in the freezer case.

“Historically when people think Stouffer’s mac and cheese it’s been in terms of a lunch or dinner type setting,” says Packaging Group Manager Chastity Prince McLeod, who works out of a Nestlé Development Center in Solon, OH. Nestlé S.A. has the largest R&D network of any food company in the world, including 39 R&D locations globally. “That package format enabled us to get into more of a snack setting, and along the way it opened a lot of eyes internally and externally for how we might be able to leverage our products in a new way.”

Robert Champion, Group Packaging Engineering Manager at Nestlé USA, was project manager as the cup and its brand new packaging line was developed for the Jonesboro, AR, frozen-food plant where Stouffer’s and Lean Cuisine brands are produced. He describes it as a very cross-functional initiative involving R&D, the Stouffer’s business unit, supply chain, operations, corporate engineering, and strategic suppliers. Material development centered on the design of the pre-made thermoformed PP cup, consumer handling of the container from a safety standpoint, and optimized microwave ability.

“There was a lot of background work,” says Champion, “before we landed at the point where we could say ‘This is how to execute on this concept so now it’s time to commercialize it.’ The innovation from a machinery standpoint was a matter of how do you connect our existing mac and cheese processing line with this brand new multi-lane packaging line and run the cups at steady rates? Ensuring accurate fill weights on the cup-filling machine and inspecting for seal integrity were also challenging. We engrafted new equipment within upstream processing equipment and downstream freezing equipment. Unique design features were implemented at the infeed to our freezer to handle these little cups instead of trays. Exiting the freezer there was the challenge of putting the cups into the paperboard sleeve. The cross-functional team working with key equipment suppliers were able to find a solution.”

No doubt the contributions coming out of R&D helped move things along. According to McLeod, the goal shared by her and her R&D counterparts around the world is to focus on science and technology that will drive the future of the business. She also makes it clear that it isn’t always a matter of waiting for the supplier community to bring the next big thing to Nestlé.

“In some cases it’s us pushing to generate those sciences and technologies if there are gaps between what we need to achieve from a strategic business standpoint and what the supplier community currently has available,” says McLeod. “A purely hypothetical example might revolve around biopolymers for a frozen food package. Such products go from below 0 degrees to in excess of 400 degrees in the consumer’s oven. If we wanted to look into the possibility of a biopolymer for one of our frozen food packages it’s pretty unlikely that there would be one available off the shelf. In all likelihood we’d have to work with the supplier community to generate what would work.”

When asked how she’d describe Nestlé’s approach to packaging innovation, McLeod says it’s strategic and consumer-centric. “We align ourselves with what Nestlé’s business strategies are, and those strategies are always consumer-centric. We work hand in hand with marketing, consumer insights experts, technical managers, and our factories to make sure innovation unfolds as an inclusive process.”

As for where Nestlé looks for packaging innovation inspiration, McLeod says it varies widely. “It could be engineers who have a good idea because they know the strategic vision for the company and they came across a technology that they think fits that vision. It could be marketing that comes up with a great idea because it tested well. And sometimes it’s a customer who alerts us to a gap in our portfolio. But at the end of the day it’s the brands working together with packaging and R&D. If an idea originates in marketing, they often come to R&D to help them leverage the right technologies and sciences that will allow them to execute on that idea. Perhaps they want to go after the value channel and they need low-cost materials to hit a certain margin, then that’s what we look for.”

The innovation continuum
Packaging innovation at Nestlé can represent anything from a breakthrough moment to a simple modification of an existing format. Clearly in the breakthrough category is the molded pulp jug for Pro Plan Renew Premium Clumping Litter, which represents a joint effort by Nestlé Purina and Ecologic Brands Inc. Made of recycled newspaper and corrugated fiber board, this container is positioned as an environmentally friendlier alternative to F-style plastic jugs. It’s similar to previous molded-pulp offerings that Ecologic developed for Seventh Generation, TWC’s BodyLogix, and Paperboy wine. Like these, the Nestlé Purina jug is made by dipping molds into a fiber slurry. Two shells emerge from this process, and the shells are joined by adhesive to create the finished bottle. But the Nestlé Purina bottle is notably different in two ways. First, it has no inner liner made of flexible film. Perhaps even more intriguing, the friction-fit cap is molded pulp as well. The three containers mentioned above all had plastic threaded closures in addition to having inner film liners.

Part of the challenge in making the Nestlé Purina container revolved around the weight of the contents. Overlapping flaps designed into the package help give it the strength it needs to hold the 10.5 lb of product in the larger size. As for the molded-pulp cap, it need only be robust enough to withstand three or four reclosings. An “annular ring” in the neck finish is a design feature that adds strength to the container and contributes to the friction-fit functionality. An existing filling line had to be modified to accept the molded pulp container.

Compared to this paper jug, the development of the beveled carton for Stouffer’s Fit Kitchen line of frozen meals—aimed at consumers looking for protein, complex carbs, and great taste—is more tweak than breakthrough. But it does a great job of differentiating the package without breaking free of the fairly traditional carton format.

“It functions like a fifth panel,” says Ya-Wen Lee, Director of Prepared Foods/Pizza & Snacking/Baking Packaging at Nestlé USA. She’s the first to admit it’s anything but a breakthrough moment in packaging innovation. But that doesn’t mean it was a slam dunk getting it launched. “If you don’t pay close attention to the impact this slight modification to a conventional carton can have on your packaging lines—from how the carton is die cut to line speeds on an existing line—you can run into trouble pretty quickly,” says Lee.

One part of any new package development process involves Life Cycle Assessment software that Nestlé developed in-house. “We use it as a project moves from concept through development,” says Baner. “It’s another design tool that helps guide us in our decision making on which materials we should be using. We look at the typical LCA outputs like greenhouse gases, energy usage, water requirements, end-of-life scenarios, recyclability, and so on.”

This thoroughness of approach is perhaps the quality that manifests itself most repeatedly as one talks with packaging professionals like Baner and the others included here. They and the many colleagues they work with in Nestlé’s global packaging network are clearly big believers in all that packaging contributes to the Nestlé brand, which, by the way, celebrates its 150th anniversary this year.

“We’re not selling product as much as we are selling a consumer experience,” says Strauss. “Packaging is vital to the overall consumer experience. So if packaging doesn’t match the consumer’s expectations, then we’ve underdelivered on the experience.”

It’s that kind of focus that will carry the firm through its next century and a half.

What about packaging machinery?

Of all the folks interviewed for the VIEW FROM THE TOP profile, Nestlé USA Group Packaging Engineering Manager Robert Champion had the most to say about packaging machinery. Here are a few of his observations:

• Packaging machinery Original Equipment Manufacturers (OEMs) can improve their chance of getting Nestlé’s attention these days if they have a clear focus on building machines that are safe to operate and are designed with hygiene and sanitation as top priorities. Some OEMs, he notes approvingly, are incorporating hygienic features as standard components in base models where in the past they might have charged extra for them.

• In evaluating packaging machinery, speed takes a back seat to operational stability. “It’s about setting a target production rate and then hitting it,” says Champion.

• One thing OEMs have done well in recent years is to simplify diagnostics by making data more readily available and, even more important, making it more actionable right at the HMI screen. Champion includes OMAC’s PackML, the ISA industry technical standard for the control of packaging machines, as one of the positive influences that has shaped and continues to shape packaging machinery today. “If you see green on the HMI screen you know your machine is in a good and steady state, and if it veers into yellow you can take action before it goes to red,” says Champion. “PackML shows us machine status in real time and helps us meet that all-important targeted production goal.”

• Performing Factory Acceptance Tests in the OEM’s plant still serves a vital purpose, but progress checks performed virtually during machine development can be a big help. “We have stage gates where we perform health checks virtually through 3D follow-up modeling, renderings, review of drawings and systems, and so on,” says Champion. “These are done strategically during project execution along with on-site reviews at the OEM’s plant where we compare the physical asset with what we’re seeing in the virtual reviews. This lets us decrease timelines and, ideally, mitigate risk virtually while validating physically.”

• Champion is part of the Worker’s Safety committee of PMMI’s OpX Leadership Network, an initiative aimed at convening the builders and the buyers of packaging machinery with the goal of solving operational challenges and achieving operational excellence through safety. Safety is a by-product of packaging systems that do not stop due to unplanned downtime. “It’s one of the best organizations available when it comes to sharing with machinery builders the requirements of CPG companies like Nestlé USA so that they can produce the capital equipment we need,” says Champion. “It’s been very fruitful for us.”

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