Rising costs should prompt beverage companies to rethink packaging

Given the rising cost environment and the increasing focus on reducing greenhouse gas emissions, beverage companies may seek cost savings by rethinking packaging. This includes reducing the weight of materials, increasing package size (ie reducing packaging per volume), or shifting to lower-cost options that may also reduce emissions.

“We see alignment between the cost pressures on packaging and the need to improve sustainability, meaning companies can take action to improve margins while lowering their Scope 3 greenhouse gas emissions,” said Jim Watson, senior analyst – Beverages at Rabobank.

Lightweighting, or reducing the weight of packaging materials, is one way recommended to improve current packaging. However, wine and spirits tend to feature heavier glass bottles, which are linked to a more premium image and feel. Preserving that premium feel while lightweighting remains a core challenge.

“Given elevated energy and freight costs, we believe that the equation is changing on lightweighting,” said Watson. “According to the European Container Glass Federation, wine bottles are already 30% lighter than they were 20 years ago, and we believe there is still significant room for improvement.”

New formats provide further opportunities, found Rabobank. The 750ml glass bottle remains the traditional packaging format for wine. A move to bag-in-box (BIB) wine is starting to happen at the margins, but the potential for significant cost and emissions savings should have companies looking more closely at this option. BIB stands out even compared to lightweighting for reducing wine’s carbon footprint.

However, bag-in-box suffers from a very real image problem: being viewed as the cheapest wine option.

“The industry has a lot of work to do to make buying BIB wine more acceptable for mainstream and premium consumers,” said Watson. “One clear way to reset the category image is to use the halo effect created by higher-end brands selling bag-in-box.”

Another opportunity is for producers to focus on the on-premise, wines-by-the-glass segment. A consumer might never see the box, but the savings to the winery would still be there.

Other types of packaging – kegs and other reusable on-premise options – may be an easier lift for companies. Meanwhile, alternative solutions like paper bottles – with prototypes being trialled by companies like Carlsberg and Johnnie Walker – present hope for more daring solutions coming online over the medium term.

Watson added: “Moving forward, we believe that rising production costs for glass will incentivise beverage companies to continue exploring new alternatives in order to maintain margins.”

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