Winning with Packaging: When Does Repackaging Elevate Sales?
53 Pages Posted: 11 Feb 2022
Date Written: January 25, 2021
After years of losses, the packaging industry became profitable in 2013 and is expected to be valued at US$1.05 trillion by 2024, with a 2.8% annual growth rate. This growth is fueled by frequent launch of new packages for established brands. Although a new package could enhance sales by offering novelty and benefits, it could also disrupt consumers who value routines and act out of habits. Given these opposing arguments, whether and to what extent repackaging affects sales becomes an empirical question of economic importance. We estimate a dynamic linear model by using a sample of new packages introduced in the U.S. CPG industry to answer this question. Results highlight risks and opportunities for managers. Specifically, we find that (1) minor improvements to existing packages are more effective than entirely new packaging approaches; (2) while a new package’s experience-enhancing and sustainability benefits are effective to increase sales, giving a distinctive look via repackaging is ineffective; and (3) premium (vs. budget) brands and brands in less (vs. more) vertically differentiated categories benefit more from repackaging. The findings help inform brand managers regarding whether, why, and when packaging boosts sales and reinvigorate policy makers’ calls for sustainable and convenient packaging solutions.
Keywords: new packages, repackaging, sustainability, consumer experience, distinctiveness, sales response, dynamic linear model, processing fluency
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