You're reading: Smart packaging market set to grow

Ukraine has a garbage problem.

The country produces around 45 million cubic meters of waste every year. Only a small percentage of that is recycled or incinerated — the vast bulk (over 90 percent) is dumped in landfill sites.

There are thousands of such sites around the country, and some cities, notably Lviv, are simply running out of places to dump garbage. The situation is so bad that city’s mayor, Andriy Sadovy, has had to appeal to other cities in Ukraine and even in Poland to take some of Lviv’s waste.

So a bright idea to address the problem could be to use more smart packaging — environmentally friendly, biodegradable food packaging that can also reduce food waste and the overall amount of garbage sent to Ukraine’s landfills.

Room for growth

Only a small amount of products in Ukraine currently come in smart packaging, so experts and market players see plenty of potential and room for growth.

One of them is Irina Mirochnik, the president of Immer Group, Ukraine’s largest manufacturer of smart packaging, which has taken around 40 percent of the Ukrainian smart packaging market.

“The smart packaging market is expected to grow in Ukraine, despite some decline in the food products market,” Mirochnik says.

Her company produces flexible packaging (as opposed to glass, metal, or hard plastic) for Ukrainian dairy products, confectionery products, and the pharmaceuticals and chemicals industries.

It also provides multinational food companies like Danone, Lactalis, Nestle, PepsiCo, Tchibo, and Mondelez with flexible packaging materials. Nearly half of its products are sold domestically, while the other half is exported, mainly to Europe, Russia and the countries around the Mediterranean.

Innovation and the introduction of new products to replace older “dumb” packaging come part-and-parcel with Immer Group’s business strategy. Every year, the company spends 2 percent of its sales revenues on research and development, Mirochnik says.

“We’re constantly investing in projects that have an ecological and energy-saving effect,” she says.

Smart versus dumb

Worldwide, the smart packaging market was worth some $31.1 billion in 2016 and its value is expected to reach $39.7 billion by 2020, according to a report by Visiongain, a London-based market research firm.

The main reasons for the market’s increase are consumers’ rising income and their increasingly busy lifestyles, which both increases demand for timesaving fast food products in smart packages and means consumers are willing to pay for more expensive but more functional and environmentally friendly smart packaging.

“Consumers will also want to know the exact nutritional value as well as the condition of the products they are consuming, and thus open up more opportunities for smart packaging products,” the Visiongain market report reads.
“The growing number of elderly people will boost the demand for pharmaceuticals, where active packaging is applied intensively,” it goes on.

Smart packaging is a somewhat vague concept, but in general it includes features such as the ability to maintain moisture levels within the packaging at ideal levels to reduce food degradation, and the use of monitoring patches that change color to indicate the freshness or quality of the product inside.

It beats traditional “dumb” packaging in terms of ease of use, reliability, environmental friendliness, and its ability to significantly extend the shelf life of products.

Big advantages

Olena Prykhodko, the commercial director of Aris, a Kharkiv-based company that produces smart packaging for the food and agricultural industries, says her company now makes over 10 million smart packages of various types every month. These range from regular sachets, to stand-up packets of the doypack type, which are commonly used for packaging ketchup, mayonnaise and mustard.

In February the company started producing retort pouches (packaging made from a laminate of flexible plastic and metal foil) which has undergone testing of its ability to maintain food quality even at exterior temperatures of up to 120 degrees Celsius.

“Currently our company is working on providing the product with the necessary level of protection from light degradation, but at the same time without the use of heavy materials such as aluminum foil,” Prykhodko said.

Mirochnik of Immer Group says that “smart packaging allows to the extension of a (food product’s) shelf life, and provide consumers with full information about the product. It also has the optimal size.”

Smart packaging waste that does end up in landfills create far less soil and ground water pollution even than food waste itself, and their use can increase a product’s shelf life by 30 percent, Mirochnik adds.

Starting small

In Ukraine, around 40 companies now produce flexible smart packaging, but their share of the market is still small. Mirochnik of Immer Group says the Ukrainian packaging market is worth around 150–200 million euros annually, of which 25–30 million euros is the segment of high-quality smart packaging.

Overall, the Ukrainian smart packaging market is indeed small, agrees Oksana Shulga, who has a PhD in food technology and is the assistant professor of the Foodstuff Expertise department at Kyiv’s National University of Food Technology. “The smart packaging market in Ukraine is in its emergent stage,” she says.

Oleh Krasnoselsky, the head of RFA Ecotrade, is banking on the smart packaging market in Ukraine growing in the years to come. His company imports disposable tableware made of cornstarch from Iran — in 2016 RFA Ecotrade imported 700,000 items of disposable tableware (including disposable plates, cups, serving dishes, fast-food packaging and knives and forks) and this year he plans to double that amount.

The advantage of Krasnoselsky’s disposable tableware is that it decomposes in a landfill within six months. It can also be frozen or heated in a microwave without it emitting harmful substances or affecting the quality of the food products it contains. Companies engaged in food delivery and the general public are his main customers, Krasnoselsky says.

“The people who buy it are interested in protecting the environment,” he says.

But despite his plans to increase imports, demand for Krasnoselsky’s tableware is limited by its higher price — the cornstarch items are on average one-and-a-half to three times more expensive than disposable plastic items.
“The smart packaging market is promising, but everything will depend on (the public’s) income,” Krasnoselsky says.

Future benefits

The annual growth of the European smart packaging market is around 2–3 percent, while in Ukraine, according to Western experts, market growth is 3–5 percent. However, Immer Group’s Mirochnik doubts the accuracy of those figures. She says she is convinced that the market will grow due to increased sales of both conventional and smart packaging.

“According to my estimates the growth (of the Ukrainian smart packaging market) should be 7–10 percent,” she says. The use of smart packaging will benefit the country in the long term by protecting the environment and reducing food wastage, she believes.

“But of course we have to switch to smart packaging. It’s the way to go for those who are thinking about the future, and not just from the point of view of saving money.”