The Cost of Packaging

The Cost of Packaging

We had a conference call recently with the CEO of a manufacturing company who is interested in distributing products into southern Africa. He mentioned when developing product packaging, even $0.75 of added cost per product puts an additional $2 wholesale cost to import products into Zimbabwe.

Doing simple math, after duty, VAT and then up-charge to retail, that’s a total of $4 to $5 added dollars per item (on a $20 item). It’s no wonder it’s so difficult to introduce new product lines and items into the local market.

I see opportunities all over to solve these market gaps. What about a local packaging company? So you solve the largest problem for companies looking to import new products—they save the $0.75 on packaging and the local packaging company can make margin between the $0.75 and $5 retail cost. Products would lower in cost overall and the economies of scale are playing nicely into the market.

Traditional thinking will only get us so far moving into this new era of brand building. Go ahead and start with traditional assumptions, but then look at the impact you want to make. From there, build backwards based on the planned impact.

Impact = lower product retail costs.
Problem = packaging costs add $5 of cost on a $20 item.
Solution = bridge the packaging costs.

Wal-mart is looking to save $3-4 billion on new packaging this year. Maybe we’re on to something here.

(photo via m.somji)