How Innovative Packaging is Transforming the Global Drinks Industry

The introduction of innovative packaging is having quite an effect on the drinks industry. Heavy tins and bottles are being replaced by lighter composite and biodegradeable materials; hi-tech cartons are being manufactured that tell consumers if the milk has gone off, and RFID (radio frequency identification) tags are being embedded with temperature sensors. These advances are designed to make production, storage and transportation cheaper.

“Packaging is a major element of cost for the beverage industry for all countries and all sizes of company,” says Richard Hall, chairman and founder of food and drink consultancy Zenith International. “It’s also an area for major opportunities for differentiation between products for the consumer, for convenience and safety, for cost-saving and for achieving environmental benefits. When it works, it looks good; it can enhance or maintain a brand or product.”

The incentive for innovation offers opportunities for cash savings “in many forms”, according to Alison Vincent, managing director of AVA Packaging Solutions in the UK. “Overall, innovation is definitely worth doing. It helps to get new materials and concepts out. Some will want to do it to reduce costs, others want a step change in the market place, or to leapfrog the competition.”

‘Light-weighting’ has been a major area of innovation for drinks packaging in recent years, with companies using lighter bio-resins rather than oil to make their plastic bottles. The Poland Spring Water Company division of Nestlé Waters North America, for example, decreased the raw materials used in its bottling, resulting in a 9.3g 0.5-litre bottle that has 25% less plastic than its 2007 prototype. “This has been a major area for technical improvements,” Hall says. “The advantages run right through the supply chain, from reduced transport costs to less waste.”

Alcoholic drinks have similarly benefited, according to the French Spirits Federation (FSF). In the past five years, the FSF notes, the weight of Champagne bottles has been reduced by 10%. “Spirits companies are looking at reducing the weight of packaging, but this is mainly driven by environmental legislation rather than a need to increase profits – these are mainly premium products where profit margins are sufficiently high,” says Augustin Chazal, the FSF’s technical and regulatory manager.

Research and development costs are crucial to the bottom line and, increasingly, packaging companies are supporting their own technological advances. “It depends who is doing the R&D,” says Hall. “Packaging companies are doing a lot of their customers’ R&D. They’re particularly looking to take costs out and improve efficiency.”

Innovative packaging can also be used to charge a short-term premium. “There are elements that can command a premium or validate a premium,” explains Hall. “But it’s difficult to maintain that premium over a long period of time. Most technological improvements are able to be replicated by competitors over time.”

Vincent warns that drinks companies should beware of being dazzled by assuming that hi-tech innovations are by definition good news. “It comes down to what can be done in a laboratory and what can be done on a grand scale,” she says. “Some companies may also want a degree of exclusivity or propriety around an innovation. Will using nanotechnology increase the cost? They need to look at the benefits. If packaging costs go up but waste goes down then there’s a potential for a large cost saving.”

“They need to look at the wider picture,” Vincent continues. “Sometimes, innovations can be driven by scientists with a particular application, but a drinks company would want an end use for the development. They need to understand how it would be commercialised and sold as a product.”

Hall echoes this point. “One of the biggest pitfalls for packaging companies,” he says, “is having a really good packaging innovation associated with a product that is either ahead of its time or otherwise unsuccessful. Some great packaging has started out with a product that is not a good vehicle.”

Another challenge, according to Mike Kelly, Anheuser-Busch InBev's media affairs manager, is that, while consumers are increasingly eco-conscious – and will subsequently choose brands they deem more environmentally-friendly – many of them are reluctant to pay the premium involved. A-B InBev has recently developed a lightweight bottle for its Stella Artois brand, on the basis that its target audience – affluent males aged 18-to-34-years-old – is concerned about the environment, but are not prepared to pay more for environmentally-friendly product packaging.

Meanwhile, Michael Hughes, a consumer analyst at Datamonitor, points out that alcoholic drinks packaged in aluminium – which makes the drink stay cooler for longer – are unlikely to sell any better than their rivals unless they match on price. According to a survey in 2009 by Datamonitor, only 6% of UK consumers say they are strongly influenced by packaging design, while 38% said price was the key factor.

That said, innovative packaging appears to be proving problematic for the hot drinks industry at present. Research by Datamonitor has suggested that consumers tend to enjoy the taste of tea or coffee from a preferred mug, implying little scope for packaging innovation. Hughes cited Tetley’s Twistea – Tea on the Go, launched in 2007, which enabled consumers to customise the taste of tea. “Little literature is available of the product three years on, and that suggests the product is not a market leader in the retail hot drink market,” he says. Even light-weighting can have limitations, according to Hall. “The optimum packaging may not be as light as some packaging has become,” he says. “Consumers can be deterred by the poorer functionality of some lightweight materials, particularly for carbonated products.”

Vincent agrees. “Consumers are often driven by perception – how sturdy something is.” she says. “Instant coffee tends to be sold in PET rather than glass but there’s a risk that the consumer may perceive it as less of a premium product.”

And, not all sectors of the drinks industry see innovation as uniformly welcome, or indeed, profit-making. “A few years back,” notes Chazal, “Grand Marnier looked to save money by painting the distinctive ribbon on the bottle rather than using a real, hand-made one. Sales went down, so they went back to the original process. The importance of traditional packaging is very clear.”

And, Hughes warns: “Consumers are increasingly sceptical because of the number of short-term health fads they have witnessed in recent years, and that means any packaging innovation should be focused around providing honest and easy-to-read information about the benefits of products.”