Research - Packaging: A key trend in a recessionary world

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While the unprecedented global financial contraction is enforcing changes in consumption patterns, innovation is retaining its focal role as a primary driver for the alcoholic drinks industry, according to Euromonitor International's latest global briefing 'Product Developments in a Recessionary World'. Packaging reformulation is hence identified as one of the key strategies for retaining faltering audiences and expanding penetration rates for alcoholic drinks sales around the globe. Spiros Malandrakis, alcoholic drinks analyst at Euromonitor International, investigates.

Convenience gains traction

Packaging reformulation in its many forms is retaining its pivotal role in providing a much-needed boost for alcoholic drinks sales while responding to demands for convenience, tapping into the eco-efficiency debate, cementing premiumisation trends, providing economy offerings to cash-strapped audiences and embracing the lifestyle choices of cocooning.

Easier to manipulate and ideal for boosting impulse sales, convenience/consumption on-the-go- oriented packaging has been driving innovation, primarily focusing on wine - cans, bag-in-box and pouch formats have all revolutionised entrenched ideas regarding wine purchasing. Nevertheless, taboos and centuries-old traditions are still creating obstacles to the acceptance of such formats in all markets. While convenience is ranked high among consumer needs in the case of RTDs and beer, which are associated with casual and impulse consumption, wine and spirits are still largely constrained by purist perceptions and a more ritualistic approach, making promotional and educational campaigns essential for the success of such alternative formats.

Green spin

Rising levels of environmental awareness have paved the way for the ongoing sustainability debate within the alcoholic drinks industry. While 'green credentials' are quickly becoming a buzzword readily applied to the majority of packaging NPDs through, for example, the selective focus on lowering product weight (hence lowering emissions), a number of products have been launched on an explicitly 'environmentally-friendly' platform. PET bottles are currently spearheading the trend, although it has to be noted that a purely environmental spin is not ranked first among the USPs of products launched within this platform but rather following their convenience and/or economising benefits. Euromonitor International expects PET bottles to post a 7% total volume CAGR over 2008-2013 globally, while clearly prioritising environmental credentials is only starting to gain traction now.

The premiumisation issue

Packaging also plays an essential role in pushing the premiumisation agenda. Despite the fact that packaging is by no means the only added-value selling point of premium offerings, it does play a key role in a brand's positioning.

Premium local speciality/national drinks have managed to successfully navigate the economic slowdown, taking advantage of their comparatively competitive pricing in relation to imported spirits. Euromonitor International expects local spirits to post a 2% total volume CAGR over 2009-2014 on a global level as recessionary pressures will enforce a shift away from imported variants. Furthermore, extensions of already successful international brands have managed to capitalise on their established brand name. Conversely, premium product launches have faced failure in the case that they did not have sufficient financial and promotional backing. Consumers have proved far less likely to experiment in the current recessionary environment, opting for trusted brand extensions if they can still afford premium offerings.

Bringing the on-trade back home

While cocooning is not a new trend by any means, the gradual but steady pattern which saw consumers limiting their outings and on-trade spending has given rise to products responding to demand to replicate the on-trade experience at home. Beer kegs and wine barrels have proved to be perfectly positioned to take advantage of the trend, while the recessionary environment has accelerated it and provides the background for more such products to be launched. Particularly in mature Western European markets, on-trade volume sales of alcoholic drinks witnessed a 2.7% CAGR decline over 2004-2009 and Euromonitor International expects them to retain their negative growth trajectory with a 1.2% decline over 2009-2014. On the other hand, off-trade sales in the region posted a sluggish although still positive 0.8% CAGR over 2004-2009 and are forecast to continue moving in positive territory with a 0.8% volume CAGR over 2009-2014, paving the way for more such products to be launched.

Thinking outside the box

While the US and the UK are unsurprisingly at the forefront of innovation, there are a host of markets that have shown an interest in, and initial acceptance of, alternative packaging, primarily focusing on wine. Metal beverage cans for wine posted a remarkable 52% CAGR over 2003-2008 on a global level, and are expected to achieve a double-digit CAGR of 13% over 2008-2013. The US will spearhead the trend with a 17% CAGR to account for 79 million units in 2013, while Spain, Germany and the Netherlands will also increasingly adopt the format.

The PET bottle revolution will also be spearheaded by the US, which is expected to post a 19% CAGR over 2008-2013, with Sweden, the Netherlands, Canada and India among others also expected to jump on the sustainability/convenience/lower cost bandwagon. On the other hand, brick liquid cartons for wine are set to rapidly expand their penetration in Russia and China, where they are expected to post a 21% and 24% CAGR over 2008-2013 to account for 99m and 12m units, respectively, by the end of the forecast period. Italy, Canada and India also feature prominently in the list of countries to watch out for. And as the issues of saturation, affordability and changing drinking patterns continue to constrain the alcoholic drinks industry from realising its full potential, thinking outside the box - or the glass bottle for that matter - will make a difference.

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