US & Global Economic Impact Analysis and Forecasts

Freedonia analysts and economists are sharing their insights on how major events are impacting different parts of the US and global economies.

40th Anniversary of the Tylenol Murders: A Packaging Perspective

It is sometimes quite useful to look backward, even in this blog about looking forward.

This fall is the 40th anniversary of the Tylenol murders, when someone took Tylenol off the shelf, laced the capsules with cyanide, and returned them to the shelves in the Chicago area. Ultimately, 7 died, but the whole national was put on edge. Looking at it from a business perspective, not only is the tragedy an example of how fortunes can change quickly and suddenly for a market leader, it also shows how companies and whole industries can adapt quickly to change how they operate, sometimes permanently.

In this case, two industries – over-the-counter medications and packaging – changed quickly and forever.

OTC pharmaceutical companies developed a new product form (the solid “caplet”) that was designed to be harder to tamper with than the old capsule designs but just as easy to swallow compared to the leading alternative then – uncoated tablets.

The packaging industry quickly developed and added glued boxes, shrink wrap neckbands, and peel-back foil as an inner seal among other tamper evident measures. The FDA announced guidelines on November 5, 1982, and suppliers of capsule and liquid drugs were given three months to comply with new packaging, a nearly unheard of time frame for such a major repackaging effort. Although some packaging was a preliminary option meant to be functionally sufficient until the companies worked out a version that was optimal in terms of cost and appearance, all met the deadline. In fact, the first tamper-evident Tylenol packages were on the shelf by the fifth week after the deaths. All other types of drug products – presumably those less susceptible to poisonous tampering – and all imported drugs were given longer time lines, with all needing to meet tamper evident packaging guidelines by February 1984.

This is an example of rapid change that was permanent. We saw a lot of rapid shifts in the COVID-era and wonder how many are sticky trends. Changes that are most likely to become permanent include those where companies had to make significant investment in the change, where the need for the change remains high, and where there are other reasons to continue the change (e.g., consumer convenience).

Freedonia analyst will continue to watch for historical parallels, market disruptions, and the potential stickiness of industry and consumer change.

For more information and discussion of opportunities, see The Freedonia Group’s extensive collection of off-the-shelf research, especially coverage in the packaging industry.Freedonia Custom Research is also available for questions requiring tailored market intelligence.

  Industry Studies      Packaging    

Too Much…: Overstocks Challenge the Economy

A lot has been made recently of the supply chain challenges and rapidly shifting demand trends messing with ordering as suppliers and retailers hope to have enough, but not too much, on hand. In some cases, too much is exactly what happened.

Some retailers found that the long-awaited grills, camping equipment, bicycles, home office chairs, small specialty cooking appliances, portable pools, and other items that were red-hot in the early days of the pandemic finally arrived from that literal slow boat from China (and after being stuck in offloading lines at ports) just in time for consumer demand to shift to restaurants, travel, and other “post-pandemic” dreams. 

Even if suppliers and retailers could see the shift in consumer demand coming, would it have been fast enough to change these earlier orders? Not likely.

But what to do with stocks that are now not the must-have items:

  • Warehouse for next season. However, warehouse space is at a premium right now and costs of goods being delivered are high given still elevated shipping prices. Will it be worth it to store the products?
  • Sell it at a discount now. In an inflation-era, deals still abound. But do consumers want or still need it, regardless of the price? And what do these discounts do to consumer pricing expectations going forward?
  • Let liquidation companies take it on. This lets suppliers and retailers take some guaranteed money now, cutting their losses at a defined point rather than potentially extended time line where costs could keep rising. It also helps protect against consumers coming to expect deep discounts on a routine basis for brands that would likely prefer to keep some premium perceptions among consumers.

Freedonia analysts continue to watch factors such as stock levels, shifts in consumer demands, evolutions in supply chains, and inflationary trends for direct and indirect effects throughout the economy.

For more information and discussion of opportunities, see The Freedonia Group’s extensive collection of off-the-shelf research, especially coverage in the Consumer Goods markets and Packaging industries. Freedonia Custom Research is also available for questions requiring tailored market intelligence.

  Consumer Goods      Custom Research      Packaging    

Inflation, the US Food Market, & Consumer Behavior

There are a lot of factors behind rising prices in food, including still high demand for cooking at home, rising cost to transport food, supply challenges as processors shut down temporarily or issue recalls, seasonal/climate/weather challenges to crops, and global shifts in supply due to crisis points such as the war in Ukraine and sanctions on Russia.

Many consumers are concerned about rising or otherwise inflated prices in several product categories, but concerns are highest for food. In the Freedonia Group National Online Consumer Survey conducted in October-November 2021, 56% of respondents reported being very concerned about rising food prices. In the November-December 2021 edition of the survey, 50% of consumers strongly agreed they were concerned about rising food prices. By the February 2022 survey, this figure had jumped to 60% of consumers.

Similarly, in the October-November 2021 survey, 49% of consumers reported they were very concerned about food shortages. In the November-December 2021 survey, 27% of consumers strongly agreed they were concerned about shortages of food they typically buy, and this figure grew to 39% in the February 2022 survey.

Shortages typically mean higher prices; low supply and/or high demand brings on higher prices. So, people who are concerned about shortages are also showing their concern for rising prices. Consumers who are expecting the things they buy (in this case food) to become less available and for prices to rise will stock up now, thus assuring themselves of enough stock locked in before prices increase even more.

However, that is a self-fulfilling prophesy. As more consumers buy ahead of their need, that messes with supplies as manufacturers can’t keep up with demand, resulting in more shortages on shelves and driving prices up even more.

Freedonia analysts continue to watch inflationary trends for direct and indirect effects throughout the economy.

For more information and discussion of opportunities, see The Freedonia Group’s extensive collection of off-the-shelf research, especially coverage in the Consumer Goods markets and Packaging industries, as well as Food & Beverage coverage from our sister publisher Packaged Facts. Freedonia Custom Research is also available for questions requiring tailored market intelligence.

  Consumer Goods      Food & Beverage      Packaging    

One Company's Waste is Another Company's Raw Material

The circular economy is not just a chance to improve green-cred or as a marketing tool. It can be a financial benefit to a company’s bottom line too. If a company finds a market for something they otherwise would have to pay to dispose of, it's a financial win and a sustainability win.

We're looking at food waste for Packaged Facts this year as it’s a major issue food suppliers/retailers are targeting for sustainability goals (oh so very much waste), but not all food waste is edible or at least not edible in the same way, so...

Interesting case: Ford is using a plastic made using McDonald's coffee chaff (apparently that's coffee bean skin that comes off in the roasting process) for some of its headlight housings. They started working on this in late 2019, but talked about it recently in light of their pledge to reduce virgin conventional plastic use. Such material creativity has become more important, given the fact that recycled plastic materials are not available in large enough amounts to allow all the companies that need it for their sustainability pledges to hit their targets.

Others are also getting creative in making unconventional and more sustainable plastics. Loliware has developed a process using seaweed pellets that can be run through the same equipment that makes plastic straws, utensils, cups, etc. Right now, the company is only making straws and is able to offer these products at a competitive price because it doesn't need special equipment to make these straws. However, Loliware is expecting to expand into other areas with their molder partner Sinclair & Rush.

For more information and discussion of opportunities, see The Freedonia Group’s extensive collection of off-the-shelf research, especially coverage in the Packaging industries, as well as Food & Beverage coverage from our sister publisher Packaged Facts. Freedonia Custom Research is also available for questions requiring tailored market intelligence.

  Food & Beverage      Packaging    

Fresh, Customized, & Contactless… More Robots in Foodservice

We’ve talked before about Sally, a salad making robot from Chowbotics (which was bought by DoorDash in February 2021). Sally seemed an ideal response to interest in healthy eating coupled with concerns about salad bars in the COVID-era, as consumers and businesses were more aware of germs and interested in contactless options.

But since we’re also in an era of shortages in labor – particularly in foodservice – and experiencing rising costs for labor, food, and facilities, there is additional energy behind the idea of how automation can help. Tech innovators have stepped in. The most recent example is the RoboBurger, first placed in New Jersey. This is not an April Fools’ joke – you can’t joke about National Sanitary Foundation (NSF) certification!

The RoboBurger requires human workers to stock the machine and to check it if on-board sensors report tech trouble, such as a power outage or other reason for improper heating or refrigeration. Otherwise, this 12 square foot mobile kitchen can make a fresh burger in about 6 minutes. The unit allows for 24/7 operation in places like college campuses, airports, malls, hospitals, and other such facilities where hot food demand could fall outside of conventional restaurant operating hours.

Freedonia analysts will continue to watch for ways that robots, artificial intelligence, and other innovations will enable businesses to operate more efficiently and affordably. These and other innovations will help businesses provide customers what they want and need when and where they want and need it.

For more information on discussion of opportunities, see Packaged Facts’ Food & Beverage industry coverage, including Food Carryout & Delivery (update coming in May 2022) and The Freedonia Group’s analysis of the packaging industry, including to-go containers in Foodservice Single-Use Products and Global Foodservice Single-Use Products. Freedonia Custom Research is also available for questions requiring tailored market intelligence.

  Food & Beverage      Packaging