Beverage barrier PET

J.F.Schrurs – © Cape Decision - Drink Technology + PET India 07 – 29/30 Nov 2007, Mumbai

“Strategic Review of Barrier PET :

a Multiple Beverage Perspective”

Mr. Jean F. SCHRURS

Director

Cape Decision

Changing Markets – Future Trends


6. Conclusions :

Business

Development

Opportunities

5. Benefits and Threats

Of Barrier PET

2. Markets and Consumers :

- Current/Future Demand

- by Beverage Type

1. Beverages :

- Risks

- Quality Requirements

4. Brand Owner’s

View

3. Barrier PET :

- Applications

- Technologies

- 3 Key Questions

Introduction

p 1


Category Still Water Sparkling

Beverages

Juice/Nectar Milk Beer

I. Product Degradation Risk Levels (off-flavor, color change, vitamin loss, product/taste integrity)

O2 ingress Low Low High High High

UV light Low Low High High High

CO2 loss - High - - High

microbiological spoilage low-medium Low High High Medium

II. Quality Requirements

(Possible) Barrier - CO2 - O2

- UV light

- micro

- O2

- UV light

- micro

- O2

- UV light

- micro

- CO2

Process Requirements - ambient

- aseptic or

- ultra-clean

- ambient - aseptic

- hot-filling

- pasteurization

- aseptic

- hot-filling

-

pasteurization

- flash

pasteurization +

ambient filling

- container

pasteurization

Consumption Requirements - thermo-mechanical stability

- product quality (visual, taste, odor, claims, freshness)

- package quality (opening, convenience, date code, appearance)

1. Beverages : Risks and Quality Requirements

Summary of Product Degradation Risks and Requirements

p 2


2. Markets and Consumers : Water

Market - Size 183 Bio L (F 2007)

- Growth +9% (00/05 CAGR)

Trends* - Quantities Quality

Still to 1 L +15% Natural -3%

Still over 10 L +9% Processed +4%

Still 1.1 / 2 L +8%

Still 2,1 / 10 L +7%

Sparkling +2% (* : CAGR 00/05)

- Environment

Geography - US, China, Indonesia, Brazil, India represent

- 16% of 05/10 incremental volume (33 Bio L)

Drivers - Value : increase purchasing weight and multi-packs

- Convenience : bottles as dispensers

- Differentiation : packaging innovation (embossing, shapes)

Packaging - PET safety, lightweight, convenient

2005 Water per Capita - Top 10

99

116

123

123

131

134

135

145

171

220

50 100 150 200 250

2006 Water Packaging Mix

1

6

12

81

0 25 50 75 100

Others

Other

Plastic

Glass

PET

p 3


2. Markets and Consumers : Sparkling Beverages

Market - Size : 195 Bio L

- Growth : +1,3%

Trends - Growing needs states :

- health and wellness

- increased functionality

- Premiumization

- Unique, single-serve packaging

- Hybrid distribution

- Micromarketing

Drivers - Development of pack sizes

- Widespread of 50 cl PET adoption

- Various novelty packs on special occasions

- Resealability essential for ‘on the go’ generation

- Colored bottles give impulse

Packaging - 50cl has been the key driver of PET growth

- Taking share from 33 cl cans

- Emergence of new metal packaging (bottle cans)

Sparkling Beverage per Capita - Top 10

50 100 150 200 250

Sparkling Beverages Packaging Mix

11

11

22

56

0 25 50 75

Others

Glass

Cans

PET

p 4


Market - Size : 140 Bio L – 270 Bio packs (80% milk) (2006)

- Growth : +3.1% (02 - 06), +3.6% (2006 – 2010)

Trends - Long life milk : +5%

- Long life yoghurt drinks/flavored milk : +10%

- Affluence : milk sold loose replaced by portion packaged products

Geography - 02-06 : +11% in SE Asia/India/China

slight decline in NAmerica/Europe

- 06-10 : same growth expected

Drivers - Health and wellness

- Environmental and recycling

- Costs

- System flexibility

Packaging - HDPE - 6.8 Bio units, 0.16 Mio tons (2006)

- more for pasteurized, UHT, sterilized

- less for long life products

- Carton - 1.7 Mio tons board

- perceived environmental benefit <> 20% PE and 5% Alu foil

- Pouches/PE - 1 Mio tons PE + other material foil

- competitive equipment/packaging costs > rapid growth ?

- PET - little impact despite consumer advantages

Fluid Milk Per Capita - Selected

Countries

3

33

65

98

137

169

0 50 100 150 200

China

Argentina

Poland

2006 Liquid Dairy Packaging Mix

0 25 50 75 100

Cartons

HDPE Bottles

Pouches

Glass

Bottles

PET Bottles

Other Mio Packs

Mio Litres

2. Markets and Consumers : Milk

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2006 Juice Packaging Mix

0 20 40 60 80

Cans

Other

Plastics

HDPE

PET

Glass

Cartons

NA

Europe

2. Markets and Consumers : Juices - Nectars

Market - Size : 40 Bio L

- Growth : +9%

Trends - Slight shift towards chilled / short life products in W EU

- Ambient/long life remains strong

- Tailored products for specific health needs

- Orange juice outsells other juices by three

- Conversion from glass to plastic

Geography - Incremental growth from rapidly developing countries (EE, ME, AS)

- US : 35% global market-share but declining - 2/3 juice in PET

- EU : second largest regional market

volumes similar to North America

6/10 highest country per caps

Drivers - Differentiating innovation tactics in new flavors and packaging formats

- Consumer targeted marketing for new occasions and locations

- Convenience single serve multi-packs (lunchboxes)

Packaging - Cardboard : most popular technology (> 50%), especially in EU

- PET : juice : CAGR +8% (18% in 06)

nectar : CAGR +18% (21% in 06)

in NA, ambient juices shifting from glass to PET

- Glass : short life and chilled juices

Juice Per Capita - Selected Countries

0

10

20

29

40

0 10 20 30 40

India

Portugal

Lettland

Spain

Germany

p 6


2006 Beer Packaging Mix

0 20 40 60 80

PET

Cans

Glass

2. Markets and Consumers : Beer

Market - Size : 155 Bio l

- Growth : CAGR 3%

Trends - Global giants : beer market consolidating three times faster as market growth rate

- Mega-mergers : InBev, SABMiller/Coors, SN/Heineken+Carlsberg ?

- Top 10 share : 37% (98) > 59% (04)

Geography growth rates E EU : +4.2% NAm : -0.4%

APAC : +3% W EU : -0.6%

SAm : +1.3% AFR : -1.0%

Drivers - Penetration : volume and value

- Light beers : “low carbs” for health consious drinkers

- Premiumization : trade-up to premium/imported beers in developed markets

- Regional : flavoured beers, beer with food, organic beer, microbreweries

Packaging - Sensitivity beer requires significant barrier material

- Glass still the key material

- PET : greater Europe is selling more than 93% of global beer in PET

60 Mio hl per year or 4-5% of global beer market

2005 Beer Per Capita

8

12

44

58

77

82

0 25 50 75 100

AFR

APAC

SAM

E EU

W EU

NA

p 7


3. Barrier PET : Applications

Applications per Technology (2006 Mio bottles)

0

500

1000

1500

2000

2500

Juice Beer Ketchup Green

Tea

Water Edible

Oil

Fab CSD

Multilayer Blend Coating PEN

2006 Global PET Penetration by

Package Type (Bio units)

0 50 100 150 200 250 300

Milk

Beer

Sports Drinks

Energy Drinks

RTD Tea/Coffee

Juice & Juice Drinks

Carbonates

Packaged Water

PET

Other

World Market Barrier PET 2006 -

Standard vs Barrier PET

Barrier Standard

p 8


3. Barrier PET : 4 Technologies

Multilayer

Monolayer

Coating

PEN

p 9


3. Barrier PET : 3 key Questions

When ?

Category Sparkling

Beverages

Juice/Nectar Milk Beer

Risk of Degradation by - CO2 loss

(<0.5L)

- O2 degradation

- UV penetration

- micro

- O2 degradation

- UV penetration

- micro

- O2 ingress

- UV penetration

- micro

- CO2 loss

How ?

Which one ?

When standard PET properties alone are not good enough for product protection :

Brand Owner’s most common requirements :

- transparency - compatibility with post-consumer waste stream

- no shining effect - stability (no delamination)

- variable cost : lightest-weight strength - production efficiency

- recycling - limited capital cost

- CO2 shelf life function of supply chain - O2 ingress compared to glass

Decision making criteria for technology selection :

- Barrier Performance : - Volume

- O2 protection requirements (scavenging) - Supply Chain needs

- CO2 loss prevention requirements - Recycling

- Location - Impact on operational efficiencies

- Cost : variable and investment

p 10


4. Brand Owners

Objectives : - drive profitable volume

- product availability, affordability, quality

- create and fulfill demand

Strategy : - preference > brand equity + consumer marketing

- price/value > value-based product differentiation

operational efficiency

- market penetration > distribution

- people : ultimate enablers

Scientific Regulatory

Affairs

Finance

Quality Assurance

Purchasing

Operations Engineering

Sales

Marketing Communicat°

R&D + Innovation

Logistics

Consumer

Customer/ Retailer

Recycling

Regulation

Converter

Brand Owner

Consumer

p 11


5. Benefits and Threats

Beverage SPARKLING JUICE/NECTAR MILK BEER

COMPLEXITY + ++ ++ +++

Protection against : CO2 loss O2 ingress

UV penetration

O2 ingress

UV penetration

O2 ingress

UV penetration

CO2 loss

ADVANTAGE ESL for smaller size

EXPECTED

BENEFITS

STANDARD PET best cost (no barrier)

BLEND better cost, easier for converters

MULTILAYER better performance and appearance

COATING best recyclability, best performance

ANTICIPATED

THREATS

STANDARD worst performance (no barrier)

BLEND recyclability (if nylon)

MULTILAYER delamination ? Higher price

COATING Investment cost, speed, flexibility, appearance, downtime, investment

p 12


6. Conclusions : Business Development Opportunities

Sources of Growth in Europe

PET barrier applications 2007

0

200

400

600

800

1.000

1.200

1.400

existing organic new

000 t

on

nes

CSD bottled water other drinks juice and juice drinks beer

PET Raw Material Cost

0,7

1,0

1,3

1,6

Jul05 janv-

06

Jul06 janv-

07

Jul07

• In Europe, beer is the largest new source of growth for barrier PET

• Cost Reductions : Barrier bottles can assist by :

- light-weighting and reducing wall thickness

- extending shelf life and reducing supply chain costs

- accelerating glass replacement programs and

saving money in distribution

- applying simpler barrier constructions

• Barrier PET : a key ingredient developing new PET markets :

- premium beers, soft-drinks, juices, milk and waters

- promoting small sizes

- adapting to wine and spirits

• Potential : the barrier PET market will double if :

1% of beer is converted to barrier pet (2.8 Bio bottles)

1,5% of CSD is converted (3 Bio bottles)

• Should be developed together with other key process developments

• Environment : a critical factor to take into account for future success

p 13


Thank you !

For further questions, contact us at :

John F. Schrurs

Cape Decision

[email protected]

+32 498 53 04 58

www.capedecision.com

p 14

mailto:[email protected]

Beverage barrier PET

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