When Flexibles Drive Retailer Success
What are some of the key drivers of a highly successful food retailer that uses flexible packaging as a lever to success? Doug Rauch, former CEO of Trader Joe’s, related these points at FPA’s 2015 Fall Executive Conference:
- Reliance on a culture of continuous innovation
- Creation of destination products
- Recognizing that the U.S is in an era of abundance without waste, and that the perception of food waste is a reality
Rauch, who led Trader Joe’s through tremendous growth as a specialty food retailer, elaborated on these factors; in doing so, he offered the flexible packaging industry insights on the thought process of innovators that set trends in retailing and packaging. Among the factors for Trader Joe’s success is what Rauch calls a “culture of continuous innovation.” Part of the environment is a willingness to tolerate failures.
How can that culture impact suppliers? First, he said, it asks that suppliers do the “heavy lifting.” It also asks that suppliers be collaborative partners. To do that, suppliers have to recognize the customer’s needs and business objectives. One of those particularly cited by Rauch is the need to reduce labor costs and to address labor issues.
For Trader Joe’s a specific issue is how to create destination products—those that bring customers to a specific business and help create a relationship between the business and its customer.
One example: Bagged salads, a concept brought to Trader Joe’s by Ready Pac Foods. Rauch underscored the need to put innovation in terms that appeal to the retailer. He said that technical advances may have made the package possible, but that’s not what appealed to him. “What it meant is that we could be in the produce business,” he said.
Anyone shopping Trader Joe’s today can find a comprehensive specialty produce section where packaging answers consumer preferences for easy-to-prepare vegetables.
Produce continues as a leading-edge category today as the concept of food waste moves to the “front burner” for consumers. Rauch notes a trend among consumers toward abundance without waste—people want more experiences while using fewer resources.
“On the issue of food waste, people care about it,” Rauch said. And, he believes, increasingly sophisticated consumers accept packaged solutions versus the unpackaged “natural” products. He observes that consumers use store-provided bags when they buy loose produce at a grocery, and that becomes an element of their value equation. They are also more accustomed to packaged foods than earlier. “Costco has lead the way in pre-packaged foods,” Rauch says in noting how that shopping experience helps make packaged foods more acceptable in other retail environments.