Cost of plain packaging on food industry revealed

Cost of plain packaging on food industry revealed
Credit: Brand Finance

The beverage industry could risk losing $300 billion with the introduction of plain packaging as seen on cigarette packs.

Following the introduction of plain packaging for tobacco products in some countries and calls to extend the legislation to other sectors, Brand Finance has analysed the potential financial impact of such a policy on food and beverage brands in four categories: alcohol, confectionery, savoury snacks, and sugary drinks.

Eight major brand-owning companies are predicted to lose a total of $187 billion should plain packaging be mandated for other FMCG products, with alcohol and sugary drinks brands most vulnerable.

The Coca-Cola Company and PepsiCo are among those corporations with most value at risk – $47.3 and $43 billion respectively, equal to 24% and 27% of their total enterprise values.

Entire brand portfolios of companies specialising in alcoholic drinks, such as Heineken, AB InBev, and Pernod Ricard, would fall within the scope of the legislation, jeopardising future revenue streams.

An extrapolation of the results to all major alcohol and sugary drinks brands, points towards a potential loss of $293 billion for the beverage industry globally.

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. Therefore, the total damage to businesses affected is likely to be higher.

“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,” said Brand Finance CEO David Haigh.

“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.”