Plain packaging could cost beverage industry nearly $300bn
Thursday, December 21, 2017
A “plain packaging” policy on food and beverage brands could result in a potential loss of $293bn (£219bn) for the beverage industry globally, new research has warned.
A report from business valuation consultancy Brand Finance published earlier this month has found that The Coca-Cola Company and PepsiCo would each lose close to $45bn, or around 25% of their respective enterprise values.
Alcoholic drinks producers including Heineken, AB InBev, and Pernod Ricard, meanwhile, would see 100% of their brand portfolios exposed to the legislation.
Brand Finance analysed the potential financial impact of a plain packaging policy on food and beverage brands in four categories: alcohol, confectionery, savoury snacks and sugary drinks.
The consultancy predicted eight major brand-owning companies would lose a total of $187bn if plain packaging was mandated for other FMCG products, with alcohol and sugary drinks brands most vulnerable.
The estimates refer to the loss of value derived specifically from brands and do not account for further potential losses resulting from changes in price and volume of the products sold, or illicit trade. Brand Finance therefore argued that the total damage to businesses affected could well be higher.
BPIF Cartons general manager Jon Clark said: “Premium drinks are all sold on the brand and the experience. People will be giving bottles of spirits now over the Christmas period and they would not want to give a plain bottle with a white label.
“Packaging provides the ‘wow factor’ on the shelf and the experience when the receiver actually opens the present.
“And how would you know that what you’re buying is actually the real product, with the increased chance of counterfeiting? It would probably push a lot underground again.”
There have been calls from some quarters to extend the plain packaging legislation to other sectors since the introduction of plain packaging for tobacco products was enforced in numerous countries, including in the UK earlier this year.
Public Health England released a report in 2016 calling for plain packaging to be considered for alcohol while Canada’s Yukon has recently become the first territory in the world to introduce sizeable health warning labels on all alcohol products, cautioning against the risk of cancer.
“Plain packaging” is often referred to as a branding ban or brand censorship. By imposing strict rules and regulations, the legislator requires producers to remove all branded features from external packaging, except for the brand name written in a standardised font, with all surfaces in a standard colour.
Brand Finance chief executive David Haigh said: “To apply plain packaging in the food and drink sector would render some of the world’s most iconic brands unrecognisable, changing the look of household cupboards and supermarket shelves forever, and result in astronomical losses for the holding companies.
“Predicted loss of brand contribution to companies at risk is only the tip of the iceberg. Plain packaging also means losses in the creative industries, including design and advertising services, which are heavily reliant on FMCG contracts.”
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