Tim Sykes visited Dow's Pack Studios in Horgen, Switzerland, to find out why the world's number one producer of polyethylene is positioning itself as a hub for packaging innovation - and whether this represents a fresh model for industry collaboration.
"Our vision is to become a solution provider, not just a producer," says Javier Constante, (commercial VP, Packaging & Speciality Plastics, Europe, Middle East & Africa). "Therefore, we need to work closer to the end of the value chain, working from the end consumer backward." This is the crux of Dow's big move into packaging, symbolised by the company's first - and certainly eye-catching - appearance at interpack last year and more substantively by the rolling out of a series of global Pack Studios facilities over the last two years.
The backdrop to this strategic shift is a packaging market in which global megatrends is driving demand for innovation, yet where industry pressures put the brakes on risk taking. Macro trends such as population growth, urbanisation, ageing populations and growth in single occupant households, in addition to pressures such as sustainability, give rise to a heightened need for new packaging solutions: portion packs, easier opening, lighter materials, easier recycling.
On the other hand, in a fiercely competitive market governed by tight margins, converters can be wary to break cover. "As industry becomes more and more fragmented, there is less opportunity for smaller companies to risk committing to an innovation," remarks Apurva Shah (market development manager, Packaging & Speciality Plastics EMEA). "The rewards for introducing a successful innovation are plain but for a smaller business the consequences of failure mean they have to be cautious about any investment."
Pooling value chain intelligence
It is this predicament that the Pack Studios concept was set up to address. Dow describes Pack Studios as an international network of experts, equipment and testing facilities, 'intended to enhance the collaborative development of better packaging'. Under the umbrella of its 'Value Chain' group, Pack Studios brings together stakeholders such as brand owners and retailers, with whom Dow has not traditionally interacted, along with packaging converters, Dow's direct customers, to pool their respective insights. Similarly, Dow is able to enlist internal and external specialists - equipment manufacturers, packaging designers, experts in prototyping and resin - to work on particular innovation projects.
As well as the centre in Horgen, Switzerland, Dow has opened Pack Studios in Freeport, Texas, Shanghai, São Paulo and, as recently as April 2015, Mozzate, Italy. The facilities are complementary, each possessing its own focus and associated technologies. Freeport specialises in logistic packaging, with an emphasis on stretch hood, while in Switzerland the spotlight is on primary packaging. The focus of the Shanghai centre is on sachet packaging (a major market in China), São Paulo's is on thermoforming, and Mozzate's on the adhesives portfolio.
Each centre comprises a Collaboration Room, laboratory facilities and equipment for fabrication and testing. Together this provides space for collaboration all the way from analysis of market needs to fine tuning product development. "The intention of Pack Studios is to change the mindset," comments Carlos Lopes (marketing director EMA, Food & Speciality Packaging Adhesives & Functional Materials). "It is all about moving downstream in terms of knowledge and breaking down silos. By doing so we can facilitate faster commercialisation of new packaging. Our motto is 'Collaborate - innovate - accelerate'."
A striking early example of this approach is PacXpert™, a pack format devised as a flexible alternative to the rigid containers used for relatively high volume liquid products, such as windscreen cleaner fluids. Being collapsible, the pack can be stored and shipped flat, meaning it delivers space and energy savings within the supply chain, as well as using significantly less raw material. The switch to flexibles has also given rise to an innovation in functionality - the incorporation of a second handle on the base of the pack which enables the consumer to dispense the contents with two hands, and therefore with greater ease and control.
It is an innovation that not only addressed the environmental megatrend of transitioning from rigid to flexible packaging. Thanks to the insights of the Value Chain group, Dow was able to identify that PacXpert™ was a product in which real value resided and for which there would be demand on the part of consumers. Designed by the US-based Smart Bottle Co, the invention was bought up by Dow with a view to commercialising for a variety of applications. Bringing together prospective licensees, Pack Studios' R&D facilities and the input of brand owners, Dow was able to advance the product development at an impressive rate and has already reached the point of commercialisation.
"I think we have found the recipe for accelerating innovation and introducing it to the market," says Fabrice Digonnet (new business development leader, Packaging & Speciality Plastics EMEA), who took a leading role on the project. "PacXpert is just one example of an innovation that reached the market in 18 months. If you talk to a machinery manufacturer, you'll hear that there are new ideas all the time coming from converters who want machinery solutions to produce a new type of package. But how many of these do you see each year taking the leap to the mass market? We are able to fulfil the function of supplier of innovation to the value chain. You could say Dow is becoming a consulting arm of the value chain."
A key ingredient in that innovation recipe is being able to devote substantial resources to product development projects that ensue from Dow's value chain deliberations.
"Coming in with a lot of resources and making them available to our customers is a game changer," asserts Apurva Shah. "Mistakes are very costly for our customers. As a resin manufacturer, we have access to the raw materials to conduct research. In addition, we've partnered with the right machinery manufacturers through sponsorships and donations to bring the costs of development down."
Indeed, it is hard to conceive of a business other than one of Dow's size and Dow's position in the supply chain being capable of bringing together stakeholders from across the value chain or making the necessary investments to facilitate innovation on such an ambitious scale. In addition to the Collaboration Room - a futuristic meeting environment - Pack Studios in Horgen devotes the kind of floor space that a medium-sized converter might possess to laboratories and manufacturing lines solely for testing and product development.
Dow works on a scale that enables it to acquire an array of testing devices - such as the leak testing and seal testing equipment shown during my tour of the premises - that most of its customers do not possess. As the tour went on the magnitude of Dow's investment in packaging was gradually brought home: a succession of packaging lines across two floors featuring machinery such as a Sealpac tray sealer, a Bosch vertical Form-Fill-Seal line, and a horizontal Form-Fill-Seal pouch machine from SN Maschinenbau - all set aside for perfecting the next innovation.
"Investing in packaging lines with state of the art machinery is all about gaining knowledge of what works," comments Marco Amici (EMEA marketing manager). "We are able here to replicate our customers' manufacturing processes and to test new combinations of materials under varying conditions. For instance, we can look for the sweet spot between easy peelability and tear resistance or barrier reliability when combining new polymers and adhesives."
Collaboration is key
Another area of R&D currently being undertaken at Pack Studios is the work aimed at pushing forward the capabilities of ultrasound technology. This particular project is a fine example of the way Dow is bringing together coalitions of stakeholders whose combined input make it possible to reach solutions faster: partners in the project comprise Hermann Ultraschall, Amcor, Bosch, the Technical University of Dresden and the Fraunhofer Institute.
"Pack Studio is an open platform for collaboration across the industry," says Marco Amici. "This approach pools knowledge to identify technical solutions quicker. At the other end of the scale, having a very close relationship with brand owners helps us understand market trends and needs. We learn a great deal from this process - also through our failures. It's great to always succeed but that means you don't take risks. The important thing when you fail is to fail quickly and learn the lessons."
There are already signs that Pack Studios is breaking down barriers. "It has been a step change in how we approach the market - not just our customers, but the brand owners and retailers," comments Fabrice Digonnet. "Stakeholders further down the value chain now want to work with us, whereas in the past they would not have seen the point in talking to a resin manufacturer. The innovations we are coming up with set the tone for a very collaborative environment. They see we are not here to sell resins, but solutions."
A further advantage is that Dow's involvement offers reassurance to brand owners who are interested in packaging innovations but reluctant to commit to a single supplier. The Pack Studios model raises the opportunity of making new technologies and formats available to multiple licensees, who can implement them together with Dow into the value chain.
Working with the entire value chain, along with internal stakeholders such as Dow's strategic marketing, new business development, sustainability and R&D specialists, implies a formidable organisational task. Is the process weighed down by its own breadth of ambition? According to Marco Amici, it is not. "Although Dow is a huge company, it is democratic in character. We have clear stakeholders involved in decision making and the number limited to 10-15 people to take key strategic decisions - you don't need to get permission from 25 layers of management. Individuals take the lead on respective projects, soliciting broad input from around the company but reporting to one person with a global purview. This means we can act quickly."
"Setting a business development strategy is a complex task," adds Apurva Shah. "We look across the whole value chain right from the end consumer level and the chain comprises so many levels, on each of where there may be different responses of a trend and how Dow can impact in terms of innovations and material sciences. Ultimately, there are probably hundreds of different ways one can interpret an end-consumer trend such as easy opening. It's an exciting challenge to be able to interact with so many different areas of the market and try to pull it all together."
The way Dow approaches this challenge is to put together a solid network. Apurva Shah continues:
"First, we put our tentacles out into the market, investing a lot in engaging with OEMs to understand performance requirements in detail and how to make our materials work on the wide variety of packaging lines out in the marketplace. We also put our tentacles into academia to conduct more experimental research and explore the possibilities in future coatings, materials and technologies."
One example of collaboration with academia is a partnership with a US university studying shelf impact using scans tracking retina movement. This has made it possible to identify and measure the negative impact of the glare reflecting off packages under the bright fluorescent lighting in grocery stores. This in turn has contributed to the refinement of Dow's OPULUX™ portfolio of matte finishes, which have been especially devised to produce a luxurious appearance in supermarket conditions.
Innovation projects are categorised as Horizon One (most near term), Two or Three (most long term). Dow's R&D teams work along the spectrum from blue-sky research, taking managed risks, to groups working with customers to effect minor improvements to existing products.
"The longer-term, strategic part of our organisation is growing as we become more market focused," says Apurva Shah. "We recognise that taking chances in innovation is important to the stewardship of the industry. In terms of Horizon Three, we are looking at things such as refining data collection and computer modelling to the extent that we could eventually skip the first 90 days of product development and go straight into trials. An example of a longer term, Horizon Two type project is to develop a coating that improves the thermal resistance and printability of PE. One of the reasons PET is often used in flexible packaging is its superior performance in these respects. Our objective, applying our knowledge from our coatings and adhesives business, is to develop a solution to bridge this gap."
One stop shop
Thanks to its vast portfolio, Dow operates in every major area of packaging, apart from print. Putting Pack Studios at the centre of collaborative innovation within the industry, Dow is placed to foster innovation that responds to most kinds of demand. This could entail developing solutions that respond to a global need such as making sustainable packaging solutions affordable to consumers; devising higher performance sealants to serve the faster lines required for smaller pack formats; or helping converters achieve more margin with products such as the AGILITY™ LDPE resins designed to get more output from the same volume of material.
It could be said that Dow is positioning itself as a one stop shop in packaging: creating a space where the needs of the value chain can more easily be met.
"When customers want to innovate, they have a long checklist to tick off - consulting with raw material producers and machinery manufacturers, thinking about IP, agonising over the business case - before they can take a decision to invest," Fabrice Digonnet concludes. "Dow is making a big move by investing in packaging technologies in order to facilitate a step change in the industry. If we can engage in innovation and encourage our customers to follow suit, the result will be to accelerate the introduction of new and better packaging products to the market."