‘Connected Packaging' may be defined as a carrier of various types of electronic or optically read ‘devices’ (*) that can transform packaged goods into sensor platforms that can provide:

• Unique serialised IDs codes
• A gateway to the Internet.

Smart phones (or dedicated readers) are then used to access the embedded code (electronic or digital) and this then drives an action in the associated IoT system.

Packaging can also house devices able to sense any changes that take place and store any variable data relating to the way the pack has been handled/used; e.g. a physical change (e.g. tampering or re-filling) or an environmental change (e.g. temperature exposure profile).

Note:    Connected Packaging can also be achieved with ‘optical devices’ (e.g.: digitally printed unique codes - barcodes, QR codes, digital watermarking and the like).

The Revolution is Underway in Retail & Implications for Consumer Packaged Goods

Retailers are evaluating a raft of technologies that will disrupt retail processes and drive fundamental change, as they increasingly attempt to meet the new consumer expectations and reduce operating costs by introducing Internet-style technologies into their operations.  

All manner of initiatives have been and continue to be tried - from self-scanning to vision systems, aisle guidance, and robots for stock taking and shelf replenishment; to self-serve vending smart machines and kiosks.  In the near future 'video analytics?' is likely to be meshed with artificial intelligence and used to identify customer traits, such as age and gender allowing brands to target specific goods. 

The new technologies are making it easier and more convenient for interaction with the brand, including mobile wallets, digital receipts, free and fast shipping, and one-click purchasing, but this raises consumer expectations even higher.  

Connected Packaging has been recognised as a key enabling technology in retail, as connected packs meet the needs for interaction and personalisation. 

As consumers embrace the new world of connectivity, consumer products are being converted into smart, functionally intelligent ones able to deliver dynamic communications and services linked to specific physical objects.  

Connected Packaging & The Internet of Things (IoT)

The concept of Connected Packaging has been understood for a number of years and has been somewhat beleaguered by 'technology hype and over-inflated Expectations.

But now the technology is really starting to come of age in commercial terms and there has been and continues to be a substantial and growing amount of development & trialing of various connected packaging variants and this is gathering pace. 

But still scaling up & widespread rollout remains elusive, with the exception of UHF for stock control in apparel which has effectively become a 'de facto' standard across forward thinking apparel retail outlets around the world today.

In apparel UHF radio frequency identification (RFID) item-level tagging has been proven to increase apparel retail sales by an average of 5% while reducing inventory by about 10%, facilitating the processes that: 

• Reduce the volumes of sales lost through 'out-of-stocks' 
• Increase customer satisfaction, as shoppers can find exactly what they want 
• Enable customers to receive their purchase where, how & when they like, regardless of where it was purchased 
• Enable customer behaviour to be monitored, leading to a 'virtuous circle' of continuous improvement, improved customer satisfaction and loyalty.

The time is fast approaching for wider roll-out, beyond Apparel.  And it is primarily a matter of commitment and investment by the industry. There are no fundamental technical barriers.

That said, brand owners need consumers to engage in greater numbers in order to make connected packaging really gain traction beyond the apparel vertical.

And this must be supported by clever marketing campaigns. conceived by the brands. 

This must just a matter of time ? When not if!

Multiple Benefits are becoming achievable

Packaged goods that can provide unique serialised ID codes for each pack and a gateway to the Internet open the door to a number of powerful functionalities:

• Consumer Engagement & Mobile Marketing enabling direct click through access to brand owner website landing pages ?can lead directly to fast measurable ROI for Brand Owners)
• Item level track & trace / Mass Serialisation
• Retail Inventory Management - UHF RFID
• Product Authentication & Brand Protection
• Tamper Evidence
• EAS - Electronic Article Surveillance - Anti Theft
• Location-based Data / GPS
• Supply Chain Management & Materials Planning
• Work-Flow Automation
• Product Quality ? Sensors (*) - detecting changes that take place to or around the packaged product ? e.g.: Time / temperature, moisture content, gas ingress / egress).

Notes:

• Other Types of Function may be envisaged for the future (e.g.: from improving the accuracy of clinical trials in the pharmaceuticals sector to possible applications for Tax Stamps in the alcoholic drinks and / or cigarette sectors)
• Enabling  packaging to not only control the way stock is managed throughout the supply chain, but also as digital media and a new channel for direct communication with consumers.Each functionality can add value to the overall packaging solution and contribute to the ROI.  When more than one functionality is used this can further improve the ROI calculation, making it significantly more robust & compelling for brand owners.
• Together these factors will combine to create a sum of benefits leading to greatly increasing sales volumes of devices (and these increasing sales volumes will drive down unit costs further)
• Increasingly this is looking like an achievable goal.

Applications / Business Benefits for Connected Packaging / Labels

Location based:

• Inventory Management 
• Product Recalls 
• Mobile Proximity Marketing
• Data Analytics for Brand Protection
• Data Analytics for Supply Chain Control 
• EAS / Anti-Theft

Brand Protection:

• Product Authentication
• Track & Trace Mass Serialisation

Consumer Engagement / Mobile Marketing

• Consumer Informing
• Consumer Influencing

Change of State 

• Product Quality Assurance
• Tamper Evidence
• Other - Dutiable Goods

Review of Connected Packaging Developments: Early Adopters Markets

Early Adopter Markets

Widespread adoption of ?radio-electronic? devices embedded in packaging or labels will offer enormous benefits further on down the road that this technology must be taken up in due time by brand owners offering premium and safety critical products ? aka the Early Adopters.

Vandagraf concludes that the most important & active areas of opportunity for Connected packaging and labels in branded packaging for retail products, at the time of writing, namely: 

• Alcoholic Drinks - Wines, Spirits
• Food products - Fresh, chilled & frozen meat & seafood, ready meals, regional specialities, confectionery
• Beauty products - Fragrances, Colour Cosmetics
• Luxury sector - Jewelry, Sunglasses, Luxury Leather Goods - Handbags, suitcases, briefcases and small leather goods such as wallets.
• Apparel & Footwear ? Premium / Designer Wear.

Note: And within these 5 vertical markets, the focus for Connected Packagng will continue to be towards higher value added ?Premium? products.  This will be particularly significant in markets where the % share of high end, premium products is growing relative to the overall vertical (eg: Alcoholic drinks, fragrances & cosmetics).

These 5 End User Vertical Markets have been identified as the most promising for a variety of reasons as follows:

• There are one or more strong business drivers for a Connected Packaging - solution 
• There is often solid evidence provided by Case Studies where brands have already been willing to experiment with Connected packaging solutions 

In some case the development of the market has previously been hampered by: 

• Some as yet unsolved technical issue, but where technical progress has recently been made, e.g.  the use of UHF radio electronic devices near fluids
• The high cost of RFID / NFC devices making it difficult to deliver an acceptable ROI, but by 2023, it is anticipated that RFID / NFC device prices will fall further below 4 US cents, possibly as low as 1 US cent.  

Next Wave Follower Markets

This will be followed by a further stream of Next Wave Follower Verticals and product categories as market acceptance is established with the early Adopters, production volumes go up and unit device costs fall.  We believe this is likely to embrace the following vertical markets:

• Tobacco - Cigarettes
• Toys & Games - Traditional Toys. Playing cards & collectible cards
• Food Products - Confectionery, Regional specialties
• Other drinks - Beers & soft drinks
• Headgear - including crash helmets and the like
• Other..............

Although by no means yet 'mainstream', within these additional vertical markets may be envisaged as substantial further areas of opportunity for connected packaging, as the first wave within the first 5 identified vertical markets gathers traction & momentum and reaches a critical mass in volume production terms.

• The benefits associated with connected packaging and labels will become better understood & quantified and this will help serve as justification for rolling out Connected packaging / labels to other lower margin product categories across the brand owner?s portfolio
• As overall volume demand rises and economies of scale become more important combined with further technological innovations, unit tag costs will fall.

As the 'premium' higher price-point / higher margin packaged products in a brand owner?s portfolio become enabled with IoT sensor platforms this will have positive effects.

This pattern has already been played out very successfully across the Apparel retail sector, when UHF label costs started out at >10 US cents in the mid-2000s but are now down nearer to 4 US cents as sales have reached over 8 billion devices per annum by 2018.

And this kind of pattern is set to be repeated in other vertical markets.

An RFID / NFC Tag solution provider might wish to give consideration to these factors in a decision process geared to identifying and then targeting specific verticals seen as best suited to their respective offerings.

Cost Issues being Addressed

Historically, the relatively high unit costs of radio-electronic ?gateway? devices had inclined brand owners to delay adoption. 

The many billions of UHF/RFID inlays now being sold for apparel stock control, subsequent economies of scale and aggressive pricing driven by over-capacity in China continues to drive down the price of UHF RFID inlays and converted labels:

• NFC suppliers have responded by also cutting prices, but although NFC inlays can be sourced at 5 US cents UHF/RFID inlays still undercut them by 1 or even 2 US cents for very high production volumes
• The cost of NFC readers has been relatively modest but now the cost of UHF readers has also dropped significantly.

In addition, following a number of years of technology development printed electronics are now well placed to start becoming a commercial reality on a significant scale and potentially offer an 80% reduction in cost per device. This will open up numerous major new markets applications and bring further big changes across the industry.

Convergence of Technologies - Approaching Tipping Point

A major 'tipping point' in favour of overall viability is coming, driven by:

• Driving down Costs - Printable electronics (*) is set to bring huge changes across the industry
• Broadening Functionality Options with a single platform - Dual frequency - Combi inlays (NFC + UHF) (**) - Both short and long range capabilities - Increasing the number of functionalities that can be achieved with a single on-label 'radio-electronic' device

(*) Printable Electronic Promises Low-cost IoT Sensor Platforms for packaging labels

• The Packaging industry demands significantly lower unit costs and promises huge volume business. 
• The Printable Electronics industry needs huge volumes and can then offer significantly lower unit costs.
• Major opportunities for solution providers are coming.
• Printed Electronic Promises Low-cost IoT Sensor Platforms - The rapidly emerging area of printable electronics promises to reduce
• the cost of memory & logic by about an order of magnitude compared to chip-based IoT sensor platforms, and hence offers a compelling proposition. 
• The substantially reduced unit cost of devices is set to open up a raft of new types of applications, including of course: 
• RFID / NFC enabled Connected (aka Smart) labels and packaging. 

(**) Dual Frequency Tags broaden the range of multi-functionality options available - Combi inlays NFC / UHF Sensor Platforms

A mix of long range and short range capabilities is required to address the various applications for IoT sensing platforms.  One way of achieving this is by using combi radio-electronic devices that can exchange data at both:

• Short range operating at NFC frequencies (1 to 4 cm - well suited for consumer engagement type applications)

and 

• Long range readability, operating at NFC frequencies but also at UHF frequencies for very long range (1 metre plus - well suited for stock control applications).

As brand owners become to understand the breadth of benefits offered by such multi-functionality the business case for investment in numerous scenarios is set to become more compelling.

Dual frequency combi inlays (NFC / UHF) certainly open up some interesting possibilities.

In response to the pent-up demand several leading chip manufacturers and inlay manufacturers have begun offering combi NFC /UHF IoT sensor platforms.  Whereas the NFC component of the design is less complex than many non-cloneable conventional NFC chips, the price is not significantly different from EPC UHF RFID devices. 

Read Range

Another major factor in opening up applications is the requirement for connected packaging to be read at both long (>2m) and short range (up to 5cm).   

A mix of 'long range' & 'short range' capabilities is required to harness the full range of the multiple functions on a single device. There are 3 principle variants of RFID that are relevant to ?on-label? functions:

• Short Range / NFC - Proximity (up to 20cm) - HF
• Long Range - Vicinity - HF (high frequency) and UHF (ultra-high frequency) (20cm to 1m)
• Extended Range - Allows tag to reader communications of up to and beyond 10 metres

The 2-read-range capability can be achieved by means of dual frequency combi inlays (NFC + UHF). This dramatically increases the number of applications that can be made possible with a single on-label / on-pack device. And such inlays need to be readable by smart phones as well as proprietary mobile readers and also static readers (e.g. portal or tunnel readers). This has become a commercial reality with several major device providers launching such devices.

Barriers to Adoption of Radio-electronic Devices 

The take-up and wider roll-out of NFC / RFID technology in the branded retail products space has been somewhat slower than some industry commentators had been predicting in previous years.

But by 2019 prospects are starting to look much brighter for much wider adoption of Connected Packaging in the next few years and the viability of NFC for the medium / long terms for certain types of branded products looks convincing.

The in-built intelligence of such smart connected packaging components can provide a diversity of functionalities including:

• Communication capabilities
• Interactivity all along the supply chain through to the consumer
• Security.

There have been a number of key evolutions that will create a raft of new opportunities for packaging and label suppliers

Cost Effectiveness

• Previously the relatively high unit costs of radio-electronic 'gateway' devices had inclined brand owners to delay adoption. The many billions of UHF/RFID inlays now being sold for apparel stock control, subsequent economies of scale and aggressive pricing driven by over-capacity in China continues to drive down the price of UHF RFID inlays and converted labels
• NFC suppliers have responded by also cutting prices, but although NFC inlays can be sourced at 5 US cents UHF/RFID inlays still undercut them by 1 or even 2 US cents for very high production volumes
• The cost of NFC readers has been relatively modest but now the cost of UHF readers has also dropped significantly
• In addition, following a number of years of technology development printed electronics are now well placed to start becoming a commercial reality on a significant scale and potentially offer an 80% reduction in cost per device. This will open up numerous major new markets applications and bring further big changes across the industry.

So, cost effectiveness is now set to become a very realistic prospect and a major 'tipping point' in the overall viability of mass scale electronic identification is fast approaching. 

The Key Role for Smart Phones

Smart phones and mobile Apps are now increasingly instrumental in enriching the in-store experience, as retailers strive to find ways to draw shoppers back to the 'bricks & mortar' retail stores. 

An enhanced shopping experience is re-defining emotional impact and response inside the store and also helping to refine spatial experiences in retail. 

In-store and outside use of mobile Apps can help consumers to identify opportunities and to drive impulse purchases.  A key issue is how to offer a variety of incentives to the traditional shopper that is physically present in the store that deliver real time benefits in terms of attractive inducements that are not available to shoppers on the Internet.

For instance, inducements can include real time 'check in points' where customers can instantly 'grab' digital vouchers in the form of barcodes and NFC value points that can be redeemed on special offers at the point-of-sale.  

The collection of virtual coupons, discount vouchers and other incentives can be delivered to a customer's smart phone ready for their next shopping trip. 

By having consumer packaged goods (and indeed other touch points) enabled with NFC creates a 'digital' rich store environment within which consumers enter at their peril!

Carriers of serialization - Printed 2D/QR codes vs NFC

NFC competes with printed codes:

• Serialization / Unique IDs / Gateways to the Internet / IoT
• Printed codes (linear bar codes, datamatrix codes, QR codes and the like)
• NFC tags (uncloneable).

These 2 approaches are not mutually exclusive and could be used together on a single package / label.

Human readable codes need to be printed for either option, which means that some printing (or other form of marking) will always be required.

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Major Vandagraf Market Study Report published in 2019:

Market and business opportunities evaluated together with a technology overview and profiles of  solution providers

Full report title:

"Connected packaging, labels and the internet of things (IoT) - RFID / NFC - Smart Phones / Proprietary Readers - Retail Branded Products (Drinks, Food, Health & Beauty, Luxury Goods, Apparel)"

Business & Market Opportunities, Competitive Analysis & Technology Status in 2018 with forecasts to 2023 - A Techno-Economic Market Report - Publication June 2019 (immediate availability).

This Report comprises 2 volumes:

• Volume I – Technology Overview & Trends/Applications Areas - Connected Packaging/Labels – 100+ pages
• Volume II – Analysis of End User Vertical Markets/Summary of Market Sizing & Forecasts – 250+ pages.

Aim of the Report

This Report sets out to:

• Make sense of this multi-facetted complex and shifting matrix of a marketplace
• To provide a roadmap for the industry
• To quantify the market opportunities & challenges.

The market for Connected Packaging / labels  has evolved and advanced significantly over the past 2 or 3 years and consequently we at Vandagraf  decided to research and write a major Report on this subject.

The new Vandagraf Connected Packaging Report completed in July 2019 is seen as timely for a number of reasons, including a number of key evolutions, as outlined in the previous pages of this White Paper.

Report Content Overview

The Report contains:

• In-depth analysis of Business & Market Opportunities, Competitive Analysis & Technology Status
• Quantitative market sizing estimates & forecasts for Early Adopter Branded Retail Products - Base year 2018 with forecasts through to 2023
• Trends & Drivers highlighted & analysed
• Numerous Case Studies
• Solution Provider Profiles
• and much more…………………..

The new Report shows where the opportunities are being created and provides a valuable tool for assisting in investment decisions for any player wishing to position themselves effectively to exploit the emerging market opportunities.

• Full Table of Contents and additional info available on request:

 For further information, please contact: info@vandagraf.com