Matt Reynolds: Hi, I'm Matt Reynolds. I'm the editor of Packaging World magazine, and with my colleagues here, we're back for another edition of the End of the Line podcast, where my fellow editors from various publications within PMMI Media Group kind of ruminate on some of the things they may have experienced this week or saw come across their desks or email inboxes.
As with every week, I'm here with my colleagues. We've got Liz Cuneo with Healthcare Packaging magazine, right beneath me in my Brady Bunch grid. We've got Derrick Teal from ProFood World, and then Sean Riley, the illustrious Sean Riley with OEM Magazine, amongst many other hats.
Welcome, everybody, to another week of the End of the Line podcast.
We're not really in the business of breaking news here. This is more of a retrospective, but as of this morning, this might be the first time that we are breaking a little bit of news.
I think you may remember a few weeks ago I was talking about the case in Oregon—NAW's suit against the EPR law in Oregon. As of yesterday, a judge ruled that the law survived its first real day in court.
So, a quick refresher on the whole law. Oregon, back in 2021, passed an EPR law—that's extended producer responsibility. The program finally went live in July, and the idea was simple: Companies that are putting packaging into the state pay for the system that collects it, the infrastructure, and the end-of-life management for that packaging.
Meanwhile, the National Association of Wholesaler-Distributors, or NAW, sued.
It's worth noting that they're not brand owners. Really, the target for EPR is going to be the brand owners themselves that put products in packaging. But these distributors get pulled in as producers, or obligated producers, under EPR law in two separate ways.
One, they make their own private-label products with their name or private-label names on them. And then there's all of that pallet stretch wrap, secondary and tertiary packaging, and corrugated that they use to take primary packaged products from brands and move them via freight into the state. That's packaging as well, and it would be obligated.
NAW's complaint really boils down to one line: "We're paying fees on packaging we didn't design and we can't control."
So it kind of stands to reason that there's going to be some contentiousness here.
NAW made two really big constitutional arguments. The first was under due process. Oregon handed the power to set those fees to the Circular Action Alliance, CAA. They're kind of omnipresent now as a PRO—a producer responsibility organization.
But "private" is the keyword. It's a private nonprofit whose board has some of the biggest CPG companies in the world on it, so you can imagine the usual suspects.
The way NAW looks at it, the state gave their competitors—the big brand-owner competitors to their private labels—the power to write a bill with no real oversight. At least that's the argument.
The second portion of the argument is under the Commerce Clause. It says that this fee regime places an unreasonable burden on business crossing state lines.
So, it was a five-day trial in Portland, Oregon, in July, just about a month ago, and the ruling came down last night. Oregon won—or I would say the Oregon recycling law won.
It's a big, 71-page document that I, let's say, dusted through today. Both claims were addressed in that ruling, and NAW didn't win either one.
The due process claim didn't fail because the judge decided that CAA was really well supervised. It failed because the judge said nobody is forced to join CAA in the first place.
NAW could potentially create its own producer responsibility organization and pay fees into that structure. Of course, they would argue that would be impractical, but that is the argument.
I guess the other sticking point is that NAW's witnesses said it's not a real option to do that. It's $150,000 just to have your plan reviewed and millions in annual fees after that. The judge's answer essentially was: Impractical isn't impossible.
So the door to create your own PRO exists.
Any questions so far? Are you guys keeping up?
Liz Cuneo: Yeah, I'm there.
Sean Riley: A lot of acronyms.
Matt: Good.
And on the Commerce Clause, NAW never really cleared that threshold to get the balancing test applied. The judge said it didn't prove that burden on interstate commerce.
They argued in hypotheticals, but they didn't really have the numbers, according to the judge.
So, what does it mean? That's what happened. That's my cursory reading, and I've got a lot of emails out this morning for statements from interested parties. They're starting to flow in, so look for something more substantial coming soon.
But what does this mean for the other six EPR states? I'm just kind of spitballing here, but it really doesn't mean much yet.
It's just one district judge. It's not really binding anywhere else. And for sure, this is going to get appealed. So this is not the end by any stretch.
But there's a scoreboard, and this is the first point on the scoreboard.
That's everything that came out this morning. We'll be watching the same sorts of things happening in Colorado and California going forward.
So, as usual, sustainability is taking center stage in our End of the Line podcast.
Liz, you and I were discussing how EPR is a U.S. thing, but meanwhile there's a much more advanced version of some of these packaging sustainability requirements in Europe with PPWR—the Packaging and Packaging Waste Regulation. Speaking of acronyms.
Liz, why don't you dive in and see what's going on on that front?
Liz: Yeah, so I was talking to the Healthcare Plastics Recycling Council about preparing healthcare packaging for some of these new regulations.
PPWR went into effect earlier this month. Really, all packaging entering the EU market, including rigid thermoformed healthcare and medical packaging, is impacted by the regulation.
It's a push for recyclability, post-consumer content, labeling, and collection. And it's really a push for proper documentation when showing or proving any of these kinds of claims.
So, it's a lot for healthcare. Of course, there are unique challenges in healthcare with protecting patient safety, maintaining sterility, and preserving the product.
It's a little bit different than consumer goods when we talk about healthcare, but definitely there are some big implications for these companies.
And while a major regulation deadline is really 2030, the focus is on moving now because it can take about that long to really get things going and make changes to packaging.
So, interesting stuff.
There are exemptions in healthcare, of course, but that doesn't necessarily mean inaction. Companies really need to dive into what those exemptions are and where they can make some recycling progress in their packaging.
Maybe it's not the package that's touching the product itself, but they can look at secondary and tertiary packaging.
Recyclability is becoming another packaging performance requirement. Sterility, barrier performance, machinability, transportation—these are all really important, and now recyclability is becoming one of those things that packaging developers really have to look at.
So, lots of stuff going on in healthcare and sustainability, and definitely an interesting discussion when you talk about how regulated the industry is.
Matt: Yeah, interesting. And obviously, anything that's not just going on your body but going into your body is going to supersede any sort of sustainability concern. Human safety is more important.
But at the same time, what can be changed in the secondary and tertiary packaging that won't impact the drug, pharma product, biologic, or whatever the product itself may be?
It's just a matter of trade-offs. You're adding another lever to pull, and when you pull this lever, that means something else may change.
So, a lot of trade-offs happening.
But you mentioned one word that was very important, I think, and that is machinability.
So, the ability for these new products or new packaging materials—let's say moving from a multilayer flexible pouch to a monolayer, something simple that renders it more recyclable or at least friendlier to the recycling stream—that's great.
But can the equipment that, say, Nestlé or, in your case, Pfizer has already bought for millions of dollars and expects to last for another 20 years run that rollstock of new material?
There are different ways to look at that.
And I think Sean, where he sits as the editor of OEM Magazine, can kind of see both sides of the aisle between what CPGs think of as sustainability and what OEMs have to do to follow suit—to run the material, make sure it's machinable, and make sure you're still running at speed.
You can't slow down Mondelez's production of Oreos for the sake of sustainability.
Or can you?
Sean, you have a new study that informs us about that handshake between the machinery builders and the brand owners on the sustainability front.
Sean: Yeah, it's interesting that you both kind of touched on the opposite ends of what I was going to say.
I'll start with a pop quiz. When you think of a part of the world that has the more stringent sustainability requirements, where do you typically think?
Liz: Europe.
Derrick Teal: Europe.
Sean: Exactly.
We did a write-up on PMMI's report. It's called The Ripple Effect: CPG Sustainability and the New OEM Spec Sheet.
And the question was posed that way to OEMs and CPGs, with two completely different answers.
OEMs overwhelmingly identified the EU as having the more stringent sustainability requirements. Seventy-five percent of them said the EU, far and away. That was followed by North America, and then, Matt, as you mentioned, the UK came in after that, but at less than half the percentage of the EU.
Whereas end users see it completely differently.
Seventy-one percent ranked North America first, which to me was almost shocking because we live in North America and we know how fragmented sustainability, recycling, and things like that are here.
The EU was significantly in second place, below 50%.
So, the gist of what came out of this from diving a little bit deeper into the report is that OEMs are supplying equipment across borders. They're dealing more internationally and tracking markets in Europe and elsewhere, so they're thinking the same things we're thinking—that Europe is kind of leading the way.
But a lot of the end users and CPGs surveyed for this study aren't all international players. They're not all Colgates or P&Gs.
If you're a smaller company, you may only be thinking about the impact of shipping to Oregon or Canada or something like that.
That put it into a different perspective for me because I thought the same way you guys did. Immediately, what comes to mind is the EU being more stringent.
One other thing that was interesting is Asia came in way, way low on both sides—CPGs and OEMs. It came in fourth or fifth of the six regions, depending on which group was being asked.
But there were interviews with some people as part of the study, and a lot of them pointed to Asia as this hidden thing that's coming—that it could be the next region with extremely stringent sustainability requirements that are going to be very hard to meet while also meeting the requirements of everybody else.
That part was anecdotal, so I guess Asia's on the rise.
But yeah, we're kind of in line with the OEMs. I was surprised by the CPG results, but there was logic to why CPGs think North America despite our fragmented recyclability and sustainability practices.
Derrick: Yeah, I can't remember exactly what it was or who said it, but they said that Japan and Asia were what they were most concerned with in terms of food safety and recyclability—something within sustainability.
I need to look it up, but yeah, it was surprising to hear that.
Matt: Yeah, I think just the sheer number of people in China and India and that area, and the volume of product moving through, is significant.
I would say China for sure has a more advanced infrastructure in some areas, but there are also more emerging infrastructures. There's actually an advantage to not having an extremely entrenched infrastructure because instead of having to move the Titanic and slowly make these graduated changes, there's a chance to start building a new, modern system out of whole cloth.
I think you hear a lot about that in India specifically.
India is one of the leading countries in terms of single-use products, single-use plastics, sachets, these types of things that we don't always see in North American markets. You're more likely to see a unit size of one as opposed to a six-pack or a 12-pack.
It's a country where you're going to find a lot of people buying one unit, and for every unit there's one package.
So there's a lot of packaging waste and not a lot of infrastructure. The advantage for some of those countries, especially India, is going to be building modern infrastructures instead of replacing existing infrastructures.
Really interesting stuff happening globally.
And when does that report come out? Is it out already, Sean?
Sean: It's out, yeah. We just touched on a little bit of it in a write-up, but there'll be more on it. It's out there now.
Matt: OK.
Now, also in the lead-up to this conversation, the editors and I were having a little private chat about how often the word "Claude" comes up, and it's pretty frequent.
So Derrick, you had some insight into the advent of AI over the last year, I would say 18 months. It's just come out of nowhere, and what does that mean for all of our jobs and the jobs in packaging and processing?
What are you hearing? You've got your ear to the ground.
Derrick: Yeah. First, I want to say it was actually at interpack, and it was an inspection and detection equipment supplier. They were saying that some of their equipment was built to a Japanese or Asian standard that they expect will ultimately be a higher hurdle to overcome than standards in other places.
But anyway, obviously we've been talking a lot about food safety lately. And throughout that, we're talking about AI and how that might help with food safety.
We have a webinar coming up on September 3, and our speaker for that is—wow, I totally blanked on his name.
Sean: James Lee?
Derrick: Thank you. James Lee from Marzetti.
In our pre-call for that, we were talking about what we're going to cover, and one of the things he said relates to something all of us have thought about—especially those of us in media—and that's the existential threat to our jobs from AI, or what we thought would be an existential threat.
I think as we've been going along, we've been finding that it's not necessarily going to eliminate our jobs. It might change how we do things, but in the end it's really a tool to help us do our jobs instead of all of us having to go pick up a hammer and become carpenters or something like that.
That's one of the things he said regarding food safety and the people who deal with food safety on the line.
AI isn't going to completely take away inspectors' jobs. There are things in terms of making a call on how to modify processes or determining where something is going wrong that ultimately are going to be left up to a human.
AI, like we've been finding in our jobs, is really great at providing you with data and information. But ultimately, it's up to you to look at that data and determine exactly what's going on.
I thought it was interesting because, is there really an industry that isn't worried about AI taking over jobs?
I've also found it interesting that right after our conversation, I read something—I think it was Meta—that they had put the kibosh on eliminating a bunch of jobs because AI wasn't up to snuff. It really wasn't performing the way they thought it would.
And as I've said before, I covered autonomous vehicles back before the pandemic, and everybody thought those were going to catch on, and they haven't yet.
So it's just another example, I think, of marketing getting ahead of everybody and the market trying to appeal to shareholders or bring investors on board: "Look how good our AI is."
But in reality, there's a lot of hype.
That's not to say it isn't useful or that it doesn't have a place. But there are fears that get stoked by what people think it's capable of doing before we're actually presented with the facts and the reality of what it is.
It's funny that it works everybody into a frenzy to get investors while also scaring the garbage out of everybody who thinks it might affect their jobs.
But in this case, yeah, it was interesting.
He had a lot more to say on the subject. Obviously, we'll have a lot more to say on the subject, so I hope everybody tunes in on September 3 for that webinar.
Matt: Yeah, I think Bill Gates, just a couple of days ago, released an op-ed saying that this transition to the AI era is going to be one of the most turbulent times in human history—which should strike some fear, or scare the garbage out of you, as you so eloquently said, considering how turbulent times have been in human history.
Well, on that very uplifting note—although it is uplifting because it sounds like some of the fears might not necessarily come true, and some of it might be more fearmongering—I guess we're going to have to live through it to find out.
One logistical note: We have decided collectively, in observance of the Monday Labor Day holiday, we're going to take Friday off.
The math might not quite map on the days there, but we're going to take next week off, catch up on some news, catch up on some R&R, and then dive into the fall season and PACK EXPO season with both feet forward.
Thanks to my colleagues. Everybody have a good weekend.
This has been another episode of the End of the Line podcast.
Sean: Yes, thank you.
Liz: Have a good weekend.
Derrick: Thanks, everybody.
