Transforming the ordinary with smart connected packaging

Packaging has been a crucial part of the product experience for centuries. But its purpose has mostly remained the same—to protect and promote its contents. Now, digital innovations are enabling companies to completely transform what packaging can do. And none are more promising than the concept of smart and connected packaging.

By Sef Tuma, Raghav Narsalay, Anita Etrati and Morgan Mullooly

Smart connected products are electro-mechanical products with features like processors, embedded systems, screens and interfaces, companion apps and cloud platforms. Customers benefit from unique digital services and unified product experiences that constantly exceed expectations. And companies get access to vital data about product usage and consumer behavior—data that can power actionable insights and drive value. Smart connected products are proliferating, but smart connected packaging is yet to have the same kind of impact.

Smart connected packaging can also make passive and bulk products experiential, interactive and sustainable. For example, companies that specialize in analog or organic products can use smart connected packaging to enable their passive products (from jars of coffee to cans of paint) to become alive. As products and their packaging are symbiotic—neither exists without the other—digitizing packaging means products are also be digitized by proxy.

The last mile of product digitization

Smart connected packaging provides digital touchpoints at every stage of the product lifecycle. It helps brands deliver exceptional customer experiences that delight and achieve ongoing operational value. And it involves an ecosystem of powerful technologies, which drive new modes of product interactivity.

The last mile includes physical sensors, flexible electronics, cameras, QR codes, NFC tags and RFID tags among many others, in addition to the software and systems used to control smart packaging systems and analyze data for business purposes.

The specialized scanners used in warehouses and distribution centers are examples of smart connected packaging but so are QR codes, which are completely free of electronics and physical apparatus—companies can simply make a change to the design printed on their products to realize the benefits of smart connected packaging.

Use cases across industries are highly diverse and smart connected packaging can activate digital content and experiences for consumers such as registering or authenticating a product. It can also support operations-focused use cases like tracking products through the supply chain.

Smart connected packaging is quickly becoming an important part of the product story for many companies:

• A global winemaker launched an augmented reality experience in 2017 that animates its bottle labels when viewed through a smartphone camera—the brand grew 70% in value that year.
• A leading cereal producer added a scannable code to its packaging to provide a better way for partially sighted people to access labeling and allergen information—smartphones can detect and playback product information.
• An example of B2B applications for smart connected packaging—a leading UK university developed a solution that enables spirits traders to authenticate bottles of rare vintage whisky by using their smartphone to tap an anti-tamper NFC bottle closure that connects to a digital certification record held on a private blockchain.

Why now?

Demand for smart connected packaging is being driven by a growing need for companies to become customer-relevant and achieve supply chain resiliency as well as sustainability. Smart connected packaging can help them reimagine the entire business through the lens of experience, ensure supply chains are repurposed for resilience and create sustainable value through responsible business.

Lens of experience

Companies are willing to change to stay relevant to their consumers. In fact,77% of CXOs surveyed for our Business of Experience research published in 2021 said their company will fundamentally change the way it engages and interacts with customers. Packaging can surely be a source of sharing a differentiated consumer experience for these companies.

Moreover, the demand for e-commerce is forcing companies to rethink package design to stay relevant and stand out from competitors. In some ways, e-commerce has negatively impacted the role of packaging as a customer attraction and sales tool—online stores tend to display their products on web pages without packaging. But online influencers have elevated the role of packaging through unboxing videos on YouTube and other platforms. The millions of viewers who watch these videos can be won over by sensational customer experiences through product unboxing. Companies must take a fresh look at packaging design and explore how digital engagement moments can be leveraged for information, education and entertainment.

Another area companies must focus on is leveraging smart connected packaging to augment direct-to-consumer (DTC) strategies. DTC boomed during the pandemic due to supply chain disruption, delivery delays and physical store closures. Smart connected packaging that monitors consumption patterns can serve as an experience differentiator. Firstly, smart connected packaging can schedule replenishment appropriately, so the consumer never has too much or too little of a product but always the right amount. Secondly, smart connected packaging can tell brands where and when a product is being consumed in near real-time. This can be fed into more detailed marketing, logistics and production optimization.

Repurposed for resilience

Recent events such as Covid-19, Brexit and the 2021 Suez Canal Obstruction illustrate the central role that well-functioning supply chains play in society and how they can be disrupted. In particular, 81% of surveyed business leaders for Accenture’s Tech Vision 2021 said that the pandemic has been their organization’s greatest stress test. Companies are now under intense pressure to better prepare for future supply chain challenges.

At the same time, consumers and legislators are demanding more transparency around products and the product journey—they want to be able to track products back through supply chains to their origins. The continued rise of global sourcing and competition for quality materials is causing its own challenges, while increased regulation and standards are changing the competitive landscape and transforming business models across the value chain. Smart connected packaging can help overcome these issues by acting as a conduit for digital identification and tracing the product along the entire lifecycle with data at the center of everything.

By assigning a unique digital identifier to each item and printing it on packaging in the form of a code (serialization), a product's location in the supply chain or its lifecycle can be tracked and traced. These digital IDs can provide near real-time updates on the product as it moves through the supply chain through code scanning at distribution centers, fulfillment centers, retail outlets and at home. The earliest track-and-trace applications were developed for sectors where consumer health could be at risk such as the food and beverage and pharmaceutical industries. However, track-and-trace solutions are also relevant for many other B2C and B2B products ranging from apparel to industrial chemicals.

For example, one of the world’s largest confectionary companies is increasing the supply chain transparency of its products through QR codes displayed on the packaging. Scanning the code with a smartphone delivers an interactive web app experience and information about the product and its journey from farm to mill to baker.

Sustainable value

Packaging is one aspect of business that has come under some serious scrutinies from stakeholders who want companies to step up and take responsible actions. Globally, $5tn of consumer spending is influenced by companies’ purpose and those that don’t commit to sustainability will lose out on profit. Product packaging has become an important part of sustainability, and companies must use packaging as a catalyst for positive change.

Our research found that consumers have stopped buying one or more products due to environmental concerns, with food and beverage packaging (23%) and personal care products (16%) topping the list. With purchasing decisions at stake, brands and retailers are working to address these concerns and retain brand loyalty.

While recent years have seen organizations strip product packaging back to the basics in response to the growing sustainability movement, the focus is now shifting to “adding” to packaging with digital innovation—smart connected technologies can shape the package of tomorrow to be purpose-led and sustainable. With an ever-growing need for brands to act responsibly when it comes to environmental policies and packaging, smart connected packaging and the wider technology supporting it provides an intelligent solution.

For example, consumers are often confused by recycling symbology and instructions on containers. But what if they could scan the package and be told which parts are recyclable? Geolocation features could then direct them to drop-off points in their local area. And with access to real-time or near real-time consumption information using smart connected packaging, visibility to excess inventory also improves. This enables better supply chain planning as well as sustainability benefits by reducing waste due to overproduction and product expiry.

Companies are already making strides in this area: A sustainability-oriented apparel brand has launched a low carbon and carbon-negative clothing line. All pieces in the line feature a distinctive piece of technology—a biodegradable NFC tag that provides each wearer with a unique ID to trace and unravel the story of the garment’s supply chain.

What are market leaders saying?

Smart connected packaging is an effective response to many evolving market dynamics like Covid-19, regulation, customer expectations and sustainability. It enables companies to weave digital threads throughout smart product lifecycles and create a steady flow of downstream and upstream value.

But don’t just take our word for it—here are some of the perspectives shared by senior packaging executives we have spoken to for our ongoing research in this area:

“We’ve seen packaging morphing from being a simple container to more of an extension of the product experience.”
Packaging Executive | Multinational Pharmaceutical Company

“Smart connected packaging involves not just some operational efficiencies but also tremendous innovation-led growth potential.”
Packaging Executive | Multinational Consumer Products Company

“We are achieving higher (2x) activation rates with smart packaging than we get from email campaigns and digital advertising campaigns.”
Packaging Executive | Multinational Consumer Products Company

What are the next steps?

The basic technologies of smart connected packaging—such as RFID, NFC and QR codes—have been around for a long time. But many companies still underestimate smart connected packaging’s potential for value and have misconceptions of costs. In this age of disinformation, it’s up to companies to get the facts straight on any opportunity that could help drive growth.

Accenture's accompanying point of view, published in collaboration with The Active and Intelligent Packaging Industry Association (AIPIA) and its members, focuses on the misconceptions companies hold around smart connected packaging and the steps they need to take to succeed.