Hero Packaging

Accelerated by COVID, the Australian e-commerce industry is on a rocket trajectory, forecast to grow at a CAGR of 15% to $45bn in 2024. Recent studies by McKinsey have shown that approximately 70% of consumers are worried about the environmental impact of packaging and would pay more for greener alternatives. Leading website provider, Shopify, had 1.75 million sellers on its platform in 2020, which is anticipated to be much higher in 2022. As a “mission critical” player in the e-commerce value chain, Hero Packaging is incredibly well placed to take advantage of these consumer and environmental trends. 

Australian governments, at both state and local levels, have various plans to implement curbside FOGO (food organic & garden organic) bins, which once rolled out, will provide a national infrastructure for the correct disposal of compostable packaging, including Hero Packaging’s compostable mailers. This long-term trend gives online retailers even more justification to switch to home-compostable shipping mailers.

In just three short years the company has grown to service over 40,000 customers of all sizes from micro retailers to large online brands in Australia such as Beginning Boutique, Cue Clothing, Veronika Maine, Zanerobe, Piping Hot, plus Boom by Cindy Joseph and Studs in the USA. Revenue increased by 3x in FY21 to $2.5m and revenue is tracking ahead of the FY22 target with an annualised run rate of $5m. With a lean operating model, the company is already profitable with EBIT margins of 24% by FY24.

Hero Packaging currently has over 600 customers in North America, over 2000 US/Canadian email subscribers, a fully operational North American website, and a new US-based warehouse full of stock ready to sell. US & Canadian customers have thus far come from organic growth in the market (from non-paid marketing activity such as organic Google traffic and social media engagement). The real opportunity for Hero Packaging is to leverage its existing customer base and existing market demand, to rapidly scale the online advertising budget to increase website visitors, and based on a conversion rate estimate of 3-5%, achieve a strong foothold in the US market within the next 6 months. From learnings in the Australian market, new customers acquired will provide recurring business to then continue growing the North American market. 

In terms of market size, the US e-commerce market is an $800bn sector growing at a CAGR of 14% to 2025. With a less mature market than Australia in regard to sustainable packaging, it provides a huge growth opportunity for Hero Packaging.

In Australia, only 18% of all plastic packaging is actually recovered for future use. The rest eventually ends up in landfill or as pollution in the environment. In landfill, this plastic contributes to the production of methane which is harmful to our planet and causes climate change. They also excrete micro-plastics into the environment. Even plastics which are successfully recycled, cause micro plastics to be leaked into the environment. So, that is why the team at Hero Packaging decided to specialise in packaging that is specifically home-compostable to Australian standards, but also made from such materials that if they did end up in the environment, they would still break down over time with no waste.

From inception the Hero team have ensured that the product, manufacturing process and supply chain meet the highest standards and are in line with the company's ethos and mission. The team is planning to attain B Corp certification as well as Climate Active accreditation. This raise will enable the hire of a dedicated Social Impact Manager to see this project completed.

With the success of their flagship HEROPACK products, and their growing customer base of over 40,000 customers, the team has identified an opportunity to increase cross-sell opportunities through the introduction of new products. Hero has introduced custom branding options for their mailers, as well as now providing accessories such as compostable labels and thermal printers. With a vision to cover all the sustainable packaging needs of an e-commerce brand, new products will continue to be introduced.

Both Anaita and Vik have deep experience across e-commerce and digital marketing having built and supported the growth of numerous companies. They have built a social media following of over 60,000 and a brand that is loved by customers and end-consumers alike. Their brand building experience is a key competitive strength that they will leverage as they expand.

The packaging industry is long overdue for a shakeup by challenger brands. Globally, businesses such as TIPA and Packhelp have seen strong interest from private equity for their vision to drive change in the sector. Another notable mention is sustainable custom packaging supplier, Noissue, who raised $10m in funding in late 2021. 

With multiple approaches from interested trade parties already, Hero Packaging is well positioned to continue its growth and is open to exploring a trade exit to a party that shares its values and ethos.