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13/02/2020by EOS Intelligence EOS Intelligence No Comments

Is Sustainability Just Another Buzzword in Food Packaging Industry?

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Sustainable food packaging has recently received an increased attention within the food & beverage sector. Most players try to make sure not to miss any chance of communicating their concern over plastic waste to the general public, showcasing their initiatives taken to curb the waste. Are such initiatives taken out of actual concern or are they just a move to position the brands right in the ‘environmentally-concerned’ market?

It is assumed that packaging is considered sustainable, if it meets three criteria of sustainability. First, it should be economically viable for the consumers as well as the manufacturers. Second, it should be socially acceptable in terms of ease of use, transporting, sorting, and storing. Most importantly, third, the packaging must be eco-friendly through the use of materials that are responsibly-sourced and reusable/recyclable, to reduce the environmental impact of the packaging.

Change fueled by multiple triggers

Food and beverage (F&B) and related packaging industry players have been under a growing pressure to be more transparent and to introduce changes to the way food products are packaged. Considering that a significant share of non-sustainable, non-biodegradable waste, especially plastic, comes from food industry, improving the packaging and transitioning to more eco-friendly solutions is becoming imperative, rather than optional, for increasing number of F&B companies.

At the same time, the pressure to reduce waste and protect the environment from non-biodegradable substances is creating new opportunities for the packaging materials producers and for F&B companies with regards to more relevant brand positioning in this highly competitive industry.

While a lot has been changing in the packaging sphere under the heat from environmentalists and legal requirements introduced by regulators, the role of an aware consumer exerting pressure through product scrutiny and shopping choices should not be underestimated in this process.

According to a report published in April 2019 by Globalwebindex, a market research company, there has been a rise in the number of consumers globally who are willing to pay more for eco-friendly/sustainable products (including their packaging), from 49% in 2011 to 57% in 2018. Consumer awareness is growing fast thanks to governments’ initiatives, educational media, and activists’ social media efforts, all of which have triggered an increased sense of responsibility amongst many consumers, who start to understand the importance of switching to eco-friendly and sustainable packaging.

Increasingly, consumer awareness is going beyond just passive understanding and translates into actions which have a real power to change F&B sector’s approach to food packaging. Consumers vote with their spending dollars and exert pressure by switching their loyalty to other brands, both of which approaches appear to be quite effective. According to the same survey by Globalwebindex, 61% of consumers are likely to switch from their currently-used brands to more environmentally-friendly ones if the latter score better on the environmental friendliness front. This shows that F&B companies really do need to re-think their product and packaging choices and start putting money and effort in sustainable solutions, if not from real concern over the environment, then for retaining consumer trust and maintaining brand values.

Big F&B brands appear to show initiative

The increased scrutiny over F&B companies’ packaging choices has already started bringing some results. Several major players are looking to invest in transforming their packaging materials to sustainable ones. Despite the challenges in bringing innovations into packaging materials and designs, and altering their supply chain, several F&B players are claiming to strive for their sustainability goals. Some claims may surely be genuine but some could possibly be a strategy to get the ‘sustainable company’ tag to stand out from the competition in the F&B industry.

Understandably, players are very vocal about their initiatives targeted at improving their eco-friendly standing to appeal to the environmentally-concerned consumers. F&B brands such as Coca-Cola, PepsiCo, Unilever, Nestle, to name a few, have already announced time-bound plans to revolutionize their packaging models.

For example, in January 2018, the beverage giant Coca-Cola announced a goal to collect and recycle the equivalent of every bottle it sells globally by 2030. The company with its bottling partners started an initiative with a plan called “World Without Waste” that is focused on entire packaging cycle from designing and manufacturing of bottles to their recycling. For the execution of this plan, the company plans to educate the public on what, how, and where to recycle, teaming up with local communities, NGOs, industry peers, and consumers. Furthermore, under the plan of “World Without Waste”, the company aspires to create packaging from at least 50% recycled materials by 2030 and continue pursuing the goal to make all consumer packaging 100% recyclable by 2025.

In addition to this, in October 2019, Coca-Cola European Partners (CCEP), the largest independent Coca-Cola bottler, announced it would switch the carriers on its multipacks from shrink wrap to paperboard to reduce packaging waste. The company claims that with this switch it will remove about 4,000 metric tons of single-use plastic per year from its current supply chain. The paperboard packaging is planned to be certified from either the Forest Stewardship Council (FSC) or the Program for the Endorsement of Forest Certification (PEFC). Similarly, in January 2019, Coca-Cola packaging partner, Coca-Cola Amatil Australia, announced to cease the distribution of single-use plastic straws and stirrers, and distribute biodegradable Forest Stewardship Council accredited recyclable paper straws.

According to a report by Packaging Gateway, Coca-Cola claims to have made 88% of the consumer packaging recyclable, while its packaging used 30% of recycled material by the end of 2018. Also, about 58% of the equivalent of bottles and cans introduced by the company into the developed markets were refilled, collected, or recycled during 2018. Overall, the company’s recover and recycle rate was said to be 56% in 2018 as compared to 59% during 2017 or 61% in 2014. This proves that with growing sales, Coca-Cola’s efforts might not make as much impact as the company would want the public to think.

Nevertheless, the company is undertaking further initiatives to improve its environmental score. It committed to invest US$15 million in Circulate Capital, an investment management firm dedicated to incubating and financing companies and infrastructure that work upon curbing the plastic waste thrown into the oceans. Further plans of the company include increasing the use of recycled plastic in Australia by 2020.

In another example, PepsiCo also talks about becoming an environment-friendly company, announcing to use 25% of recycled content in its plastic packaging by 2025. In order to meet its target, in September 2018, the company announced its participation in the World Economic Forum’s Global Plastic Action Partnership (GPAP). The partnership focuses on stakeholders located in coastal economies, such as those in Southeast Asia, and its purpose is to help businesses, communities, and local governments redesign waste management to create circular models that include collecting waste and recycling or composting it to reduce waste streams to the oceans or landfills.

PepsiCo also announced other targets for improved sustainability to be achieved by 2025. These include to re-design all of its packaging to be recyclable, compostable, or biodegradable, to reduce virgin plastic content by 35% across its beverage portfolio, and to amp up investment to increase recycling rates in key markets.

Apart from individual targets, another initiative was also launched in October 2019 jointly by a few beverage players. As reported by a publishing firm, William Reed, three beverage companies, Coca-Cola, PepsiCo, and Keurig Dr Pepper, announced their partnership with World Wildlife Fund, The Recycling Partnership, and Closed Loop Partners under the “Every Bottle Back” initiative. This initiative, starting in late 2020, will include investment of US$100 million and will focus on sorting, processing, and collecting discarded plastic bottles in four US regions. The initiative also targets to educate consumers that PET bottles are 100% recyclable, easily remade into new plastic, bottles, shirts, shoes, coats, park benches, and playground equipment, by introducing pack label messaging.

Smaller players are emerging with packaging innovations

The pressure to embrace sustainable packaging is even greater for smaller and mid-size F&B companies, if they want to stay relevant to the customers, grasp their attention, and grow own market share. Smaller players in the industry seem to understand this and have proven to be more agile in introducing new products that focus on organic ingredients with sustainable packaging, while challenging big brands’ prices.

For example, in March 2016, Alter Eco Foods, a San Francisco-based chocolate-centric, healthy indulgence, and sustainability-oriented food brand, launched the first stand-up pouch made from renewable plant-based materials, designed for storing quinoa grain. This innovative pouch named “Gone 4 Good”, is not meant to be recycled but to be thrown in a composting bin where it will disintegrate within three to six months. Made from eucalyptus and breech trees for the exterior and compostable resin called “Matter-Bi” for the interior, the pouch has several green certifications. Apart from this, in early 2019, the company also transitioned its chocolate truffles packaging from non-recyclable plastic pouch to a recyclable paper box and claims to be looking for solutions to replace its current plastic Coconut Cluster pouch, since it is yet not recyclable or compostable. The company is determined to make all its products packed in 100% recyclable or compostable packaging by December 2020.

Another player, B.O.S.S. Food, a Texas-based nutrition bar company, started selling its premium nutrition bars in compostable wrappers made by TIPA (an Israel-based compostable packaging company) in 2017, focusing on ensuring the products’ packaging is environmentally safe. TIPA’s packaging is a bio-based blend with all the properties of normal plastic but is certified for both home and industrial composting through OK Compost mark by the TUV institute. The packaging also complies with food contact regulations in Europe and the USA.

Similarly, a UK-based beverage company named Earlybirds launched a 100% plant-based packaging for its breakfast drinks – bottles and lids made from sustainable sugarcane, over the span of two months of September and October 2019. The launch made the packaging 100% compostable as per EU biodegradability standards. The company’s advertisements claim that, under the right conditions, the bottle will breakdown in twelve weeks and it can be thrown in food waste bin and then composted at an industrial composter, reducing it back to soil. The company is the first in the UK to launch sustainable packaging for beverages.

These are just a few of several smaller F&B companies, which are focusing on bringing new packaging solutions to improve their rating as environment-friendly companies in the eyes of consumers. The initiatives are worth the effort, even though players face quite a few challenges in embracing sustainable packaging over traditional packaging.

Such challenges include higher costs, choosing the right material for packaging that must comply with the standards of environmental safety, as well sustaining the quality of the food product. It is estimated that the companies are required to spend nearly 25% more on the sustainable packaging than on the traditional packaging. This higher cost is attributed to major shifts in supply chain, including (but not limited to) procuring the raw material for packaging to collecting the used packaging for recycling. Another major factor contributing to higher costs of sustainable packaging is the R&D expenses that must be borne by the companies. The solutions still require a lot of research, as there are still very few commonly-used technologies and packaging products, thus a lot of players need to invent them. The companies need to invest considerable sums in developing an environment-friendly packaging material that is viable for their food product to sustain throughout the supply chain as well as shelf life, and (equally importantly) has the aesthetic appeal to grab the consumer’s attention.

But despite being smaller in size and having to deal with challenges, companies such as Alter Eco, B.O.S.S. Food, or Earlybirds have been investing extensively in R&D, a fact that resulted in several of them coming out with better and innovative packaging solutions. In fact, at times, smaller scale of operations works to these players’ advantage, as they do not have the constraint of having to convert the existing large-scale traditional packaging lines to ones suited to deliver new format or feature of packaging. Therefore, many efforts undertaken by smaller players seem to be converted into tangible solutions and launched more quickly and easily, also giving the companies a great marketing advantage over large F&B brands.

EOS Perspective

With the rise in awareness about plastic waste and environment safety among consumers, along with regulations formulated by governments across many countries to curb plastic waste, it has become paramount for F&B companies to enter the path of sustainability. At the same time, sustainability is becoming an important element of many companies’ marketing strategy to get ahead of the competition (or, increasingly, not to stay behind other players). The latter reason alone makes it no longer a matter of choice for F&B companies whether to keep assuring the public about efforts undertaken towards improving own sustainability rating across the supply chain.

Certainly, it is doubtful whether all these F&B companies are capable of actually achieving the claimed sustainability. On the one hand, there is a doubt if the scale of their efforts is relevant enough to bring about an actual change and not remain just a PR tool. On the other hand, the doubts seem to be really justified considering the challenges associated with achieving true sustainability goals.

The challenges range across many aspects. These include the complexity of the required changes in the supply chain, which involve both radical and incremental change, from manufacturers to users, owing to alterations in packaging materials and designs.

Another major challenge is the higher cost associated with changing the packaging materials from plastics to renewable or compostable materials. This starts with the development of the right product’s packaging material to ensure stable and long shelf life, and safe transportation with minimal waste, all of which is particularly challenging when dealing with food products. The costs and complexity of the task is further increased by the responsibility of creating an infrastructure for recycling of the packaging materials and taking the onus of collecting and recycling the packaging of own products, if not directly then through well-planned network of third-party entities.

Considering the complexity of these challenges and the high cost of going up the sustainability ladder, many F&B companies are likely to not be able (or to not want to) work towards full sustainability across their supply chain. In the midst of the growing pressure to meet the sustainability criterion, it is possible that some of the players might quietly opt for less sustainable solutions or stick to only those changes that are most visible to the consumer’s eye.

06/03/2014by EOS Intelligence EOS Intelligence No Comments

Alcohol in Pouches – Fad or Business Reality?

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Packaging and labeling are one of the key factors driving alcohol purchasing decision for an average consumer. For years, the alcohol packaging industry focused on developing sleek, sophisticated bottles with elegant labels, a significant factor in brand positioning. Beer was amongst the first alcoholic beverages to be poured into something other than glass container. Beer cans gained popularity several decades ago, however always posed the problem of lack of resealability, one of the most important package attributes for consumers. In wine segment, sales of carton box (e.g. Tetra Pack) and bag-in-box packaged wine started to accelerate in early 2000s, though these were mostly associated (sometimes not without a reason) with substandard quality products. This has continued to improve, however till date, it is the bottle that still rules alcohol packaging, and any other form of packaging in alcohol drinks generally meets with consumers’ skepticism and assumption of inferior quality.

With a relatively new concept of alcohol sold in pouches, it is unreasonable to expect a different reaction, with associations with baby beverage rather than classy adult drink. However, something is buzzing in the alcohol pouch packaging industry, and while still marginal, several launches of alcoholic drinks and beverages in this packaging format were welcomed with surprising consumer acceptance.

What’s the growth story so far?

In September 2012, Nielsen reports indicated that retail sales of pouch-packaged alcoholic beverages were about US$200 million annually (compared to US$12 million sales in a comparable period in 2010). This growth is being eyed by more and more producers, and invites market entries across new products, flavors, and alcohol types. Interestingly, it is being observed that this new packaging format brings additional sales and expands the market – while there is some level of cannibalization of existing sales with consumers shifting from purchases of bottled drinks to pouched drinks, there is a number of new consumers, who never bought such drinks before (and probably would not have tried them in bottled format, if it was not for the curiosity of trying a new drink in a pouch).

Ready-to-drink and frozen cocktails are currently the leading segment, in which pouches are gaining popularity. For instance, sales of several frozen cocktails such as margaritas and daiquiris, offered by brands such as Daily’s and Cordina in 187ml and 296ml pouches, are known to have witnessed healthy growth in 2012 in the USA, and it is expected that majority of growth will continue to be experienced in this market. The UK has also seen launches of pouched alcoholic drinks over the past few years; however, they were typically associated with summer season.

Another segment to have seen pouch launches was, surprisingly, vodka. In early 2013, Good Time Beverages launched its first Ultra Premium Vodka in flex pouches, positioning the product as an environmentally- and budget-friendly option. This was an addition to the existing line of pouched Good Time Beverages’ products, Bob & Stacy’s Premium Margarita and Big Barrel Spirits.

In wine segment, while multiple wineries in the USA, Australia, Europe, and South Africa have been using pouches for several years, the trend is yet to take off in mainstream use. This is mostly due to the fact, that the common perception of wine being a traditional and sophisticated product clashes with pouches being typically associated with hip, unsophisticated, low quality products. Launches of pouched wine products tend to focus around multiple-serve quantity pouches, e.g. launches by Echo Falls and Arniston Bay, both in 1.5 liter stand-up pouches with dispensers, launched in the UK in ASDA in summer 2013. The products were so popular that, ASDA followed with the launch of its own pouch wine brand. ASDA’s sourcing arm, IPL Beverages, which deals with bottling and pouching, said that the demand for pouched wines was so great that it led to sales forecasts being outstripped by 400% by the actual demand.

What’s so great about the pouches?

Contamination and oxygen barrier

Glass has long been considered the best material to store wine and other alcohols, mostly due to the fact that it is neutral and does not lend flavors to the bottle’s content, even during long-term storage. Alcohol was also too aggressive for most flexible packaging available in the market, affecting the layers of films used in such pouches and compromising their safety and durability. Therefore, previous limitations to the introduction of pouches in alcohols packaging were driven not by the problems with leakage or thickness, but rather with the right choice of materials and laminating – materials that would offer adequate protection and prevent product’s ingredients from changing their properties. The currently available pouches do not pose such problems, e.g. with triple-layer structure: polyethylene terephthalate, aluminum metalized film, and polyethylene. Instead, they offer very good oxygen barrier with around one year shelf life as the tap nozzle allows for one way flow, and once the beverage is poured, oxygen does not enter the container, extending the product’s freshness.

Ability to compete in economy price range

Selling alcoholic beverages, such as wine or vodka, in a pouch, enables the producer to compete against the glass bottle in the economy price range, both in single serving capacity, as well as larger 1.5-2 liter pouches. For instance, in 2012, the single-serve 10-ounce pouches of fruity malt-beverage alcoholic drinks by Parrot Bay or Smirnoff retailed for around $1.99 in the USA. Thus, it was a cheap, easy-to-carry option that offered these alcoholic drinks at a fraction of a bar or bottled equivalent price. In Europe too, economy packs of wine, sangria, and other drinks in larger 1.5 liter pouches meet with customer acceptance, allowing the producers to increase sales.

Lightweight for reduced transportation costs and greener label

The traditional glass bottle always brought challenges, due to its energy intensity in production process, as well as weight and fragility in transportation. Pouches, on the other hand, offer reduced weight and by far greater resistance in transportation, considerably reducing transportation costs (using less fuel to transport same amount of the product), at a lower risk of breakage. Pouches are also presented as a greener alternative to glass, as they do not require such energy-heavy production process. Additionally, many currently available pouches are increasingly made with recyclable materials. Overall, pouches are believed to offer an 80-85% reduced carbon footprint compared to glass (i.e. flexible film pouch is said to offer a carbon footprint of approximately 20% of traditional glass bottles). Also, producers indicate that in alcohol packaging, the cost of pouches stands at around 68% of the cost of traditional bottling.

Frozen single- and multiple-serve convenience

From consumer’s perspective, too, pouches have the potential to deal with some of the disadvantages inherent to glass bottles. Several alcoholic drinks launched in a pouch are positioned as straight-from-the-pouch, instant, ready-to-drink cocktails, that do not require the use of cork pullers or even glasses. Currently offered pouches, thanks to metalized layers, allow for faster cooling (about half the time required to chill a bottle), and can be frozen, while cans and bottles cannot. Such ready drinks are typically launched in single- or double-serve size, allowing the consumer to save time of preparing a real drink. There have been several launches in larger capacities as well, such as Pernod Ricard’s Malibu rum launched in 2010, at 1.75 liters pouch size. The product was not positioned as a single serve but rather emphasized it was enough for 10 cocktails, for use in larger gatherings or over period of time, thanks to resealable nozzle. Also in wines segment, pouches, thanks to their reduced weight and resistance, can be larger, at 1-2 liters. 2-3 liter pouches are particularly popular in food service sector, e.g. in restaurants selling wine by the glass.

Lightweight for on-the-go use by consumers

Reduced weight and resistance to breakage have found consumers’ acceptance, as pouched alcoholic beverages are often positioned as on-the-go, convenient, easy products for use in outdoor situations, picnics, concerts, boating, barbecues, etc. Convenience of pouches also comes from the pack’s stability thanks to the popular stand-up design, commonly offered reseability (in a form of a tap or screw cap, a considerable advantage over vast majority of cans). Pouches are believed to be stronger, safer, and more convenient for consumer transportation, and they eliminate the risk of an unpleasant realization of having left the cork puller at home.

Challenges and question marks

It is unlikely, to say the least, that the nearest future will see pouches enter the mainstream dinner-table use. As of 2013, pouches had rather limited application in retail alcoholic drinks markets globally, with differing levels of popularity across regions and seasons. The most significant challenge for this packaging format is still to build consumer trust in quality of an alcoholic drink sold in a pouch. Equally important challenge is to overcome the consumers’ perception that classy alcoholic beverages (wine, vodka) should come only in a bottle and perception of mismatch of pouched wine and traditional wine etiquette.

While the list of potential advantages of pouches in alcohol packaging is unquestionably robust, there is still a key question of the consumer’s long term acceptance of this packaging format. It remains unclear what it will mean to a range of alcoholic beverages, especially in wine, whisky, and vodka segments, which have traditionally positioned themselves in upper to premium segments. Will the pouches, no matter how sleek or elegant in design, affect such a brand positioning? Will they ever go beyond the outdoor use, and enter mainstream use (dinner tables in homes and restaurants)? Will a pouch be ever fully accepted in such sophisticated setups, or will the association with juices, baby drinks, or inferior quality remain too strong? And finally, while producers emphasize green aspects of pouches in terms of production and transportation, what is the real environmental impact of such pouches ending up in a landfill, considering that not all used pouches will enter recycling stream?

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