After a post-pandemic pause, product and line extensions returned at a rapid pace. Here is how package printers are keeping up with the Stock Keeping Units (SKUs), writes Cory Francer:
Stock Keeping Units (SKUs) Proliferation refers to the process of adding more products to an inventory based on changes in the market, thus increasing the number of stock keeping. In simple term, this occurs when the number of SKUs that comprise a business’s inventory expands significantly over time.
Among the top challenges package printers and converters have faced in recent years, the rise of SKU proliferation and short runs has been a primary driver in how these companies are assessing their workflow strategies. Motivated by consumer demand for new products and varieties, brands have been actively expanding their offerings for decades, introducing a boom of new products into the marketplace, along with new labels and packaging as well.
With this increase of new packaging expected to continue, printers and converters have turned to emerging technologies to efficiently produce these increased packaging versions, along with the short runs that have been a direct correlation to the rise of the SKUs. This is because SKU proliferation supports rapid increase in the number of distinct products or variants a business offers based on changes in the market.
Digital printing and production technologies, though not necessarily new to the packaging segment, have become undeniably important tools in managing these challenges. “Digital permits shorter run lengths and minimal economic order quantities that are much lower than would be permitted by flexography, rotogravure. or offset,” says Ron Sasine, principal at Hudson Windsor, a packaging consulting firm that focuses on strategy development, packaging innovation, and supply-chain transparency. “I would have said 10 years ago, digital is going to be a very interesting side light. It’s going to be a little niche that might grow a little bit. But I will admit having underestimated the transformation and improvement in digital production equipment that has emerged over the last five years.”
A ‘Flight to the Familiar’
While the increase in SKU proliferation and reduced run lengths in the packaging industry goes back many years, the pandemic puts a temporary pause on the trend. Just as brands and their package printer partners were acclimating to a changing environment, the pandemic and its subsequent shutdowns resulted in brands focusing on their primary products instead. By doing so, consumers could still get their staple items at a time when stores are closed, and the supply chain was upended.
“There was a flight to the familiar in those years when people wanted something they could rely on, something they trusted, and that the big manufacturers would continue to provide,” Sasine says. “That flight to the familiar put a pause on some of the new flavours and new line extensions and other products.”
However, the pandemic restrictions dissipated in 2022 and 2023, Sasine explains that this pause of SKU proliferation was reversed, and not only did the brands return to introducing new products and line extensions, they did so at a rapid pace. Similar to how the travel industry has bounced back, as lockdown-weary consumers sought new experiences, brand owners have focused on offering fresh takes on their products and have embraced the ability to develop new versions, complete with new packaging.
“All of those things that are growing and expanding, digital is what permits that,” Sasine says. “The brands have discovered that there is an appetite for new and novel, which presents a new sales channel for some of these companies that they have exploited before, but they are finding new ways to attack it.”
What’s Driving Brand Extensions
Personalization in the packaging segment is often thought of as a one-to-one communication, in which the brand speaks directly to the individual consumer though a custom name or photo on a label or package. But personalization can take on different forms in Consumer Packaged Goods (CPGs) segments, where brands expand on their product lines to better serve certain demographics or groups of people.
David Luttenberger, global Packaging Director for market intelligence agency – Mintel, points to the beauty and personal care segments as strong evidence of this trend. He explains in this segment, brands historically offered a core grouping of products that were designed for mass use. However, because the beauty and personal care segment require products for an expansive variety of people, brands have extended their product lines to be inclusive of multiple factors, such as different genders, skin tones, ages, and body types.
“The brands have to be where the consumers are,” Luttenberger says. “So, the SKU proliferation in the beauty and personal care category may be as strong as any because you’ve got a greater age range or different gender types looking for different products.”
- Since launching its ice cream in New York City, Van Leeuwen has expanded its flavours and product line, maintaining its instantly recognizable packaging in a variety of colours. Credit: NAPCO Media File
Beyond developing new flavours or targeting certain demographics, Luttenberger says that brands have expanded their offerings, utilizing digital production technologies to release seasonal or limited-edition packaging. In many cases, Luttenberger explains, the brand could be offering the same product, but packaging it differently to correspond to specific events or seasons. For example, if a brand is targeting sports fans, implementing packaging specifically for the Super Bowl in February, and then altering to correlate with the 2024 Summer Olympics could be an effective way to continually engage with consumers in new ways throughout the year.
“A lot of brands are saying, ‘I’m going to expand my product portfolios,’ ” Luttenberger says. “Mintel has a trend called ‘Extend my Brand,’ where after the pandemic we did see a lot of brands saying, ‘you know what, I’m going to give consumers anything and everything they want.’ ”
The Tools for a Short-Run Reality
From the beginning of the influx of short runs and increased SKUs and packaging versions, digital printing has played a big role in this new reality of packaging production. In fact, according to NAPCO Research 2023 report – Digital Packaging: Opportunities to Thrive: package printers and converters that currently rely on digital printing largely stated that short-run production (36% of respondents) were among the top benefits of digital printing. This is in addition to 31% citing personalization as a top benefit of digital (see Figure 1).
- Figure 1
While digital printing has been beneficial for package printers in contending with increased SKUs and short runs, printing is just a portion of the equation. The finishing and converting processes required in label and packaging production still present challenges. Package printers that attempt to run digitally printed output through conventional finishing equipment are likely to run into production bottlenecks. As reported in NAPCO Research’s digital packaging study, 84% of respondents stated finishing and converting short runs presents some level of challenge, underscoring the importance of pairing digital printing equipment with digital finishing and converting equipment (see Figure 2).
- Figure 2
Sasine explains that digitalization of workflows continues to make SKU proliferation and the processing of short runs less cumbersome. He shares that he recently participated in a panel conversation with a digital press manufacturer that detailed how the number of units that could be produced on a digital press in 24 hours could equal that of an offset press, but with two-thirds of the labour hours.
“Think about the amount of time printing presses are stopped to do a changeover and all of that effort that accompanies the changeover,” Sasine says. “Eliminating that and all of a sudden having a smooth and immediate transition to the next job, it absolutely removes hours and hours of labour from the cost structure of a company and boots output. ”
Beyond digital printing and production technologies, however, Luttenberger says the rise of artificial intelligence (AI) in the printing industry is having a positive impact on brands’ increase in SKUs. For example, brands can implement AI tools that utilize rich data sets to take on tasks including developing brand imagery, colours, graphic and structural design, and create packaging based on a brand’s identity. Then, using these results, a brand owner can confidently take a design to a package printer to be produced.
This, Luttenberger adds, can reduce marketing spend and test marketing time, all while meeting key objectives such as consumer acceptance, sustainability, and functionality. “The advent of AI and how it’s being used in package design really fits hand in glove with SKU proliferation when you’re trying to reach a different demographic, a different age group, a different income level,” Luttenberger says. “ That’s really where we’re seeing the brands really up their game in terms of being able to offer line extensions, new varieties, and do it quickly, economically, and more predictively so that when they go to the printers and say, ‘here’s what we want,’ there’s a greater assurance that it’s going to be accepted in the marketplace.”
The Trend Continues
With SKU proliferation back on track after the pandemic, package printers and converters should be prepared for it not to just continue, but to ramp up even further. As reported in Digital Packaging: Opportunities to Thrive, 41% of the brand owners surveyed about their current SKU trends indicated that they had grown over the past two years.
When asked the follow-up question of how they expected the quantity of their packaging SKUs to change in the next two years, 60% stated they expected an increase. When asked why they expected to see an increase in the next t years the No. 1 answer was that consumers were demanding more variety in their product mix, with 75% of respondent citing this consumer demand (see Figure 3).
- Figure 3
“My general sense is that consumers remain interested in new approaches, new flavours, and new branding,” Sasine says. “All of those things are still very much in consumers’ eyes and interests. Were it not that way, we would not see that continued growth in those areas. But we are seeing it and the retailers that observe and talk with, they’re seeing it as well.”
In addition to consumer demand, brand owners surveyed by NAPCO Research reported the other top drivers of SKU proliferation include:
- Keeping up with competitors: 39%
- Printing technology that allows for cost-effective short runs: 39%
- Increase in limited-edition products or packaging designs: 36%
- Shorter product development lifecycles: 36%
These results indicate that brand owners are also feeling pressure to not just satisfy consumer demands, but to keep pace with their competition out of fear that consumers may shift their allegiances. They also are seeing opportunities for limited-edition products, which drives up SKUs, along with a need to consistently introduce new products in shorter intervals.
But perhaps most intriguingly, with nearly 40% of respondents stating they recognize their ability to leverage printing technology that allows for cost-effective short runs, it is clear that brands have upped their education on digital printing technologies and view as a key tool in growing their product lines. “Digital print, variable printing, [brands] are well aware of that,” Luttenberger says. “They use it when and where they can. They use it to their advantage for ultra short runs, for customization, for personalization. They’ve got that down for science.”
About the Author
Cory Francer is an analyst with NAPCO Research, where he leads the team’s coverage of the dynamic and growing packaging market. He is the former editor-in-chief of Packaging Impressions, the most comprehensive source of business solutions for printers and converters of labels, folding cartons, flexible packaging, and corrugated packaging.
