The evolving nature and use of pallets in modern food storage and distribution infrastructure

Also known as a “skid”, the pallet is a flat structure that supports goods in a stable manner during transport, designed to allow access to forklifts, pallet jacks and other lift-transport devices.

Pallets are an ever-present feature of the modern food and beverage transportation infrastructure. Also known as a “skid”, the pallet is a flat structure that supports goods in a stable manner during transportation. They are designed to allow access to forklifts, pallet jacks and other lift-transport devices. This provides greater stability and makes the entire loading and offloading process easier.

In the food industry, pallets are critical at almost every point of the supply chain. They transport raw materials into the factory, are used in moving products from point A to B in the manufacturing plant and are finally critical in the transport of food and beverage consignment to retailers. Without them, food transport would be one highly inefficient and cumbersome process.

As the food industry evolves to become more transparent, sustainable and environment friendly, the pallet industry has also been forced to metamorphose to keep up. In this issue, we explore the trends impacting the pallet industry even as it tries to conform to evolving demands of its biggest client – the food and beverage industry.

Plastic pallets threaten wood’s dominance

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For more than a century now, wood has been the dominant material in the pallet industry, and rightly so, for it produces strong, stiff, durable, easy to use, and inexpensive pallets.  As late as 2013, wood pallets controlled between 90 to 95% of the market, according to report by the Department of Agricultural and Biological Engineering of Pennsylvania University, USA.

Although it remains a dominant material today and is projected to remain so for the foreseeable future, plastic is quickly gaining popularity and is becoming increasingly sought after by food and beverage companies. According to a Grandview Research, the global plastic pallets market size was valued at US$6.7 billion in 2020 and is expected to expand at a compound annual growth rate (CAGR) of 5.6% from 2021 to 2028.

Mordor Intelligence notes that logistic and shipment companies are shifting towards plastic pallets owing to its advantages such as high strength, durability, lightweight, and long-term environmental sustainability.

Mordor Intelligence notes that logistic and shipment companies are shifting towards plastic pallets owing to its advantage such as high strength, durability, lightweight, and long-term environmental sustainability. Woodwork Network further notes that plastic pallets are becoming increasingly popular in the food and beverage industry as they are resistant to organic and inorganic chemicals at normal temperature. They also do not absorb moisture and can be thus subjected to the standard sanitary conditions required to guarantee food safety. Drawbacks such as high cost of initial investments, risk of pallet theft, and lack of repair options are however, expected to constrain growth of plastic pallets.

Standardization of pallets formats

There are two main structural designs used for manufacturing pallets: block and stringer. They differ in design as the block pallets allows for full four-sided access when using a forklift while stringer pallets can only be fully accessed from two sides.

Mordor Intelligence notes that as global trade continues to grow and shipments made across continents, pallet construction will become more standardized. In terms of design, the market research firm notes that more companies are adopting the block design owing to its greater flexibility. When it comes to size, the most prevalent size of wood pallet is 800mm x 1,200mm unit, which was developed by the European Pallet Association. Disposal fees on pallets that are not standardized in Europe is particularly driving the shift towards this size.

Recycling and reuse take centre stage of pallet handling

In the past, very few pallets were reused, mainly because when shipping across continents, the cost of recovery is more than that of the pallet. However, due to increases in material cost, environmental concerns and the cost savings that can be achieved, manufacturers have become interested in developing systems to increase reusability of pallets.

Subsequently pallet pooling systems which have been popular in Europe for decades now have gained popularity globally due to their ability to economically reuse pallets. Thanks to the pooling system and development of dedicated pallet management systems, companies can rent pallets when transporting goods across continents or for for local shipping. The Commonwealth Handling Equipment Pool (CHEP), the pioneers of the system is currently the largest establishment of its kind across the globe. It has operations in Europe, North America, and Asia. Other companies that have since grown to offer this kind of service include European Pallet Association, Canadian Pallet Council, and Logistic Packaging Return.

Apart from reusing pallets, recycling of pallets is also increasingly becoming a significant part of the pallet packaging industry. Used pallets are no longer considered garbage, and every day less of these materials are put into landfills. Instead, most are subjected to recycling processes to produce other materials. In Europe, the law requires at least 60% of the fibre-based packaging waste to be recycled, leaving no room for manufacturers to haphazardly dispose of their used pallets. This trend is expected to continue as the more food companies work to achieve a closed loop system and net zero carbon status.

Embedded RFID Chips go main stream

Traceability in the supply chain has become an important factor in the food and beverage industry. Consumers are demanding greater transparency as to how the food they consume is produced and transported.

Pressure has thus mounted on companies to prove that they can trace their processed foods back to the farm where they were first produced. To address consumer concerns, companies have implanted embed Radio-frequency Identification (RFID) chips to their pallets to track movement of both raw materials and final products.

Pallet tracking has also proved useful particularly in managing recalls and expiration dates, minimizing product loss and getting items to their end-users in an efficient and cost-effective manner. Use of RFID chips on plastic pallets has also come with an additional advantage of reducing chances of theft, enabling companies to increase the number of trips per single pallet, which eventually lowers cost per trip and results in a rapid return on investment.

Market status into the future

The global pallet market was valued at US$79 billion in 2020, according to a report by Allied Market Research. The market is expected to grow at a Compounded Annual Growth Rate (CAGR) of 5.1% from 2020 to 2027 to reach US$110.5 billion at the end of the forecast period.  The food and beverage end-use segment led the market in 2020, with over 23.4% of the global revenue. Regionally, North America enjoys the leading position in the market thanks to an advanced food and beverage sector in the USA and Canada, which heavily uses pallets in transport and logistics. The Asia Pacific region however presents the greatest opportunity for growth due to a thriving manufacturing industry, a rapidly expanding population, a continued rise of disposable incomes and consumerism in food and beverage sector. Countries such as China and India are likely to be the most progressive markets in the forecast years.

The market in the MEA (the Middle East and Africa) generated a value of US$6.18 billion in the year 2018 and is expected to grow, owing to the rising adoption of plastic pallets, especially in the logistics and transportation industry. For Europe, Research and Markets projects that the pallet industry there is expected to exhibit a modest growth of 4.4% driven by increasing industrial production in European industries as well as high applications in shipping and load handling sectors. 

The rise in e-commerce has also challenged supply chains to develop transportation and logistics to control flow and cost of outgoing and incoming goods. Online orders are generally in smaller quantities and more frequent, thus, requiring more assets for goods management. This creates a demand for pallets for e-commerce-based logistics, which in turn is expected to drive growth in the pallet industry.

This feature appeared in the March/April 2021 issue of Food Business Africa. You can read the magazine HERE

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