An Evaluation Of The Cost Of Packaging And Its Implication On The Profitability Of An Organization

Project and Seminar Material for Marketing

An Evaluation Of The Cost Of Packaging And Its Implication On The Profitability Of An Organization


Abstract


This study was carried out to evaluate the Cost of Packaging and its Implications on the Profitability of a Manufacturing Organization with a Case Study of Unilever Nigeria Limited, Kaduna Branch. The study made use of 50 questionnaires, 20 to distribution staff of Unilever Nigeria Limited, Kaduna Branch while 30 questionnaires were issued to customers of UNL. From the data collected, the study found out that as against the general belief that packaging is intended or meant to attract consumers to the product, as well as providing essential information about the product ingredient, reaction side effects and other useful information. It was also evident from the study that evaluation is simply determined by many variables which include products safety, durability, compact and attractiveness in design to facilitate easy identification among various close substitutes and to create customer loyalty which in turn lead to increase in sales volume. The study concluded that the rising cost of packaging is the main contributing factors in increased unit prices of convenience products. This is from the fact part of the product cost of packaging. Also, the tremendous increase in packaging cost can be effectively tackled through the introduction of recycling technology designed to produce cheap raw materials for packaging industries. The study recommended that Unilever Nigeria Limited should look for alternative sources of raw materials for their packaging materials or to embark on the recycling technology to reduce the growing cost of packaging.

 


Table of Content


Preliminary Page(s)

  • Title Page
  • Declaration
  • Approval
  • Dedication
  • Acknowledgement
  • Abstract
  • Table of Content

Chapter One

Introduction

  • 1.1 Background of the Study
  • 1.2 Statement of the Problem
  • 1.3 Objectives of the Study
  • 1.4 Statement of Hypothesis
  • 1.5 Significance of the Study
  • 1.6 Scope of the Study
  • 1.7 Historical Background of Unilever Nigeria Limited
  • 1.8 Definition of Terms

Chapter Two

2.0 Literature Review

  • 2.1 Introduction
  • 2.2 Definition of Packaging
  • 2.3 Reasons for Packaging
  • 2.4 Elements of Packaging
  • 2.5 Types of Packaging
  • 2.6 Packaging Expenditure
  • 2.7 Cost of Packaging
  • 2.8 Packaging and the Environment

Chapter Three

3.0 Research Methodology

  • 3.1 Introduction
  • 3.2 Research Population
  • 3.3 Sample Size and Sampling Technique
  • 3.4 Sources and Methods of Data Collection
  • 3.5 Methods of Data Analysis
  • 3.6 Justification of Instruments Used

Chapter Four

Data Presentation and Analysis

  • 4.1 Data Presentation
  • 4.2 Discussion of the Results of Data Analysis
  • 4.3 Testing of Hypothesis
  • 4.4 Summary of Findings

Chapter Five

Summary, Conclusion and Recommendations

  • 5.1 Summary
  • 5.2 Conclusion
  • 5.3 Limitations of the Study
  • 5.4 Recommendations
  • Bibliography
  • Appendix

 


Chapter One


Introduction

1.1 Background Of The Study

We live in a world of packaging our foods, our supplies and to a large extent our clothing. We use packaging in wide variety of forms, shapes and materials.

Packaging means all the activities in the product planning that involves designing and producing the container or wrapper for a product. The wrapper container is called the package. The exterior cover for a product packaging is often referred to as the silent salesman because it has the ability to persuade people to impulse buying. It calls for immediate attention to the product, stimulate demand and increase sales. It is often said that, packaging cost often exceed all other marketing tools that are used to move goods from the manufacturing to the consumers and also used to determine the price of goods and services.

It can be stressed also that, considering packaging as a marketing tool, emphasis is also given to vast and environment concerns that is involved in packaging. These acts were emphasized through cost analysis research conducted by Lemar and Dobler (1992) it has found out that while advertising only accounts for about two of the total cost, packaging materials were responsible for about twenty two percent in most manufacturing organizations.

In terms of environmental concerns, packaging makes up a third of the rubbish by weight, which we put in our dustbin.

The research project is aimed at evaluating the cost incurred in packaging and the effects, it has on the profitability of manufacturing organizations.

It further explains in details the benefit of packaging and its disadvantages on the society and the economy.


1.2 Statement Of The Problem

In recent years, packaging has been under almost constant barrage of criticisms of lack of attention devoted to packaging. Packaging has been accused of being misleading, expensive, littering and anticipating inflationary, offensive and even immoral.

No area in modern business that is so spread in its operation and so highly treated in writing as that of packaging. Existing literature is almost entirely confined to article and reprints of talks dealing largely with “how to do it” and “why it was successful”.

The major reason could be attributed to the tendency of classifying packaging as a production cost ad secondly, the practical functions which the pack performs, which tend to shied it from public scrutiny of the type directed at promotional expenditures whose practical virtues are less discernible.

At the moment, there is death of reliable information on packaging expenditure in manufacturing organizations in Nigeria. Most of the information related to packaging expenditure usually comes from foreign sources. In the light of this, the researcher attempts to undertake this study in order to find out the cost of packaging and its effects on manufacturing organizations profitability in Nigeria with special forms on Unilever Nigeria PLC, Kaduna Branch.


1.3 Objectives Of The Study

This study on an evaluation of the cost of packaging and its effects on the profitability in Unilever Nigeria PLC attempts to achieve the following objectives.

  1. To find out the types of packaging materials used in Unilever Nigeria PLC
  2. To examine the cost of packaging in Unilever PLC
  3. To identify the motive behind Unilever packaging.
  4. To investigate the problems associated with Unilever packaging.
  5. To provide recommendations for improved strategies in Unilever packaging.

1.4 Statement Of Hypothesis

In order to have a meaningful direction and to obtain meaningful and necessary information, the following hypothesis have been formulated.

Ho: Cost of packaging has no effect to the profitability of a company

H1: Cost of packaging has effects on the profitability of a company.


1.5 Significance Of The Study

This study is in partial fulfillment for the award of a Higher National Diploma in Department of Accountancy,School Business and Management Studies, [CBMS]

Kaduna Polytechnic.

The significance of this study lies in its great benefits to individuals and manufacturing organizations in Nigeria. First and foremost, the study holds immense contributions to students in search of relevant literature review materials on the subject of packaging and it’s cost in manufacturing organizations. Secondly, the management of Unilever Nigeria Plc will certainly find this project very informative and a useful tool in decision making particularly in the area of packaging.

Finally, the general reading public will also find this project research very educative and useful in terms of general knowledge.


1.6 Scope Of The Study

Packaging constitute an important cost element in the production and marketing of good in manufacturing organizations in Nigeria. However, to undertake a study on nation-wide basis covering all manufacturing industries in Nigeria is too numerous task and beyond the resources of the researcher. Based on this, the study is confined to Unilever Nigeria Plc, Kaduna Branch .

The study covers the material design and types of packaging used by the Unilever as well as the cost involved.


1.7 Historical Background Of Unilever Nigeria Limited

From its modest beginning in Nigeria in 1923 Lever Brothers as it was formerly known, now Unilever Plc has given into a successful economic grant, thanks be to the foresight of its founder William Hesket Lever who saw in Nigeria the potentials of a vast market beyond the United Kingdom where he had already been founder of Lever Brothers United Kingdom, the Nigeria branch of his company was initially known as Lever Brothers (WA) Limited when it was incorporated as a private company in the country on April 11, 1923; it was engaged then largely in the sales of soap. It changed its name a year later, in 1924 to West African Soap Company Limited. Sensing a profitable future in the Nigeria market, the company opened its own factory at Apapa, that same year 1924 to produce bar soaps, Lever Helmet died a year in 1925.

Thirty years after its factory was established in Nigeria, the company in 1955 changed its name to Lever Brothers Nigeria Limited. It has in the mean time diversified into the production of edibles. As time progressed, it increased its product range to include personal care products. Of course, the production of bar soap continued and even increased with the commissioning in 1958 of second UNL factory, this time at Aba in the eastern part of Nigeria, now in Abia state.

The company all this time was still foreign owned with the natural desire for the nation to be involved in, in fact, control its economy, the Nigeria government in 1972 introduced the indigenization policy by which Nigerians acquire majority shares in the foreign owned companies. While some companies sold out and left the country. Others stayed and complied the new policy. Unilever Nigeria Limited was among the Latter and it sold 60 percent of its shares to Nigerians. For UNL and its shareholders, both local and foreign business has been very good.

Unilever Nigeria Limited continued to grow, particularly with the company’s introduction into the market of more product lines, for example goods to meet increasing consumer demand, UNL in 1982 commissioned an ultra-modern factory not far from Lagos at Agbara in Ogun State for the manufacture of edible products.

In addition, there is the ‘MASTERLINE BAKERY CENTER’ also at Agbara for the training of bakers and the development of new good products based on the utilization of local raw materials, particularly with the ban which the Nigerian Government in the 1980’s imposed on importation of wheat and hence the necessity for non wheat or local grain substitutes for flour.

Not only UNL products, it also absorbed other companies into its umbrella. Lipton of Nigeria was absorbed in 1985.

Three years later, in 1988, Chesesbrough products Industries Limited which makes Vaseline and ponds range of products joined the UNL. Currently, A.J. SEWARD has joined too. Thus, true to the expectations of its founder, Unilever Nigeria Limited business increased and expanded by leads and bonds.

Today, Unilever Nigeria Plcss products range is vast-over fifty and in different wallet sizes. Its quality brands have made UNL a Visible Friend in every home throughout Nigeria and beyond her borders to the west African sub-region as well as even to central Africa. A satisfied consumer audience has rewarded UNL the head share of the market.

Abbreviations

UNL: Unilever Nigeria Limited

KJ: Stand Measurement of Energy


1.8 Definition Of Terms

The following terms used in this project research work are defined bellow:

Analysis:

Resolution into sample elements, for example summary of data into tabulated form which may take the form of chart or diagram.

Packaging:

All activities involved in designing and producing the container or wrapper for the product.

Expenditure:

Amount of money spent in doing something.

Slack Fills:

Space left unfilled with product in designing and producing unit packaging.

Added value:

Increase in value acquired by materials, components or other commodities as a result of any input, whether processing, handling, distributing or any other marketing activity.

CAN:

Diminutive of canister. A metal container usually of tin-coated mild steel for preserving or dispending liquids or solids, especially food stuffs.

Marketing:

Is the management process responsible for identifying, anticipating and satisfying customer’s requirements profitably.

Total Cost:

The summation of labour, material and direct cost and the cost of overheads.

Material:

Something which can be used in covering a product or making a product.

Marketing Mix:

The marketing strategy consisting all elements in the planning and operation of marketing such as pricing, promotion, product e.t.c.

Respondent:

Research information, person answering or supplying answers to research questions.

Label:

Card, tag, patch or other attachment to a product or package in order to give it a particular identity.

Rubbish:

Waste, things to be thrown away.

Plc:

Public liability company


Chapter Five


Summary, Conclusion And Recommendations

5.1 Summary

The topic of this project work “An Evaluation of the Cost of Packaging and its Implications on the Profitability of a Manufacturing Organisation” with a Case Study of Unilever Nigeria Limited, Kaduna Branch.

In the previous chapters, the researcher explained in details the meaning of packaging, its uses as a marketing tool, factors that contributed to the potency of packaging, reason for packaging, characteristics of a good packaging design, elements of packaging as well as types and forms of packaging.

Chapter three of this work dealt with sampling procedures, research method used in collection of data and also the instruments used in the analysis and presentation of data. In this regard, 50 questionnaires were issued, 20 to distribution staff of Unilever Nigeria Limited, Kaduna Branch while 30 questionnaires were issued to customers of UNL.

Chapter four analyse and presented data collected from questionnaires issued in tabular form and also test the hypothesis formulated in chapter one for this research work. From the data collected, the following findings were made:

  1. This study found out that as against the general belief that packaging is intended or meant to attract consumers to the product, as well as providing essential information about the product ingredient, reaction side effects and other useful information. Packaging is principally designed to provide protection for the product. This reason was supported by 80% of the respondents of the distribution staff of Unilever Nigeria Limited, Kaduna Branch.
  2. It was also evident from the study that evaluation is simply determined by many variables which include products safety, durability, compact and attractiveness in design to facilitate easy identification among various close substitutes and to create customer loyalty which in turn lead to increase in sales volume.
  3. It also revealed the determinants of packaging itself in manufacturing organizations; market research is often employed to find out consumer motivation, attitude, tastes, and product preferences. However, the findings of this survey reveals the packaging design in the prerogative of top distributors staff who considers various factors including costs, convenience and durability of materials used in packaging.
  4. It was also noted in the study that, packaging costs, continue to rise tremendously over the years, resulting in an increase in product prices, observation has shown that, rising trend for packaging comprise an increasing proportion of the total cost of convenience goods.
  5. The new trend in packaging technology consist essentially of increasing change in style of product packaging. The study discovered that customer’s satisfaction as well as cost reduction constitute the principal motives behind increasing changes in packaging. This finding is in line with government directives that all products packaged should be re-designed or re-packaged at affordable prices to satisfy average consumers.

5.2 Conclusion

Based on the findings of this study, the researcher draws some conclusions.

First, the rising cost of packaging is the main contributing factors in increased unit prices of convenience products.

This is from the fact part of the product cost of packaging.

Secondly, the tremendous increase in packaging cost can be effectively tackled through the introduction of recycling technology designed to produce cheap raw materials for packaging industries.


5.3 Limitations Of The Study

A study of this nature is by no means an easy task. In the course of carrying out this survey, the researcher encountered a number of constraints, among which are time, death of relevant materials and financial constraints.

The time allowed for the conduction of this research was too short considering the intense academic programme or calendar.


5.4 Recommendations

In addition to the conclusion drawn above, the researcher has the following recommendations to make.

  1. Pilfering is a major hazard through all the stages of production and marketing. The evaporation rate of goods is high to be a real cost which must be calculated and included in the mark up obtained at all transaction level.
  2. Unilever Nigeria Limited should look for alternative sources of raw materials for their packaging materials or to embark on the recycling technology to reduce the growing cost of packaging.
  3. The use of traditional materials has also been recommended to tackle the cost of packaging. For example weight cans and closures can be replaced with light weight tinplate to reduce the cost.
  4. The establishment of bottle bank has also been recommended to ease the pressure from the environmentalist groups.
  5. The introduction of use of electronic device can also be recommended. For example, the use of European article numbering system used in food retailing. This is a system of incorporations 13 digit item identification number, both in decimal characters and bar code form into the product packaging.
  6. Unilever Nigeria Limited should redesign their packaging to reposition their brands and emphasise their intrinsic values.
  7. The organizations should cater for varieties in household size and usage rates to each consumers with limited purchasing power.
  8. Finally, concerted effort should be made to reduce packaging or going “green” in packaging.
  9. For examples, S.C Johnson repackaged agree plus Shapoo in a standing pounch using 80% les plastic or eliminating outer carton.

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