We also look at packaging costs for the small food businesses we work with. It’s another cost that sneaks up on you. A few cents per box here and there seems like no big deal, but if you serve or ship out say 200 orders a month that’s 200 * a few cents per box!
And that’s before you factor in the cost of any packaging fillers like bubble wrap or paper to stop things from moving around in the box. We’ve found that many of the small food businesses we work with are spending way too much on packaging for no reason. They don’t have to.
Most small food businesses spend too much on packaging without knowing it. It’s not that they’re buying expensive packaging materials. No, it’s that they’re buying packaging in the wrong way.
The Costs of Food Packaging – How to Reduce It!
Start by calculating how much you are paying for packaging on a monthly basis. Divide the monthly packaging spend by the number of orders you shipped or served. This number will give you an idea of how much packaging is costing you per order.
For many cafes, bakeries and meal-prep companies packaging can account for 3-8% of the total revenue. Knowing this number is crucial for making the right packaging decisions that won’t negatively impact your bottom line.
In practice, packaging typically costs small food businesses 3% to 8% of their revenue. We often help businesses save 3% to 5% off their packaging budget, and in some rare cases we’ve seen businesses cut their packaging costs by as much as 7%.
Now you have a fixed point against which to measure future decisions regarding packaging costs. Will buying a specific product save you money in packaging costs? If so, then it should save you at least that same amount in improved customer experiences.
Right-Size Everything
In small food businesses the biggest packaging mistake is often to use too large packaging for the food products. The excess material of the packaging, the empty space that has to be filled with packaging fill (packing material), and the excess weight of the packaging for shipping purposes all together result in a high cost of packaging for the food business.
Take a week to list out all of the orders you have, and go through each one to list out which size of packaging you used to pack the items, and how much empty space there was in the packaging to pack the items.
Changing one line of products to a smaller box of small cardboard food boxes for example can save up to 20% - 30% of the packaging costs for those types of orders. Smaller packaging items are usually cheaper to buy than their larger counterparts, cheaper to ship (because of weight) and can keep the food items more secure (because they won’t be able to move around in the box). Customers see snug packaging as care and rattling half-full boxes of food as carelessness.
Packaging that is just the right size for the job lets your customers know that you care. Large, empty boxes with paper stuffed in to hold things in place let your customers know that you don’t.
Buy in Bulk — But Buy Smart
The cost of a item in small quantities can increase very quickly as the quantity is increased. A good example of this is cardboard boxes. A box that normally costs 60 cents when purchased in small quantities could cost as little as 35 cents when purchased in bulk for a business that uses 2,000 boxes per month.
However, there are certain rules to purchasing boxes in bulk to reap the greatest benefits.
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To benefit from buying packaging in bulk, only buy the sizes you are already using, i.e. your 2 proven large sizes and 1 proven small size. Do not buy in bulk the size or sizes that you are still testing and using in small quantities.
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Secondly, make sure you have enough dry storage to stack all those flat boxes. I have seen many instances where boxes are stored in a damp location, only to develop musty smells and weaken within a short period of time. This can have a devastating effect on a business, all for the sake of trying to save a few cents per box.
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When you are a repeat customer, suppliers value you. They can give you a standing price for a repeated order, as opposed to a one-off quote for an odd order here and there.
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Also order your packaging ahead of time. Prices and lead times of packaging supplies tend to increase just before holidays, so make sure to order in time to avoid last minute purchases of overpriced packaging supplies.
Transform your packaging buying habits and turn packaging into a wholesale product that you buy in bulk to sell.
Choose Materials That Do Two Jobs
To this end, every material in your packaging must earn its keep. That is to say, each of them must solve two problems for you.
Paperboard made from 100% Kraft paper is a very suitable packaging material. It is strong enough, it is food safe and it is biodegradable and even compostable. Kraft paperboard also has a very natural look and feel, without printing it already looks premium.
Because of the natural brown color of the Kraft paper it already signals ‘eco-friendly’ to the customer, which can be very important to some customers. This means you can save a lot of money by not printing anything on the packaging, because custom printed packaging is very expensive.
A good supplier of kraft packaging can provide your business with stock boxes made from unbleached paperboard. These can be stamped or stickered with a simple one-color logo to create an effective branding package at a fraction of the cost of custom print.
This is in stark contrast to plastic-coated packaging, which is so very expensive, non-compostable and increasingly repellent to customers. So, in summary, the worst packaging deal of all is to pay a premium for something that your customers hate.
Simplify Your Lineup
Additional packaging formats, such as different box sizes, sleeves, inserts, etc. always entail additional costs, for instance, for storage space. These do not become visible at first, but become apparent when the number of SKUs is increased in order to take advantage of the cost savings of a larger order quantity.
As a result, the cost per unit of the items will be higher than for a smaller number of items. Furthermore, more space on the shelves, more administration for reordering and more confusion for staff in peak periods are further costs that can be incurred by having too many packaging types.
Consider your packaging inventory. If you have 5 different box sizes and 3 of them make up 90% of your orders, you would be better off reducing the 5 sizes down to 3. This will likely improve your cost on the packaging you use most, and help keep more stock on your shelves.
One thing to keep in mind: when simplifying your lineup, you should aim to go smaller, not bigger. That is to say, instead of cutting 5 box sizes down to 2, you would cut them down to 3 (if those 3 cover 90% of your orders). The worst cost in packaging is the cost of shipping air.
Protect Food First, Always
Your cheapest box can become your most expensive if it allows food to be damaged. Air your worst nightmares about returning money for spoiled items and re-making them for your customers. Two cents to save on a thinner box of cake or fried item packaging just isn’t worth it.
This means packaging has to protect food first. Sturdy walls to stop boxes from getting crushed in delivery bags, greased resistant liners to stop oil from penetrating packaging, and vented packaging to allow items to steam slowly in delivery. Once you have worked out a cost reduction, test it on a mock delivery before ordering changes in bulk.
Cheap packaging that fails is not cheap. It is the most expensive packaging you can buy.
Small Changes, Real Margins
So now that you’ve read the article, here are 6 steps to save your small food business money on packaging. Don’t believe that you have to spend a lot of money to save money.
Measure the cost per order of your packaging. Right size the boxes that you use for shipping. Buy the packaging materials that are the core of your business in large quantities. Use the packaging materials to do your branding. Cut your packaging SKUs. Protect the food.
So do all six! And within a few months, most small to medium sized food businesses can save a quarter or more on packaging, while sending food of the same quality or better to their customers.
Your margins are hiding in your packaging. Go find them.
