A Cost Analysis of Alternative Fluid Milk Packaging Systems

Abstract

The fluid milk processing industry faces a problem arising from demands of consumers and environmentalists. Consumers want an inexpensive, high quality milk product in a convenient package, based on varying family needs. Environmental groups are concerned about the best container for packaging milk when the capacity of solid waste disposal systems, environmental quality, and natural resource utilization are considered. This study is intended to aid industry and government policy makers to evaluate the costs of five container systems: (a) paper, (b) returnable rigid plastic, (c) disposable blow-mold plastic, (d) plastic pouch, and (e) glass. The study is based on a non-random stratified sample of 28 firms in Washington, Oregon, and California. Costs were identified by departments or functions to reflect the various production or handling stages. The appropriate categories were combined for each type of fluid milk container to ascertain average unit costs. The average total dock cost for whole milk in all sizes of paper containers and gallon in-plant blow-mold plastic containers declines as the volume of fluid milk processed by a firm increases. Even with large variation in some cost categories by container type, there appears to be little difference in the average total dock cost among the returnable rigid plastic, paper, in-plant blow-mold plastic, and plastic pouch containers.