Wal-Mart’s Sustainable Packaging Initiatives Costing Marketers Money

October 1, 2007

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Wal-Mart’s sustainability initiative to downsize packaging is costing manufacturers money, AdAge reports. It could cost Procter & Gamble, part of Wal-Mart’s effort to concentrate certain products, $200 million by one estimate.

Wal-Mart’s packaging initiative pressures marketers to invest substantially upfront to reduce packaging and energy use – estimated at $100 million for Procter & Gamble in the case of laundry-detergent compaction. The savings in shipping costs and packaging materials that could offset that appear to be going toward giving better prices to Wal-Mart and its customers, rather than to the marketer.

The price per load of the compacted laundry detergent has been at times significantly lower than the old formulation. That led Deutsche Bank analyst William Schmitz last month to change his assumption that detergent compaction would be price-neutral.

Those price cuts would reduce P&G’s savings from an originally projected $109 million to $72 million and the overall industry savings from $238 million to $191 million.

Almost one year ago today, Wal-Mart announced plans to measure its 60,000 worldwide suppliers on their ability to develop packaging and conserve natural resources. Wal-Mart expects the project to reduce overall packaging by five percent and save 667,000 metric tons of carbon dioxide from entering the atmosphere.

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