How does a Packaging Company Make Money?

This question came from a client and really got us thinking! The first thing that surprises people is how vast our industry is. According to the Packaging New Zealand website, the industry accounts for around 1.8% of the nation’s GDP revenue and powers around 53,000 jobs and almost $70bn in exports. That’s huge.

Why Berica sits so prominently in the industry is because we’re at the forefront of the Government’s vision that by 2025, all packaging in New Zealand will be reusable, recyclable or compostable. Consumers are asking more and more challenging questions around where their produce, and the packaging that’s wrapped around it, comes from – and never more so than in the sphere of food packaging. 

There are three aspects to consider when establishing how packaging companies operate. Just like any other business, success hinges on ‘what drives up costs’, ‘what keeps costs down’ and ‘why companies differ in what they charge?’

(1) What drives up packaging costs?

Just like any other industry, global demand has a big say in the packaging sector. And it seems demand is not wavering – reaching US$917.1bn in 2019, and expected to reach US$1.05 trillion in 2024, according to the latest research from industry analyst Smithers. Increased online shopping, fast food consumption and a more affluent spending class in emerging markets are obvious examples of this increased demand.  

Costs are also driven up by logistics and supply chain disruption – such as less container ships coming to NZ and freight increases due to higher demand. Raw material scarcity – paper costs have increased in due to more paper packaging being used, currency fluctuations, rising labour costs and, more generally, the labour-intensive nature of offering sustainable options all have an impact on costs.

(2) What keeps packaging costs down?

Many industries and businesses in general use New Zealand’s ‘remote’ location as an excuse to legitimise high pricing. Not so much for the packaging industry and this is not aligned to Berica’s way of doing business.

Naturally, increased demand resulting in volume purchasing, more attractive exchange rates, access to new suppliers, a growing sophistication in trading among developing off shore trading partners in new territories will have a positive effect on keeping down prices.

The companies that are most successful in negotiating with suppliers and locking in favourable supply agreements and better trading terms are the ones who’ve worked hard to build long-term relationships with third-parties over time.

(3) So, why are some Packaging Companies so expensive?

Again, there are a number for reasons for this; being located in remote regional centres can mean that products are harder to distribute. The flip side however is that strong local firms are good for the local economy because they employ locally and use distributors and third-party suppliers that are ‘close to home’.

Other considerations include superior customer service and reinvesting profits in R&D (Research and Development). Meanwhile, the manufacture of products and services which are sold under the ‘green banner’ – products which are environmentally acceptable for a domestic market and meet various trading standards, will involve higher packaging costs than alternatives (like plastic) because you are paying for a specialist product. 

The old adage rings true in the packaging industry. You get what you pay for. Expensive can mean a superior-made quality product, a specialist product which is unique to the market, is highly innovative or fulfils a need that the majority of products in a sector don’t.

(4) Why are some Packaging Companies cheaper?

Correspondingly, you’d be surprised how many company’s don’t generate sufficient margins to allow for R&D. Other reasons include lower service levels, cheap or inferior freighting services, over reliance on loss-leading products. Many multinationals will enter a new market and sell products at a low margin to get a foot hold in the market.

In the packaging industry, cheaper is usually a word used to describe bulk, mass-market items where the quality is not expected to ‘hold’, has a high turnaround and short lifespan and follows a short path from manufacturer to distributor to consumer.

So how do all these factors affect what Berica is up to?

At Berica, our pricing reflects our continual commitment to sustainability and innovation within the new Zealand market. We are regionally based – we’re not tucked away in Auckland but based in Blenheim.

We have a range of eight categories and deliver to our customers the best service/experience delivery in a timely manner. Customers are paying for our experience – we know the local and nationwide market – after more than 25 years in the business, we should – and we do!

We also lead the way in innovation packaging in NZ to ensure they are fit for purpose.  You are buying from ethical suppliers – which ties in with one of our core values. We value every customer. Our interaction with you is unique. We’re proud of our high-quality and highly ethical products that only see the light of day after stringent R&D, testing and retesting.

We see the value in providing free samples to new and existing customers and provide solutions for the industry for problems they didn’t know they had. We also source New Zealand-made products to overcome the supply chain issues which result in higher product costs. 

At Berica, we ensure we can continually supply you and your company. We’re currently on a strategic programme of investment in higher stock levels which cut per unit costs and offset the ever-increasing longer production lead times and extended shipping times caused by the current global challenges due to Covid. 

If you read this and think we area the right packaging company for you,  please contact us on 0800 237 422, email us at sales@berica.co.nz to discuss your packaging challenges and you will be sent samples to ensure the best solution prior to purchasing or alternatively shop now.

berica.co.nz | 0800 237 422 | sales@berica.co.nz