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PET and can format challenge glass dominance

Glass bottles and cans have been generically associated with beer consumption throughout the world. However, environmental concerns, cost-saving initiatives, convenience issues and novelty elements are driving packaging innovation, hence bringing PET, aluminium and mini-keg formats under the spotlight.

Glass bottles retain their dominant position on a global level with China holding the leading slot in glass bottle usage by virtue of its large population and resulting large-scale consumption.

On the other hand, volume consumption declines in Germany are proving detrimental to the use of glass bottles, while Russian and Canadian consumers' acceptance of metal beverage cans is having a cannibalisation effect on the penetration levels of glass.

Russia also leads PET consumption within the beer industry with 47% of global unit volumes, with the bulk of PET bottles currently being sold primarily on the economy platform. In times of recession, consumers typically shift to economy brands. Nevertheless, historic lessons from previous recessions in Russia suggest that economy domestic beer tends to suffer as consumers in lower-income brackets halt purchases. Instead, premium domestic lagers tend to benefit as higher-income consumers reduce the frequency of eating out, but counterbalance this with an increase in at-home premium beer consumption. As a result, glass will not suffer to the same extent as PET from the expected temporary decline in consumption. At present, there are still only a few brands available in PET format, primarily limited to the domestic premium lager segment in Russia.

Conversely, manufacturers are reaffirming their support for the segment through new product launches such as Zlatopramen and Starobrno beer brands in 1.5-litre PET plastic bottles, introduced in May 2009 in the Czech Republic. Beer in PET bottles is also doing well in neighbouring Slovakia, where its market share is almost the same as for glass bottles. Glass manufacturers hence need to maintain the premium positioning of glass to avoid an even greater uptake of PET among brewers.

Niche opportunities

Aluminium bottles remain a niche packaging type for beer, used primarily for occasional promotional campaigns, such Estralla Damm's limited edition aluminium bottle for 2008. Aluminium bottles have also found use in the premium low-alcohol sector, as was the case with Icône Heineken. The aluminium bottle format is expected to witness strong forecast growth, but from a small base, to achieve a 0.5% share of total unit volumes in 2012.

Following a difficult start, beer draught systems and mini-kegs are beginning to benefit from a shift from on-premise to at-home consumption in Western Europe although they are still considered niche. Heineken's BeerTender and InBev's PerfectDraft systems using mini-kegs have been largely considered novelty products rather than functional packs and retail prices have initially put off part of their target audiences. Some beer producers are currently attempting to address price-sensitive consumers by offering a more competitive price. Grolsch launched “Cheersch” in 2008 at a lower price than most other home beer tap systems. Like Carlsberg's DraughtMaster, the new Grolsch draught system is to be used with a specially designed PET bottle, while its 2-litre format ensures frequency of renewal/purchase.

Packaging innovation in recessionary times

Despite the apparent unit volume growth of beer in glass, beverage cans and other packaging formats will continue to cannibalise share in both domestic and imported lager. Furthermore, glass bottles are increasingly facing strong competition from PET variants in the domestic lager segment due to their use in 1-2 litre sizes for economy variants. The use of glass bottles will remain prominent in imported beer due to the perception of it being a premium packaging type for this higher margin sector.

Innovation within the glass segment can also take many forms. The launch of Summer Draft beer in a non-symmetrical 'grip' bottle for the Brazilian market in 2009 by Femsa Cerveja Brasil clearly demonstrates that convenience can sometimes be based on a detail rather than a radical reformulation.

Metal formats can be expected to gain share in the off-trade channel as consumers will temporarily be forced to trade down to economy lines in metal beverage cans as the global financial crisis takes its toll. The growing acceptance of PET bottles in 330-500ml sizes for mid and premium lines is also starting to have an impact. For the moment, glass remains stronger in the on-trade due to less opportunity for other pack types to utilise innovative packaging for shelf impact. On the other hand, the further establishment of the cocooning trend could trigger a temporary decline in on-trade use of glass bottles as this format could shift its focus to the retail channel as consumers seek luxury and affordable indulgence at home.

Looking ahead, Euromonitor International believes that a move to larger sizes and economy formats such as metal beverage cans should be considered certain, at least for the duration of the economic downturn as consumers seek to maximise value and minimise cost. Moreover, emphasis on lightweighting as a method to reduce material and transportation costs will gain renewed momentum following existing activities under 'green' initiatives. Anecdotal evidence that suggests lack of willingness to experiment and consumer hesitancy to purchase radically innovative products in economically challenging times will also lead to a significant slowdown in new packaging launches over the short term.

Packaging trends report by Spiros Malandrakis, Alcoholic Drinks Analyst – Euromonitor International

1 June 2009 - Felicity Murray