A Quick Win

Hey there!

This is a quick note that I think is valuable to share. It’s not about copacking but most definitely impacts copackers. More on that at the end. Let’s go.

The cat is out of the box.

The producer price index (PPI) has decreased for wood pulp. If you didn't lock in costs from your corrugated supplier, now is a great time to knock on their door and say, "What gives, why didn't you let me know costs were decreasing?"

Unless your main corrugated supplier is Uline...

Let's unbox what this means.

Wood Pulp PPI

January 2023: Pulp PPI = 269

July 2023: Pulp PPI = 204 (-24.16% from beginning of the year)

If you're not familiar, wood pulp can make up anywhere from 50% to 80% of a corrugated box, with the balance being comprised of recycled material.

So, if you're working with a vertically integrated manufacturer or a manufacturer that owns its own mill and corrugator, and you don't have costs locked in via contract, you should definitely reach out and ask about market conditions, how their input costs are tracking, etc. They should reward a cost decrease but don't expect a 25% decrease. 5-10% is more likely.

What does this mean?

Your manufacturer's input costs should have decreased since the beginning of the year. Based on the trajectory, it looks like costs will continue to go down.

Your manufacturer should provide you with some type of cost decrease. But what happens if they don't?

First, find out why. Are they sitting on an abundance of old components? This is likely the case. If so, find out what your cost would be when they get new raw materials in.

The next step would be to quote your corrugated category out with other manufacturers. This should be part of your corrugated strategy at least once a year, just to get a sense of where costs are at on the market.

Just remember, that onboarding a new manufacturer takes a lot of work. Even for something as commoditized as corrugated boxes.

How This Applies to Copackers & Your Brand

I always have to tie this back to copacking.

If your copacker is any good, you bet their sourcing team is already taking the steps above to squeeze every penny out of their corrugated category. Given the amount of shipments that go out of their door, this could lead to a nice decrease in their corrugated category.

Well, if they are packing your products into corrugated boxes that they are sourcing, those costs are included in your finished goods costs. This may be a stretch, but it doesn't hurt to ask them if the recent decrease in corrugated materials could lead to a penny, a nickel, or a dime, off of your costs.

Don’t forget…

I have this copacker directory that I’m building. I’d love your support by sharing it out and signing up! It’s going to be way different than anything out there…