Following the introduction of plain packaging for tobacco products in a number of markets around the world, Brand Finance looked at the potential impact of a similar policy on food and beverage brands across alcohol, confectionery, savoury snacks and sugary drinks worldwide. It found that alcohol and sugary drinks were the most vulnerable.
Brand Finance carried out the same exercise two years ago, where it estimated that the impact on beverage businesses from plain packaging would be $300bn.
But over the last two years brand values have grown and parent companies have become more and more reliant on their performance – leading Brand Finance to grow its estimate by almost 50% to $400bn.
'Plain packaging would render some of the world's most iconic brands unrecognisable'
In 2012, Australia became the first country in the world to implement plain packaging for tobacco products. Since then, France, the UK, Ireland, Norway, and New Zealand have all implemented the policy. Several other countries have also legislated for it, including Belgium, Singapore, Thailand, Slovenia, Israel, Turkey, and Uruguay.
A number of calls have been made to extend the concept to certain food and drink categories. And restrictions on packaging and advertising have been growing: in 2016, Public Health England called for plain packaging to be considered for alcohol; while in 2018 Ireland passed the Public Health (Alcohol) Act which makes health warnings on packaging compulsory.
“We have therefore felt it pertinent to examine the potential financial impact of such a policy and updated our 2017 study to model the brand and business value impact of a broader application of the plain packaging legislation," notes Brand Finance.
“To apply plain packaging to alcohol, confectionery, salty snacks, and sugary drinks would render some of the world’s most iconic brands unrecognisable, changing the look of household cupboards and supermarket shelves forever.”
Plain packaging would damage a brand’s ability to differentiate itself from others on the market. With plain packaging in place, the value that brands have would fall.
Brand Finance based their findings on investigating the effect on eight multinational companies: Pernod Ricard, AB InBev, Heineken, The Coca-Cola Company, PepsiCo, Mondelez International, Nestle and Danone.
Collectively, these companies control more than 1,000 brands.
Alcohol beverage giants such as Pernod Ricard, AB InBev and Heineken would be strongly affected given that all of their brands and revenues would be exposed, says Brand Finance.
In the soft drinks category, around three quarters of Coca-Cola’s portfolio would be ‘at risk’, given the prominence of key brands such as Coca-Cola, Sprite and Fanta, it estimates. While Coca-Cola has been boosting its zero sugar and diet lines (now accounting from around 20% of sub-Coca-Cola brands) and thus lessening the impact, Brand Finance warns that ‘diet options can becoming subject to the legislation in their own right because of additives and preservatives some of the products in this category may contain’.
PepsiCo would be in a similar situation, while its portfolio would also be affected if there was plain packaging for savory snacks.
Brand Finance's analysis looks at the impact of plain packaging on beverage companies themselves, and not the wider industry that may rely on contracts from big brands, such as design and advertising services.
David Haigh, CEO, Brand Finance, commented: “With health advisors labelling obesity ‘the new smoking’, it is not surprising that there have been repeated calls for plain packaging legislation to expand into the food and drink sectors. It is obvious, however, that this type of legislation could severely damage these companies’ business values.
"The contention between health and policy advisors and global food and drink brands will no doubt pick up pace as the issue continues to gain traction on the global stage.”
The Brand Finance report can be found here.
Legislation developments to promote healthy eating
Brand Finance’s report is hypothetical. But with obesity a pressing problem, calls for more drastic measures to improve public health - particularly through what we eat and drink – are increasing.
Taxes, restrictions on marketing and advertising, minimum unit pricing are among measures being introduced or considered.
Last year, Canada’s Yukon became the first territory in the world to introduce sizeable health warning labels on alcohol products, cautioning against the risk of cancer, as part of a study funded by Health Canada.
In Scotland, minimum unit pricing (MUP) is believed to have cut alcohol purchases by 7.6%.
In non-alcoholic drinks, sugar taxes have been gathering momentum around the globe.
A number of beverage companies, however are already actively diversifying their portfolios, thus reducing their exposure to potential legislative measures. In non-alcoholic drinks, sugar reduction is a key trend; while there are an increasing number of zero or low alcohol beverages reaching the market.