Beverages Packaging - Part IV - Emerging Market Middle Classes Demand Better Drinks Packaging

By | 18 September 2013

The Drinktec exhibition is taking place across all of this week in Munich. To coincide with the event, just-drinks' management briefing this month takes a look at the drinks packaging category. In this, the final part of our four-part briefing, we turn our attention to the emerging markets of the world.

The role of packaging in emerging markets’ drinks sectors is becoming more important as their growing middle classes are increasingly influenced by branding images when making consumer choices. Brazil is a case in point, says Mauricio Groke, president of the Brazilian Packaging Association (ABRE). Drinks packaging design here is a key part of generating demand, with consumers identifying with packaging more than in some other emerging markets. "Buying a product is also buying its packaging altogether," notes Groke.” He belives that “improved packaging design is fundamental” to a brand’s success in Brazil.

Packaging design outsourcing is also common in Brazil, with drinks manufacturers generally buying beverage packaging from a third party provider. “The packaging industry is mostly outsourced,” says Groke. He notes that the ABRE takes an active role in developing Brazilian innovation and sustainability in packaging production, offering advice to member companies on professional skills improvement and technology updates.

There are some companies, however, that undertake such work in- house. One is Brazilian brewing giant AmBev, which produces its own beer bottles, labels and caps, with factories located in Rio de Janeiro, São Paulo and Manaus.

In February, the Brazilian Institute of Economics (IBRE) and the Getúlio Vargas Foundation (FGV) published research that showed the 2012 production of packaging of all kinds in Brazil is growing, reaching BRL46.9bn (US$23.2bn), up 3% on 2011. This total comprised 37% plastics, 34.74% cellulose, 16.7% metallic material and 4.65% glass. For 2013, the outlook for the sector is also positive: Packaging production should grow by up to 2%, generating BRL48bn. 

The Russian market for drinks packaging is also growing, with drinks manufacturers demanding higher quality and more expensive packaging, reflecting the role of packaging in influencing consumer choice amongst the country’s middle class.

Today, the production of packaging for drinks - both alcoholic and soft - remains one of the largest and fastest-growing segments of the Russian packaging industry, accounting for 25% of all sales within the sector.

The majority of Russian drinks’ producers prefer to order packaging for their products from leading domestic and global packaging producers, instead of launching production at their own facilities. 

Switzerland’s Tetra Pak is a leader in Russian drinks packaging, mainly specialising in the supply of cardboard packaging for local wine and juice producers. Meanwhile, leading Russian manufacturers of beverage packaging include such companies as Upakovka.

The outsourcing exceptions are leading market players and transnational corporations, such as The Coca-Cola Co. According to Vladimir Kravtsov, press secretary of Coca-Cola Russia, the company has invested heavily in the development of new types of packaging, as well as upgrading existing models.

"The result of this is that all the company’s flagship brands, including Coca-Cola, Sprite, Fanta and BonAqua have their own unique packaging," says Kravtsov. "This applies both to PET packaging and glass containers. The adoption of new technologies and production capacities each year result in the change of packaging of our drinks.”

In India, the packaging industry generally is experiencing significant growth, increasing at an annual rate of 12%, compared to 5% globally. The sales turnover of this industry last year was US$27.6bn, and is likely to reach $43.7bn by 2016, according to the Indian Institute of Packaging’s chairman S K Ray, speaking at a Mumbai packaging conference in January. Meanwhile, it is expected that, by 2015, sales for India's non-alcoholic beverage market will grow to US$2.3bn as domestic consumption reaches 35bn litres, according to the Associated Chambers of Commerce and Industry of India's 2011 report.

As alcoholic and non-alcoholic companies vie for retail space and young Indians' have a growing disposable income, drinks producers are turning increasingly to third-party packaging companies that provide hygienic and attractive packaging.

“Soft drink and alcoholic beverage companies are hiring speciality third party design and packaging services, and also getting packaging manufactured from specialist like us,” Rajat Kedia, director of Bangalore-based Manjushree Technopack, tells just-drinks. Manjushree Technopack's client portfolio includes brands such as Coca-Cola, PepsiCo, Bacardi, India-based United Spirits and Britain’s Diageo.

In India, the copyright and licence of such designs are generally held by beverage companies rather than the designer.

In a cost-conscious market such as India, the focus is on providing economic solutions. But that, says Kedia, is slowly changing: “Of late, certain companies are looking for high-end design activity for specialised and functional beverages where they focus more on aesthetics appeal; premium looks; good ergonomics – overall, a very premium-looking packaging for their beverages. However, this is a small chunk of the market. We expect that this will be the trend for the future.”

Finally, China is also witnessing growing demand for quality drinks packaging, but here a key concern is product safety, because of the series of health scandals damaging the reputation of China’s food and drink sectors.

The bad news stories keep coming: In March, Chinese language media reported that the heavy metal antimony was found in the PET bottles of some famous drinks, including some Coca-Cola brands and Niu Lan Shan's 'Er Guo Tou', a popular baijiu spirit from Beijing-based Niu Lan Shan Distillery. Also, in November last year, the Shanghai operations of UK testing service provider Intertek found excessive plasticiser in China’s high-end baijiu Jiugui, which is manufactured by Hunan province-based Jiugui Liquor. Xia Xinguo, Jiugui's general manager, told Chinese media that the plastic corks could be one reason for the problem.

“Safety is now at the top of the list when it comes to packaging design for drinks and foods,” says Dong Jinshi, secretary general of Beijing-based International Food Packaging Association. Manufacturers should not only try to meet China’s national standards, Dong argues, because “many of the standards are obsolete” in the rest of the world. In Jiugui’s case, the company insisted that Chinese regulations do not order them to check for plasticiser in China-made spirits: “A good manufacturer should set the standard instead of just following, while the government’s role is to improve,” Dong says, adding that other trends in drinks packaging include developing “minimal, recyclable and biodegradable” products.

Coca-Cola is already one step ahead. In April, it revealed that it will make PET bottles for Coca-Cola, Sprite and Fanta sold in China from sugarcane waste.

For the full contents of this briefing, click here.

Sectors: Beer & cider, Soft drinks, Spirits, Water, Wine

Companies: Diageo, AmBev, Bacardi, PepsiCo, Fanta, Sprite, Coca-Cola Co, United Spirits

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