Final Project Report The impact of premiumisation on ... Premiumisation of drinks... · This report...

Final Project Report

The impact of premiumisation on drinks packaging

This report looks at the trend towards ‘premiumisation’ in the UK drinks market. It explores the meaning of ‘premium’, attempts to estimate the extent to which it is happening and looks at the implications for household waste and packaging. It also examines what activity there is in the sector, what barriers there are to greater resource efficiency and finally how to overcome these barriers and design premium, environmentally sustainable drinks packaging.

Project code: RPO020 ISBN: 1-84405-426-8 Research date: 19 Sep 2008 to 22 Feb 2009 Date: September 2009

WRAP helps individuals, businesses and local authorities to reduce waste and recycle more, making better use of resources and helping to tackle climate change.

Written by: Sprout Design Ltd. and Eco3 Ltd. www.sproutdesign.co.uk & www.eco3.co.uk

Front cover photography: SIP is a functional water aimed at women, which communicates its premium status through simple, elegant design rather than through excessive use of materials. Any trade marks, copyright material and or intellectual property that is reproduced in the images of packaging shown in this report are not the property of WRAP and WRAP acknowledges the proprietors' rights in such intellectual property. WRAP, Sprout Design and Eco 3 believe the content of this report to be correct at the date of writing. However, factors such as prices, levels of recycled content and regulatory requirements are subject to change and users of the report should check with their suppliers to confirm the current situation. In addition, care should be taken in using any of the cost information provided as it is based upon numerous project-specific assumptions (such as scale, location, tender context, etc.). The report does not claim to be exhaustive, nor does it claim to cover all relevant products and specifications available on the market. While steps have been taken to ensure accuracy, WRAP, Sprout Design and Eco3 cannot accept responsibility or be held liable to any person for any loss or damage arising out of or in connection with this information being inaccurate, incomplete or misleading. It is the responsibility of the potential user of a material or product to consult with the supplier or manufacturer and ascertain whether a particular product will satisfy their specific requirements. The listing or featuring of a particular product or company does not constitute an endorsement by WRAP and WRAP cannot guarantee the performance of individual products or materials. This material is copyrighted. It may be reproduced free of charge subject to the material being accurate and not used in a misleading context. The source of the material must be identified and the copyright status acknowledged. This material must not be used to endorse or used to suggest WRAP’s endorsement of a commercial product or service. For more detail, please refer to WRAP’s Terms & Conditions on its web site: www.wrap.org.uk

http://www.sproutdesign.co.uk/

http://www.eco3.co.uk/

The impact of premiumisation on drinks packaging 3

Executive summary This report is presented as the final deliverable of this project, looking at the impact and implications of ‘premiumisation’ on drinks packaging. The project has been conducted, for WRAP (Waste & Resources Action Programme), by packaging and product design consultancy Sprout Design Ltd. in collaboration with environmental consultancy Eco3. Project objectives 1. To better understand the implications of premiumisation on efforts to promote resource efficient packaging in the UK’s drinks sector - focusing specifically on wine, spirits, beer (including ale and lager), cider, ready-to-drink, soft drinks and water. 2. To make recommendations to WRAP and the drinks sector to overcome barriers and encourage the optimisation of premium drinks packaging. The project was researched through interviews with 20 key sector representatives, through magazine and internet article searches, by carrying out environmental assessments of sample packs, from five retailer walkthroughs and from relevant marketing reports. References are given on page 77. The project and this report are split into distinct phases, with the findings summarised below: Market research Large brand owners generally dominate drinks production and packaging. Within the UK alcohol sector, these include: Diageo, Pernod Ricard, Constellation Europe, Bacardi-Martini, Coors Brewers, ABInbev, Heineken and Carlsberg UK. Within soft drinks; Britvic, Coca-Cola, Danone Waters, GlaxoSmithKline UK, Innocent, Nestlé and PepsiCo. UK are key players. Within packaging, Rexam, Crown and Ball dominate in metal, O-I, Quinn Glass, Ardagh Glass, Allied Glass and Beatson Clark in glass and Artenius, Linpac and Rexam in plastic. Whilst many of these are large multi-nationals, independent companies such as Innocent have shown the influence that they can have on the market and also on packaging. The UK Drinks sector (both on and off-tradeA ) is worth approximately £54.6bn with total volume sales of 19.4bn litres.35 & 5 Alcohol makes up 77% of this by value (£42bn) but only 39% by volume (7.5bn litres)5. By volume, carbonates are one third of the entire drinks market and after that, lager and fruit drinks & juices are second and third largest respectively. Definitions and themes The section ‘Definitions and Themes’ examines definitions of ‘premium’ and ‘premiumisation’. There is no clear consensus on a definition of either, but the term ‘premium’ clearly relates to actual or perceived product quality and also to price. ‘Premiumisation’ of a sub-category generally refers to an increased demand for and proportion of premium products, but it can also describe the trading up of consumers from lower to higher price points. There are many strategies for positioning drinks as ‘premium’ and these have been distilled into eight key themes: 'Designer', 'Quality', 'Luxury', 'Responsible', 'Health', 'Exotic', 'Functional' and 'Functional Packaging'. These themes have been mapped against sub-categories for relevance. The market is commonly split into five price tiers: Value / Budget, Core / Mainstream, Premium, Super Premium and Ultra Premium. The price points defining these tiers are particular to whichever organisation is using the system. On top of this, it has recently been seen that Tesco has launched a ‘super-budget’ line, undercutting their own economy range. At the other end of the spectrum, there is also ‘luxury’. ‘Luxury’ products exist outside the ranges commonly stocked by supermarkets and are unattainable by the masses.

A Definitions:

“On-trade” – refers to any licensed establishment that allows the sale and consumption of alcohol to occur on the premises. Drinks are usually served in a ready-to-drink fashion and cannot be taken off the premises for consumption later. It is acknowledged that some on-trade establishments also offer off-trade sales, with these sales considered separately from on-trade sales.5

“Off-trade” – refers to any licensed establishment that legally sells alcohol for off-premise consumption 5 for example, retailers and off-licences.

‘Premium’ was not found to relate directly to particular customer profiles and retailers especially commented that their ‘good’, ‘better’ and ‘best’ own-label ranges are designed to allow consumers to trade up or down easily within their normal shop. Retailer own-label ranges are increasingly defining what ‘premium’ means on the supermarket shelves and brands are starting to position their launches in relation to them. Implications of the premium trend Premiumisation is evident in all categories including those outside of the drinks sector and seems to be surviving in the current economic climate. However, within the drinks sector, it is most clearly evident in spirits and liqueurs, fruit drinks and juices and in bottled water. It became clear, through interviews with the drinks sector, that ‘premium’, as a tier, is moving down the cost-curve with more every-day products becoming ‘premium’ during the recession. In order to better understand the level of premiumisation within each drinks sector, an attempt was made to estimate and identify the proportion within each drinks sub-category and then to calculate the packaging produced as a result of the ‘premium’ portion of the market. Due to there not being a universally recognised definition of what is or what is not ‘premium’, these figures are estimates only, but are still a useful way of examining the implications of premiumisation. Ales and stouts, functional drinks and alcoholic ready to drinks (RTD’s) have the highest proportion of premium products. Example products from premium and core areas of each sub-category were bought and their packaging weighed. The results showed that the packaging for premium drinks tended to be heavier than their core counterparts, even when packaged in the same material and format. Where premium products are sold in a different packaging material or format than the core equivalent, for example a bottle rather than a can, the difference in weight was more pronounced. However, care should be taken about solely measuring weight. There are many other factors which should be considered when determining not only the environmental impact of a pack but also its overall sustainability, which are discussed in Section 9 ‘Assessing the environmental impacts of premium drinks packaging’. Drivers behind premiumisation Interviewees representing retailers, producers, design agencies and industry bodies were asked about the drivers behind premiumisation. There were widely varying opinions about drivers. Design agencies and producers typically saw the producers driving premiumisation but retailers saw consumers driving it. One respondent thought that consumers, retailers and producers are all driving it, which may well best explain the actual situation. ‘Premium’ products do not only respond to increasing affluence and consumer expectations but also to consumers’ desire to ‘trade up’ at occasions for example, weekends. Identification of barriers Interviewees were also questioned about what barriers to the adoption of resource-efficient premium design the sector faces. These were grouped into technical, knowledge-based and economic barriers. Only one interview respondent saw a tension between premiumisation and resource efficiency within drinks packaging design. The majority did not see a tension, believing that clever design could achieve both things simultaneously, and that in the future, the “product would be the hero” and would not rely so heavily on packaging. In general, there was a high level of awareness of eco-design methods amongst interviewees, but some examples of a lack of knowledge about the comparative environmental performance of different materials and formats. Developing new structural packaging is generally limited to larger (drinks and packaging) producers, with retailers and smaller producers typically sourcing existing solutions, such as stock components. Resource efficiency innovations tended to be targeted at budget and core products rather than premium, due to the larger opportunities for waste reduction. One option for optimisation is lightweighting, but there is a limit as to how far lightweighting can go, as packs need to survive the supply chain intact, protect the product and maintain brand equity. In addition there was also some concern that consumers may think they are getting less from a pack that looks smaller, although not all lightweighted products are smaller or look smaller. Sector activity Within the drinks sector, interviewees agreed that premiumisation is a combination of delivering a premium product and a packaging solution that communicates that it is ‘premium’, both on shelf and at home. It is a commonly held view that glass conveys ‘premium’. Brands tended to think that heavier bottles do more to convey ‘premium’ and designers interviewed also felt that customers held this view. There may be an expectation for the use of glass in some sectors like whisky, which has a long tradition of bottling in glass. There is an increasing amount of lightweighting activity going on, primarily in glass but also in PET and aluminium. Supermarkets have recently started moving some own-brand spirits into PET. Some interviewees commented that this activity has


been going on for decades but has only recently been linked to sustainability. There have also been moves to bottle, for example, wine in the UK rather than in the country of origin. This saves the distributor transport costs and allows products to be bottled in the UK in green glass bottles containing a high level of recycled content. Assessing the impact of premium drinks packaging A variety of premium drinks packaging samples were purchased, weighed and analysed using Eco3’s packaging assessment tool, to assess the potential environmental impacts associated with premium drinks packaging, and identify opportunities for change. The environmental elements investigated were; recycled content, recyclability, product/pack ratio, and volumetric efficiency. Packaging Benchmark Data analysis highlights that significant opportunities exist for packaging weight reduction through minimisation, with further reductions in environmental impact being achieved by increasing recycled content. Design guidelines and good practice This section of the report explores premium drinks packaging by pack format or type and gives guidance on how to design premium drinks packaging with less environmental impact. Topics cover; the waste hierarchy, recyclability, recycled content, changing pack format, lightweighting, reuse, gifting and graphic treatments. Case studies are put forward in each section with images of packaging solutions which demonstrate the various opportunities discussed. In conclusion, through informed design it is possible to overcome the majority of the barriers identified by this project and produce premium drinks packaging without compromising environmental performance, consumer acceptance, brand equity or functional performance. Conclusions Premiumisation is a clear current trend in the drinks sector and its impact on packaging waste is significant as premium drinks frequently use more packaging than their core equivalents. This trend could threaten the drive towards resource efficiency and packaging waste reduction being led by government, retailer and brand targets to reduce absolute packaging, such as the Courtauld Commitment. Although there is a high level of awareness of the need to address both premiumisation and resource efficiency at the same time, and there are examples of products which do, there is still a relatively small proportion of the sector as a whole which actual deliver both. However, good packaging technology can be used to help achieve both goals simultaneously: Technical barriers such as UV resistance and physical pack strength are being overcome through modern manufacturing, analysis and inspection techniques. Economic barriers such as the capital investment required to produce a lightweight mould can be overcome, for example, by waiting until a mould tool needs replacing and using this as an opportunity to replace it with a redesigned, lightweighted mould. Consumers have been shown to accept lightweighted bottles, and resource efficient packaging and lightweight packaging can resemble (if necessary) its predecessor. Good design, in terms of form, function and communication has the ability to ensure that packaging with reduced environmental impact can still communicate the ‘premium’ message and there are examples of where this has been achieved illustrated in Section 10, ‘Premium drinks design guidelines and case studies’.


Contents 1.0 Introduction ........................................................................................................................... 10

1.1 Background.........................................................................................................................10 1.2 Objectives...........................................................................................................................10 1.3 Methodology .......................................................................................................................10

2.0 Market research ..................................................................................................................... 11 2.1 Overall UK drinks market .....................................................................................................11

2.1.1 Alcoholic drinks.......................................................................................................11 2.1.2 Soft drinks..............................................................................................................11 2.1.3 Comparison of drinks sub-sectors, by volume ...........................................................12 2.1.4 Estimating the size of the premium drinks market.....................................................13 2.1.5 Key players.............................................................................................................16 2.1.6 Key trends affecting the drinks sector ......................................................................16

2.2 Premium drinks sub-category overview.................................................................................17 2.2.1 Categorisation of the premium drinks sector .............................................................17 2.2.2 Premium still wine, sparkling wine and Champagne...................................................17 2.2.3 Premium lager, ales, stouts and cider.......................................................................17 2.2.4 Spirits and liqueurs .................................................................................................18 2.2.5 Premium alcoholic mixables and ready-to-drinks (RTD’s) ...........................................18 2.2.6 Premium carbonates ...............................................................................................18 2.2.7 Premium fruit juice, juice drinks, squashes, cordials and smoothies............................19 2.2.8 Premium bottled water............................................................................................19 2.2.9 Premium functional drinks (excluding water) ............................................................19

3.0 Definitions and themes .......................................................................................................... 20 3.1 Existing definitions of ‘premium’ ...........................................................................................20 3.2 Definitions of ‘premium’: Findings from interviews .................................................................21 3.3 Tiers of premium.................................................................................................................24 3.4 Premium themes .................................................................................................................25

3.4.1 ‘Designer premium’ .................................................................................................26 3.4.2 ‘Quality premium’....................................................................................................27 3.4.3 ‘Luxury’ ..................................................................................................................28 3.4.4 ‘Responsible premium’.............................................................................................29 3.4.5 ‘Health premium’ ....................................................................................................30 3.4.6 ‘Exotic premium’ .....................................................................................................31 3.4.7 ‘Functional premium’ ...............................................................................................32 3.4.8 ‘Premium functional packaging’................................................................................33

3.5 Premiumisation strategies by sub-category............................................................................34 4.0 Evidence of the premiumisation trend ................................................................................... 35

4.1 Premiumisation trends outside of the drinks sector ................................................................35 4.2 Evidence of premiumisation within the drinks sector ..............................................................37 4.3 Premiumisation and new product development claims in the alcoholic drinks sector.................38 4.4 Conclusions.........................................................................................................................39

5.0 Drivers for premiumisation: Findings from interviews .......................................................... 40 6.0 The implications of premiumisation on packaging weight .................................................... 42 7.0 Barriers to the adoption of resource efficient packaging for premium drinks....................... 43

7.1 Interview responses ............................................................................................................43 7.2 Summary of factors cited as barriers to the adoption of resource-efficient premium packaging.44

7.2.1 Technical barriers ...................................................................................................44 7.2.2 Economic barriers ...................................................................................................44 7.2.3 Knowledge barriers .................................................................................................44

8.0 Premium packaging and the environment ............................................................................. 45 8.1 Packaging ...........................................................................................................................45 8.2 Environment .......................................................................................................................46

9.0 Assessing the environmental impacts of premium drinks packaging .................................... 47 9.1 Methodology .......................................................................................................................47 9.2 Lager, ales and cider ...........................................................................................................47 9.3 Bottled Water......................................................................................................................48


9.4 Soft Drinks ..........................................................................................................................48 9.5 Wine...................................................................................................................................49 9.6 Spirits and Liqueurs .............................................................................................................49 9.7 Summary ............................................................................................................................50

10.0 Premium drinks design guidelines and case studies.............................................................. 51 10.1 Introduction ........................................................................................................................51 10.2 Disclaimer ...........................................................................................................................51 10.3 General packaging guidance.................................................................................................52

10.3.1 The waste hierarchy................................................................................................52 10.3.2 Overview of premium drinks packaging formats........................................................53

10.4 Glass packaging ..................................................................................................................54 Design guidelines....................................................................................................54 10.4.1 54 Lightweighting ........................................................................................................54 10.4.2 54 Strength of lightweighted glass bottles: ................................................................................54 Lightweighting and consumer perceptions:............................................................................54 UV and lightweighted glass bottles: ......................................................................................55 Lightweighting glass case studies: ........................................................................................55 Kingsland Wines & Spirits: Wine bottles ...............................................................................56 10.4.3 Use of recycled content ...........................................................................................56

10.5 Plastic packaging.................................................................................................................57 10.5.1 Examples of plastic packaging used in the premium drinks sector ..............................57 10.5.2 Design guidelines....................................................................................................57 Lightweighting and optimised packaging case studies: ..............................................58 10.5.3 58 SIP water............................................................................................................................58 Coca-Cola ...........................................................................................................................58 Highland Spring...................................................................................................................59 10.5.4 Use of recycled content case studies:.......................................................................59 Sainsbury’s ‘Taste the Difference’ orange juice ......................................................................59

10.6 Metal packaging ..................................................................................................................60 Examples of metals used in premium drinks sector ...................................................60 10.6.1 60 Volute ‘premium portable wine’ ............................................................................................60 10.6.2 Design guidelines....................................................................................................60 10.6.3 Lightweighting case study: ......................................................................................61 Coca-Cola Enterprises ..........................................................................................................61 10.6.4 Recycled content ....................................................................................................61 Recycled content case study: Volute ‘premium portable wine’ ................................................61

10.7 Flexibles and bag-in-box ......................................................................................................62 Examples of flexibles and bag-in-boxes used in the premium drinks sector .................62 10.7.1 62 10.7.2 Design guidelines....................................................................................................63 10.7.3 Recycled content case study....................................................................................63

10.8 Liquid carton packaging .......................................................................................................64 10.8.1 Examples of liquid carton packaging used in the premium drinks sector .....................64 10.8.2 Design guidelines....................................................................................................64

10.9 Gift packaging .....................................................................................................................65 10.9.1 Design guidelines....................................................................................................65

10.10 Biopolymer packaging..........................................................................................................66 10.10.1 Official WRAP stance on biopolymer packaging 43......................................................66 Case study – Innocent ............................................................................................66 10.10.2 66

10.11 Reusable packaging.............................................................................................................67 10.11.1 Guidelines – reusable packaging ..............................................................................67 10.11.2 Reusable packaging case studies .............................................................................67

11.0 Conclusion.............................................................................................................................. 68 References ......................................................................................................................................... 72 Appendix 1: Wine, sparkling wine and Champagne........................................................................... 74


1.0 Market survey ........................................................................................................................ 74 1.1 Still wine .............................................................................................................................74

1.1.1 Store walkthrough findings ......................................................................................75 1.2 Champagne.........................................................................................................................75

1.2.1 Store walk-through results.......................................................................................75 1.3 Sparkling wine.....................................................................................................................76

2.0 Definitions and themes (wine)............................................................................................... 77 3.0 Implications of the trend (wine)............................................................................................ 78 4.0 Market drivers ........................................................................................................................ 78 5.0 Wine sector response to demand for more ‘premium’ packaging.......................................... 79 Appendix 2: Lager, ale, stout and cider.............................................................................................. 80 1.0 Market survey ........................................................................................................................ 80

1.1 Lager..................................................................................................................................80 1.2 Ales and stouts....................................................................................................................81 1.3 Cider ..................................................................................................................................83 1.4 Non-alcoholic and low-alcohol drinks ....................................................................................84

2.0 Definitions and themes .......................................................................................................... 84 3.0 Implications of the trend ....................................................................................................... 84 4.0 Identification of barriers........................................................................................................ 85 5.0 Sector activity ........................................................................................................................ 85 Appendix 3: Spirits & liqueurs............................................................................................................ 86 1.0 Market survey ........................................................................................................................ 86

1.1 Vodka .................................................................................................................................87 1.2 Gin .....................................................................................................................................88 1.3 Whisky................................................................................................................................89 1.4 Rum ...................................................................................................................................89 1.5 Brandy................................................................................................................................89 1.6 Liqueurs..............................................................................................................................89

2.0 Definitions and themes .......................................................................................................... 90 3.0 Implications of the trend ....................................................................................................... 91 4.0 Identification of barriers........................................................................................................ 91 5.0 Sector activity ........................................................................................................................ 92 Appendix 4: Alcoholic mixables and RTD’s ........................................................................................ 93 1.0 Market survey ........................................................................................................................ 93

1.1 Alcoholic mixables ...............................................................................................................93 1.2 RTD alcoholic drinks ............................................................................................................93

2.0 Definitions and themes .......................................................................................................... 94 3.0 Implications of the trend ....................................................................................................... 94 4.0 Sector activity ........................................................................................................................ 94 Appendix 5: Bottled water ................................................................................................................. 95 1.0 Market survey ........................................................................................................................ 95 2.0 Implications of the trend ....................................................................................................... 96 3.0 Sector activity ........................................................................................................................ 97 Appendix 6: Carbonates ..................................................................................................................... 98 1.0 Market survey ........................................................................................................................ 98 2.0 Definitions and themes .......................................................................................................... 98 3.0 Implications of the trend ....................................................................................................... 98 Appendix 7: Functional drinks............................................................................................................ 99 1.0 Market survey ........................................................................................................................ 99

1.1 Sports and energy drinks .....................................................................................................99 1.2 RTD tea and coffee..............................................................................................................99

Appendix 8: Fruit juice, juice drinks, squashes, cordials and smoothies ......................................... 100 1.0 Market survey ...................................................................................................................... 100

1.1 Squashes and cordials ....................................................................................................... 100 1.2 Fruit juice and fruit drinks .................................................................................................. 101 1.3 Smoothies......................................................................................................................... 101

2.0 Definitions and themes ........................................................................................................ 102 3.0 Packaging............................................................................................................................. 102 4.0 Sector activity ...................................................................................................................... 102 Appendix 9: Premiumisation in specific non-drinks sectors ............................................................ 103



Figures Figure 1: Comparison of sub-sector sizes by volume, 2008, (estimated). ........................................................12 Figure 2: Proportions of each sub-category estimated to be ‘premium’ ...........................................................15 Figure 3: Drink sub-categories, their groupings and references to the appendices...........................................17 Figure 4: Price tiers.....................................................................................................................................24 Figure 5: U.S. spirits and wine price tiers......................................................................................................25 Figure 6: Relation between premiumisation strategy and sub-category...........................................................34 Figure 7: Claims accompanying new alcoholic drinks product launches 2005 to 2007 ......................................38 Figure 8: WRAP-approved waste hierarchy ...................................................................................................52 Figure 9: Pack types currently available to consumers, by drinks sub-category................................................53 Tables Table 1: UK sales of alcoholic drinks by volume.............................................................................................11 Table 2: Estimate of proportion of alcohol market which is ‘premium’, by sub-category, by volume ..................13 Table 2 (continued):....................................................................................................................................14 Table 3: list of interviewees for this project...................................................................................................21 Table 4: Barriers and opportunities for resource-efficient premium drinks packaging design.............................69 Table 6: Top ten UK off-trade wine brands, 2006 ..........................................................................................74 Table 7: Top ten uk off-trade wine brands, 2008...........................................................................................75 Table 8: Champagne, by brand ....................................................................................................................76 Table 9: Champagne, by style ......................................................................................................................76 Table 10: Sparkling wines............................................................................................................................77 Table 11: UK retail sales of lager, by type of packaging, by volume................................................................80 Table 12: Top lager brands..........................................................................................................................80 Table 13: Ales and stouts brand share (on-trade) .........................................................................................82 Table 14: Ales and stouts brand share (off-trade) .........................................................................................82 Table 15: Top five cider brand shares in the off-trade, by value 11 .................................................................83 Table 16: Trends for format of cider drinking, 2003 to 2007 ..........................................................................83 Table 17: Low alcohol and alcohol free drinks ...............................................................................................84 Table 18: Top ten spirits & liqueurs 2008 .....................................................................................................86 Table 19: New product launches in the UK spirits and liqueurs market by claim, Jan 2007 to April 2008 ...........86 Table 20: Top ten gin brands 2008 ..............................................................................................................88 Table 21: Volumes comparison of whisky sub-categories ...............................................................................89 Table 22: Liqueurs sub-sectors ....................................................................................................................90 Table 23: Alcoholic mixables ........................................................................................................................93 Table 24: RTD alcoholic drinks: top brands ...................................................................................................94 Table 25: Bottled water ...............................................................................................................................96 Table 26: Bottled water volumes, by packaging type, 2006............................................................................96 Table 27: Bottled water volumes, by water type, 2006 ..................................................................................96 Table 28: UK Carbonates brand share, by volume, 2005-2006 (%) ................................................................98 Table 29: Health sports and energy drinks (functional drinks) ........................................................................99 Table 30: RTD tea & coffee .........................................................................................................................99 Table 31: Squashes and cordials ................................................................................................................ 100 Table 32: Fruit juice and juice drinks.......................................................................................................... 101

1.0 Introduction 1.1 Background Premiumisation is the current retail trend (even within the current economic climate), and a key theme in today’s retailer market. Retailers and brands are increasingly seeking to take advantage of this trend. But what implications could this trend have on packaging, in particular on activities to reduce, optimise or make drinks packaging more resource efficient? 1.2 Objectives This project has been conducted for WRAP, by eco-packaging and product design consultancy Sprout Design Ltd. in collaboration with environmental consultancy Eco3. The objectives were: 1 To better understand the implications of premiumisation on efforts to promote resource efficient packaging in

the UK’s drinks sector - focusing specifically on wine, spirits, beer (including ale and lager), cider, ready-to-drinks (RTD’s), soft drinks and water.

2 To make recommendations to WRAP and the drinks sector to overcome barriers to the optimisation of premiumised drinks packaging.

1.3 Methodology A number of methods have been used to research this project: Marketing research: Various publications were reviewed, such as those produced by Mintel and Verdict and

used to identify market share and trend data. Unfortunately, some of the data identified was up to three years old but the most recent data available has been used and identified in all cases.

Store walkthroughs: Retailer walkthroughs were carried out in order to get a feel for the sorts of premium drinks packaging formats on the market, and the approaches taken by retailers and brands to ‘premiumise’ drinks. A number of case study packs were also identified and their environmental impacts assessed (see Section 9, ‘Assessing the environmental impacts of drinks packaging’).

Media searches: Searches were conducted in trade press for articles on premiumisation and sectoral market reviews.

Interviews: Interviews were conducted with 20 key representatives from UK retailers, brands, packaging and design companies. Interviewees ranged from for example, PR, packaging technology, store design, design to brand managers, and also covered a range of drinks sub-categories’.

Sample pack assessments: A range of sample products were purchased and analysed using eco3’s packaging assessment tool to assess and estimate the environmental impact, and potential for reduction, of within the premium drinks sector.


2.0 Market research This section of the report looks at the size of the UK drinks market and identifies the key players and general trends, with particular reference to premium products. More detailed information is given for each sub-category in the Appendices. 2.1 Overall UK drinks market 2.1.1 Alcoholic drinks The UK alcoholic drinks market has a value of £42bn and volume sales of 7.5bn litres.5 This includes both the on-trade and the off-trade markets, with the off-trade being responsible for just over half of sales by volume. Table 1 shows the breakdown of volume sales during 2008 by sub-category and the change in sales from 2003 to 2008. The market as a whole has been declining since 2002 and is predicted to continue to decline over the next five years as consumers adopt healthier lifestyles.5 The alcohol retail sector underwent the biggest decline in sales of any retail sector in the UK in the 2000-2008 period, dropping 30% to £3,504m7. According to Mintel’s market intelligence report ‘Alcoholic Drink Packaging and Labelling’ (Feb 2008)8, the “‘Premiumisation’ trend is driving the packaging innovation in the alcoholic drinks market, led by the spirits category over the last few years, with demand high for products highlighting provenance as well as natural and authentic ingredients.”

Table 1: UK sales of alcoholic drinks by volume Source: Off Vs. On Trade Drinking, Mintel, Sept 2008 5

Total volume

2008 Share of alcoholic

drinks market 2008

Proportion which is off-

trade 2008

% Change 2003-08

Million litres % % by volume % by volume Beer 4,987 66% 42.3% -13.3% Cider 642 8.5% 49.4% 26.4% Wine 1,262 16.7% 83.4% 14.9% Spirits & Liqueurs 507 6.7% 71.6% -9.2% Alcoholic RTD’s* 159 2.1% 47.8% -42.8% Total 7,557 100% -7.8% * RTD’s – ready to drinks 2.1.2 Soft drinks Mintel’s report ‘On-Trade Soft Drinks’ (September 2007) estimates the UK soft drinks markets at £12.6bn35 by value and 11.90bn litres by volume, making it approximately 59% larger than the alcohol market by volume. Of this total, the UK off-trade soft drinks market is worth £3.4 billion, with value sales having increased by 9% in on 2006, while volume sales grew by l.5% (TNS Worldpanel 52 w/e 28 January 2007). The hard discounters, such as Lidl, Netto and Aldi, are the fastest-growing retailers of soft drinks, with sales up 21% on last year 9 and we can expect this trend to continue in the current economic downturn. Consumer demand for healthy drinks is reflected in the performance of soft drinks sectors which are perceived as healthier. For example, fruit juices are growing at 18% year-on-year, while carbonated drinks such as colas are growing less quickly, at 6% for the same period.9 In the last few years, growth across the market has largely come from consumers purchasing more frequently and spending more, especially in fruit juices, where premiumisation of the product range has resulted in a 17% rise on the average price paid per litre year on year.10 Premium soft drinks performed ahead of the market in 2007, growing by 10% to £83 million as consumers opted for healthier, natural soft drinks. Mintel forecasts that the value of the UK premium drinks market will increase by an estimated 20%, to reach £100 million at current prices, by 2011, before seeing a decline to £94 million by 2012.6 However, it is worth noting that Mintel define ‘premium soft drinks’ simply to be all those within the following categories:


fruit and herb drinks (for example, Amé, Aqua Libra, Shloer and Appletiser); Pressés, from brands such as Bottlegreen, Belvoir and Duchy Originals; and premium flavoured sparkling waters – typically spring waters with a subtle flavour achieved by the addition to

the water of fruit juice, essences or flavourings plus usually some form of sweetener.

2.1.3 Comparison of drinks sub-sectors, by volume The figure below shows the relative sizes of drinks markets in the UK, by volume:

Figure 1: Comparison of sub-sector sizes by volume, 2008, (estimated). Total height of bottle represents UK market size by volume.5 & 35


2.1.4 Estimating the size of the premium drinks market This section looks at how the size of the premium drinks market is estimated, in order to investigate the implications of the trend towards premiumisation on drinks packaging in a later section of this report. As the term ‘premium’ is poorly defined and means many different things to different groups (see Section 3, ‘Definitions and Themes’), it is impossible to get accurate figures for what proportion of each sub-sector is ‘premium’. However, it is possible to estimate these figures if certain assumptions are made. Table 2 shows estimated proportions of each sub-category which might be called ‘premium’, by volume, and details the assumptions, logic and sources used in making these estimations:

Table 2: Estimate of proportion of alcohol market which is ‘premium’, by sub-category, by volume

Sub-category UK market volume

Proportion estimated premium

Assumptions and logic

Million litres % Still wine 1262m litres5 3% From interview with Philip Malpass, Head of PR,

Constellation Europe Champagne 29.2m litres3

(2007) 10 to 15% http://www.novusvinum.com/features/prestigecuvees.html

Sparkling wine 29.2m litres3

(2008) 10% Of top ten brands, only ‘Friexnet’ seems to be ‘premium’ at

£11.99 and this has 6% of market. Also, assumed similar to Champagne in terms of proportion.

Whisky 88.2m litres24

(2008) 28% Total of all Deluxe, Imported and Malt as a proportion of

total volume.24 Vodka 61.6m litres

(Neilsen to yr end Aug ’08)

10% In 2007, Smirnoff, Glens & Vladivar, all non-premium, made up 66.7% by value. Own brands was 8% (non premium).

Gin 11.94m litres (Neilsen to yr end Aug ’08)

20% Gordon’s, non premium, approx 50% of market. Own brand was 19.8% by value (non premium). Approx half of other top ten brands are premium.

Rum 18.7m litres26 Unknown Liqueurs 30.95m

litres16 Unknown

Ales & stouts 1.43bn litres4 46% From draft, assume ‘nitrokeg’ and stout are premium and ‘mainstream’ are not. From packaged, assume ‘premium’ and ‘stout’ are premium and ‘mainstream’ is not.4

Lager 3950m litres14 (2007)

40% Class III = 1590m litres (refers to ‘premium lagers of 4.3-7.5% ABV’)14

Cider 726m litres 10% 2 biggest premium brands, Magners and Bulmers = 14% of the market by value (2007) - probably 10% by vol. 10% of cider sold in the same period was in glass bottles & and most premium cider is sold in glass bottles.

Alcoholic RTDs 151m litres22 88% 88% are PPSs (Premium Packaged Spirits) rather than alcoholic carbonates22

Alcoholic mixables

38m litres25 23% Pimms is only top ten brand which is premium = 18.2% of market by vol25. Own label (8%) not premium. Assume half of remainder are premium.

Low-alcohol & non-alcoholic

19.4m litres 17 50% Kaliber market leader – 40% in 2006. Most of others are German premium brands.


Table 2 (continued): Estimates of proportion of soft drinks market which is ‘premium’, by sub-category, by volume

Sub-category UK market volume

(and source)

Proportion estimated premium

Assumptions and logic

Bottled water 1717m litres27 20% 17% of market sales by volume were in glass in 2006. Some premium would also be in PET.

Carbonates 6274m litres28 0.5% All top ten brands at almost the same price point. Whole Earth Organic one of few premium brands but with much smaller distribution.

Sports drinks 129m litres13 Energy drinks / Stimulants

313m litres13 70% Red Bull, Lucozade and Lucozade Sport made up 65.8% of the market by vol. in 2006 (DATAMONITOR) and these are all described as premium by Mintel. There are other brands which are also premium, so the proportion is likely to be higher.

Squashes, cordials & high- Juice

567m litres29 7.4% Assume all cordial and all High-Juice is premium.29

Fruit juice and fruit drinks

1970m litres29 51% Assume pure fruit juice is premium. Pure as %age of all fruit juice + fruit drinks29

Smoothies 92m litres31 Unknown “Organic smoothies are a relatively recent development, since manufacturers have been waiting for the market to be mature enough to support a premium tier.”31

RTD tea and coffee

19.07m litres28

Unknown

Figure 2 below provides a visual representation of these estimated proportions. The sub-categories with the highest proportions of premium products are therefore: 1 Alcoholic RTD’s; 2 Energy drinks / stimulants; 3 Fruit juice and fruit drinks; 4 Low alcohol and non-alcoholic; and 5 Ales and Stouts


Figure 2: Proportions of each sub-category estimated to be ‘premium’


2.1.5 Key players The UK drinks sector is dominated by large brand owners. Within the UK alcohol sector, these include Diageo, Pernod Ricard, Constellation Europe, Bacardi-Martini, Coors Brewers, ABInbev, Heineken and Carlsberg UK. Within soft drinks; Britvic, Coca-Cola Enterprises (CCE), Danone Waters, GlaxoSmithKline UK Ltd., Innocent, PepsiCo UK and Nestlé are key players. Within packaging; Rexam, Crown and Ball dominate in metal O-I, Quinn Glass, Ardagh Glass, Allied Glass and Beatson Clark in glass and Artenius, Linpac and Rexam in plastic. Whilst many of these are large multi-nationals, independent companies such as Innocent have shown the influence that they can have on the market and also on packaging. The Appendices to this report show the top ten brands in most drinks sub-categories and their respective market share. 2.1.6 Key trends affecting the drinks sector Research was undertaken into trends affecting the drinks industry in the UK in order to help assess the implications for resource efficient premium packaging in the future. These are summarised below: Increased drinking at home: While two thirds of alcohol sales by value are via the on-trade, this proportion

has fallen since 2005.5 The shift away from pubs, bars and restaurants towards more drinking at home is a major trend in the drinks sector and will encourage the consumption of premium drinks, which become more affordable to drink at home than in pubs and restaurants. This shift has been helped by the recession and smoking ban in the UK.5.

An ageing population: Older drinkers as a consumer segment are forecast to grow more rapidly than any other age demographic8. The expected impact of this is to favour the off-trade and exacerbate the swing towards more drinking at home.5.

Increasing number of ABC1 consumers: ABC is a socio-economic group that includes professional and skilled workers. According to Mintel’s ‘Off vs. On Trade Drinking’ report (September 2008), “In 2003, 53.7% of the population were ABC1, whereas in 2013 it will be 56.4%. This will benefit the off-trade sector as consumer research show that this group drink at home more frequently than the rest of the population. It is also good news for on-trade, which will be more reliant than before on premiumisation.” 5

Health consciousness: The last few years have seen an increased concern over health in the UK, helped by celebrity chefs and the Government’s 5-a-day, to encourage the consumption of fruit and vegetables. This has led to, for example, an 18% year-on-year growth in fruit juices compared to 6% in carbonates.10 The Government also, during 2008, launched a £6m ‘Know your limits’ campaign and a £4m campaign to emphasise the serious consequences of binge drinking to 18-24 year olds.8 This trend is illustrated by a reduction in sales of super strength ciders and lagers, which have dropped due to their associations with excessive drinking and alcoholic RTD’s.

Rise of the ethical consumer: Since around 2005 there has been greatly increased consumer awareness of and demand for environmentally friendly packaging and ethical, organic and fair trade premium products. Over the same period there has been a proliferation of NPD based around premium ethical and environmentally friendly drinks, so this trend seems to be encouraging the development of resource efficient premium drinks packaging. There currently seems to be no consensus about how this will be affected by the credit crunch and whether demand for low-cost products will erode this growing market.

Premiumisation: This has been a key theme across new product development (NPD) within drinks, and across all categories, particularly in spirits, seasonal launches and new drinks targeting females.5 Premium options are particularly important in the off-trade, with consumers happier to experiment with more expensive brands and products for home use before trying them in costlier on-trade settings. 30

Fluctuating energy and materials costs. Rising material and energy costs have squeezed margins at a time when prices are being driven down due to the credit crunch. Companies are set to benefit more from resource efficiency measures in light of high materials costs and this has been encouraging investment into lighter weight drinks packaging.

The ‘credit crunch’: The effects of the ‘credit crunch’ at the time of writing this report, are increasingly evident as companies go out of business and jobs are lost. The recession is predicted to continue into 2009.



2.2 Premium drinks sub-category overview 2.2.1 Categorisation of the premium drinks sector The figure below shows how the drinks sector has been split up into sub-categories for the purposes of this project. More detailed information is given in the appendices for the various sub-category groups and the figure also indicates which appendix relates to which sub-category.

Figure 3: Drink sub-categories, their groupings and references to the appendices.

2.2.2 Premium still wine, sparkling wine and Champagne Interviews with sector representatives indicated that the still wine retail market seems to define ‘premium’ or ‘fine’ wines as bottles retailing for £7 or £8 and over, although one wholesaler defines ‘premium’ still wine as that which retails over £15. According to one respondent, these wines have seen a rise from 1% to 3% of the market in the last few years. Despite this ‘premiumisation’, ‘premium’ remains a small proportion of this still wine and the wine sector has seen a cycle of discounting at the same time. According to this same respondent, retailers and brands are keen to get the higher margins associated with trading up but UK consumers generally have limited knowledge and find it hard to see the value in more expensive wines. In terms of packaging and sustainability, the still wine market has seen significant lightweighting activity and experimentation with alternative packaging formats, such as aluminium cans and bottles, doy sachets, alternative formats for bag-in-box, liquid cartons and PET bottles. Champagne can be seen as a ‘premium’ sub-sector and within that, 10% to 15% of Champagnes are ‘deluxe’, or ‘vintage’ 44 and represents the best a maker can produce. Sparkling wineB has been growing faster than Champagne. The shift towards home entertaining is boosting volume sales of Champagne and sparkling wine in the off-trade and inspiring NPD in ultra-premium styles and secondary packaging for gift occasions.3 2.2.3 Premium lager, ales, stouts and cider At around 4bn litres a year, lager is the second biggest drinks sub-sector by volume in the UK. Historically, a ‘premium’ lager was defined as one having more than 5% alcohol, but this definition is no longer applicable and low alcohol premium products are now available. ‘Premium’ was seen by interviewees to represent a broad range of characteristics including heritage, sense of place, scale of production, provenance, personality and packaging. In terms of packaging, twice as much lager is sold in glass than aluminium cans and that proportion is B ‘Sparkling Wines’ including, white, rosé and red, are known by a variety of terms, dependant upon region of production.3

‘Champagne’ including rosé and vintage Champagne, is produced under strict regulation within the tightly defined Champagne appellation of France. Within the EU, the term méthode champenoise is similarly restricted solely to the Champagne area.3

increasing.14 The volume of lagers sold in glass increased by 17% from 2004 to 2006.14 According to Mintel’s Lager report (July 2007) 14, this is partly due to less draft lager being sold because more people are drinking at home. The report states “Product presentation has an impact of consumer perceptions of the quality of the lager contained within it. Lager presented in bottles is perceived by consumers as better quality than that presented in cans.” Ales and Stouts sell in smaller volumes, but have a very high and increasing proportion of ‘premium’ products. Smaller niche producers are enjoying a revived interest in this category, but beer as a whole is a declining market. Cider is a small category compared to lager but has seen 25% growth since 2005 due to Magners ‘over ice’ campaign and the resulting re-branding of Bulmers and Gaymers as a premium product11. This has resulted in a 6.6% increase in the proportion of cider sold in glass between 2003 and 2007, 11 showing a potential link between a higher proportion of premium products on the market and a higher proportion of glass packaging. There have been a number of high profile case studies on lightweighted bottles in this sub-category. Please refer to the Grolsch bottle case study in section 10.4.2 in ‘Premium drinks design guidelines and case studies’. There is also more information on the WRAP website: www.wrap.org.uk/retail/case_studies_research/case_study_2.html 2.2.4 Spirits and liqueurs This sector is relatively small in volume terms, compared to other drinks consumed in the UK, at 210m litres, however volume is growing by approximately 5% per year.15 Spirits and liqueurs have been leading the way in terms of premiumisation, with ‘premium’ being three times more common than other new product claims during 2008.25 Vodka brands are seeing the largest growth in consumption (13% by volume) and there is a huge expansion in the number of ‘premium’, ‘super-premium’ and flavoured vodkas being launched, commonly positioned as ‘designer premium’ (see Section 3, ‘Definitions and Themes’) and claiming purity and sophisticated manufacturing processes. The whisky sector is characterised by a large number of small distilleries, some of which are owned by large international brand owners, with around 90% of Scotch whisky being exported to international markets. The gin sector includes premium brands such as Bombay Sapphire, Tanqueray and newcomer Hendricks in the top ten UK sales for gin brands, all of which are experiencing growth.15 Spirits and Liqueurs do have a large proportion of products with additional packaging to encourage gift purchases and to increase shelf presence and a ‘premium’ feel. 2.2.5 Premium alcoholic mixables and ready-to-drinks (RTD’s) This market has grown in volume by 6.6% to 38m litres between 2003 and 2007 but it is still a small sub-category in relation to other alcoholic drinks, with growth recently stagnating.15 According to Mintel’s 2008 report on this sub-category, top brands such as Malibu and Martini have updated their bottle and labelling design to improve the premium feel, but in general, alcoholic mixables are seeing much less premiumisation than other categories.15 Alcoholic RTD’s (formerly referred to as Flavoured Alcoholic Beverages (FAB’s) or alco-pops)) are predicted to decline steeply in volume sales by 34% from 151m litres in 2007 to 2013.22 This is due to the increasing number of ABC1 consumers turning to more sophisticated alternatives, predominantly due to alcoholic RTDs’ association with binge drinking22. Premium RTD’s, such as Smirnoff Ice, have dropped in price, making this sector an example of how ‘premium’ products can make up the majority of sales, or how ‘premium’ has become ‘core’. According to one interview respondent representing a major supermarket, premiumisation has occurred within canned pre-mixed drinks as a result of the introduction of branded products such as Gordon’s Gin and Tonic. Prior to this, own-label products were the only ones available as pre-mixed. 2.2.6 Premium carbonates In the UK, over 6bn litres of carbonates are consumed every year, over 50% more than any other drinks sub-sector. 28 Coca-Cola hold almost one third of this market and have recently launched lightweighted versions of their 500ml PET bottle, ‘Contour’ glass bottle and aluminium can. Carbonates have a very small proportion of premium products, such as Whole Earth Organic and Fentimans. These products tend to be sold in the same packaging formats as the mainstream products, such as glass, PET


http://www.wrap.org.uk/retail/case_studies_research/case_study_2.html


and cans and so further premiumisation of this sub-sector is unlikely to have a major impact on packaging resource efficiency. The carbonates sector has also seen a decline in sales due to increased health concerns and new legislation in schools to ban sugary drinks being sold from vending machines. This could well contribute to premiumisation of the carbonates sub-sector, as premium carbonates tend to be marketed as healthier alternatives. 2.2.7 Premium fruit juice, juice drinks, squashes, cordials and smoothies Cordials are defined by Mintel as having higher concentration levels than ‘squashes’ (see Appendix 8) and are a ‘premium’ alternative to core ‘squashes’. 29 ‘Premium’ cordials are seeing a rapid growth in sales, however these account for a small proportion of the category. 29 As squashes make up the majority of the sector and volume sales of squashes are declining, overall volumes of this sub-sector are falling. However, as premium cordials are normally packaged in glass there is likely to be an increase in the amount of glass within the sub-category as a result of further premiumisation.29 Fruit Juice and Juice Drinks make up the third largest category in this sector by volume, at 1.97bn litres for 2008.30 Premium brand Tropicana leads this market. The premium Smoothie market has grown from 12m litres in 2003 to 92m litres in 2008, led by InnocentC, but is still small in comparison with fruit juice and juice drinks. 31 Growth is now slowing as consumers swap from smoothies to premium juices in the economic downturn. 31 2.2.8 Premium bottled water Bottled water is the fourth largest drinks sub-sector by volume at approximately 1.7bn litres sold per year. 27 Use of glass is normally restricted to premium products and, according to Mintel’s report ‘Bottled Water, Market Intelligence, June 2007’, use of glass is on the decrease. 27 The water sector is likely to continue to push the resource efficiency agenda due to its coming under fire on environmental grounds with respect to high transportation impacts and as such, premium bottled water may come under pressure to reduce the amount of packaging material used. Increasing health concerns have seen consumers switching away from carbonates towards premium flavoured and functional waters, resulting in a nine-fold increase in sales of this sub-category from 2000 to 2006. 21 There has been a plethora of premium new product development activity in this sector, with premium products launched which claim to give improved health, alertness, energy, vitamins and even younger looking skin and it is this trend which is mainly responsible for the premiumisation of the water sub-category. According to Zenith International, whilst the poor summer weather was identified as key reason for an overall 4% decline in UK sales volumes, ethical brands are expected to become a major driver in the segment in the future.36

Another trend we are increasingly seeing is company-branded in-office glass water bottles encouraging employees to re-use bottles and discouraging the buying of bottled mineral water, for example EcoPure Waters. IMAGE Reusable water bottles are being introduced in offices

2.2.9 Premium functional drinks (excluding water) These include sports and energy drinks and RTD teas and coffees. GSK’s premium product Red Bull has dominated the market over the last few years and been partly responsible for its strong growth and premiumisation.

C Innocent is both an independent producer and a market leader in packaging innovations, such as its development of 100% recycled PET bottles. It is also an interesting case study in terms of environmentally friendly packaging materials as Innocent switched from using bioplastic bottles to recycled bottles in 2007. Furthermore, its use of graphics to position the product as premium in liquid cartons is also interesting.

3.0 Definitions and themes This section looks at the meaning of ‘premium’ and ‘premiumisation’ within the drinks sector, exploring whether there is a common definition, and identify the ways in which retailers, brands and designers have developed and marketed drinks products as ‘premium’. 3.1 Existing definitions of ‘premium’ The dictionary definition of 'premium' as an adjective relates to quality, value, price and cost: “ - adjective of exceptional quality or greater value than others of its kind; superior: a wine made of premium grapes. of higher price or cost.” 47

Mintel’s 2006 Report ‘Premium Foods, Market Intelligence’ defines ‘premium food’ as follows: “Premium foods are defined … as food products that take a premium position within mainstream food categories, whether processed food such as ready meals, soups etc or primary commodities foodstuffs such as red meat, rice, oil etc.” 33 It goes on to say: “Products with a luxury image, like caviar and truffles, for example, are excluded as one-offs belonging to no mainstream market, and special seasonal assortments, like Christmas hampers and gift packs, are also excluded.” 33 Taking these definitions and applying them to the drinks sector, it could be argued that sub-sectors such as Champagne are ‘luxury’ rather than ‘premium’. It could also be argued that all Champagne is premium but for the purposes of this report, it is most useful to look at the highest end of each sub-sector. In the case of Champagne, this would refer to ‘deluxe’ Champagnes, which make up 10% to 15% of the Champagne sector.44 The Institute of Grocery Distribution issued a report called Shopportunities’ in 2005 that defined ‘premium groceries’ as follows: “The use of the word premium to describe a product suggests to shoppers that the product will be of better quality than competitor products. However, for many shoppers the word premium can imply a higher price-point and can therefore be a barrier to purchase. Use of other words which indicate a superior product and imply added benefits but are not immediately associated with price are therefore preferable to the word premium. Ongoing improvement and innovation are important for a product to maintain its premium status as shoppers see premium as being a comparative term. Therefore, unless a product stays ahead of its competitors it will no longer be considered premium. The main reason for buying a premium product is the expectation of a high quality product. The description and product delivery therefore need to meet with shoppers aspirations.” 35 From these definitions, it can be concluded that ‘premium’ refers both to price and to product quality. It could be argued that it relates also to packaging format (is Coca-Cola sold in a glass bottle more premium than the same Coca-Cola sold in a 2 litre PET bottle?). Furthermore, it is clear that the same product can lose its premium status – either due to competition, as a result of stagnation and lack of innovation, or due to retailers cutting prices. The following sections of this report look at these issues in more detail.


3.2 Definitions of ‘premium’: Findings from interviews Twenty key representatives from the drinks, retail and design sectors were interviewed for this project about what the terms ‘premium’ and ‘premiumisation’ meant to them within their organisation. For confidentiality reasons, and for the purposes of this report, the interviewees are identified as follows:

Table 3: list of interviewees for this project Organisation Interviewee Retailer A (Supermarket) - Packaging Technical Manager Retailer B (Supermarket) - Head of Packaging and Print Retailer C (High Street) - Marketing and Store Design +

CSR Project Manager + Senior Packaging Technologist Beer Brand D Small brewery Beer Brand E (Large international brand) - Senior Brand Manager Wine Brand F (Large wine brand) - Senior Marketing Director Alcoholic Drinks Brand G (Large international brand) - Head of Public Relations Alcoholic Drinks Brand H (Large international brand) - Innovation Manager + Packaging Technology

and Innovation Bottled Water Brand I (Large water brand) - Packaging Development Manager Functional Water Brand J (Small water producer) - Co-Founder and Director of Sales and Operations Premium Fruit Drink Brand K (Independent producer) Sustainability Manager Design Agency L Client Director Design Agency M Structural Design + Planner Glass Sector Association N Director General Spirits Sector Association O Environment Manager The range of definitions relating to a premium drinks offering varied considerably between respondents. This reflects the key issue of trying to define premiumisation - that it lacks a single definition. Premiumisation was taken to mean (amongst other things): more expensive; better quality; more expensive and better quality; having more expensive, ‘lush’ packaging; having more considered packaging using different fonts, colours, textures, materials etc. that attract a

different customer – generally a higher spending or more ‘sophisticated’ customer; having packaging that projects quality cues. These cues are often seen as shorthand for a range of larger

quality associations, maybe related to other products and categories even; additional layers of packaging; the heritage of the product; the provenance of the product; the target market; sold in selective outlets; out of reach of the average shopper; very sector specific; or ‘trading up’ by customers to higher price point products

The philosophy of premium, however, was seen more uniformly with all respondents viewing the trend for premiumisation as a way of more effectively segregating the market in order to provide a ‘better’ offering to those customers with larger incomes or greater product interest. Some went as far as to acknowledge that premium means not affordable or attainable to the majority. There was also a suggestion that premium can happen both intentionally and unintentionally, although the latter is undesirable as customers looking for value may well be put off by a premium appearance. In many cases premiumisation manifests itself as the ‘up selling’ and re-alignment of existing brands. The issue of defining a ‘better’ offering is complex. Beer is an extremely interesting example. Traditionally stronger beers (over 5% ABV) were considered premium, however this is not necessarily the case anymore. Premium is now represented by a much more complex mix of attributes including the heritage of the beer, its provenance and ingredients, its packaging (glass providing significantly enhanced premium cues over PET or aluminium), its country of origin, and its price. There are examples of brands that have reduced alcohol strength


to appear more premium. Examples from other countries are also interesting in this case, such as with the Swedish three tiers of beer strength - there are no premium beers at the mid-strength, premiumisation is reserved for the stronger beers and the weaker ‘lunchtime’ beers. This latter point hints that premiumisation also relates to occasion. This was a theme that emerged again and again with respondents differentiating between mid-week purchasing decisions, weekend, party, dinner party, birthdays and anniversaries, and Christmas/holiday. For example, it was thought that customers may buy less premium products (for example beer in tins and value sausages) in the week but switch behaviours and buy more premium examples at the weekend. Therefore, premium is not simply about fragmenting customer types by income, but by looking at where they focus their spending throughout the week/year. The same customer may buy premium and value items without contradiction. One of the most significant developments to emerge from the respondents was the retailer dissected own-label offering of ‘good’, ‘better’ and ‘best’. The majority of respondents mentioned this product tiering system when they were defining premium. Retailer A used this split as their sole definition of premium but also acknowledged that premium varies from one category to another. Design Agency M viewed premium as a much more complex mix of cues and attributes including, amongst others, heritage, pack design, choice of font, textures and association with other products. Premium Fruit Drink Producer K sees premium as being mainly about the quality of the product. Indeed they intended their packaging to be purposefully simple and driven by the strong environmental ethics of the owners. Furthermore, they saw premium as a way of buying into an emotional or philosophical relationship with the customer. The Glass Sector Association N clearly sees glass as the package of choice for premium products. With good reason, they highlighted a survey carried out by independent research organisation FEVE65. that indicates consumers too have this perception. Design Agency L sees premium products as having a greater connection with the consumer. This can be emotional or story-led and attempts to differentiate between for example, high and low cultural value, between heritage and tabloid. Wine Brand F sees premium as focused on heritage and provenance. Yet they also acknowledge that in their sector this can be perceived as too confusing for many buyers and hence are simplifying their offering in order to provide a simpler story on heritage. This allows the consumer to more easily differentiate between wines with a greater heritage from the ‘old world’ and ‘new world’ wines that generally have less of a history or heritage. Returning to the introduction of the ‘good’, ‘better’ and ‘best’ offerings from retailers it appears that this has done more than anything to enhance both consumers understanding of premium and brands’ need to premiumise and match or fit into this offering structure. Rather than retailers simply providing an outlet for goods and competing at the lower end of the market they are now competing throughout the market and in many cases defining tiers of premium. They do this and still apply their value quest within these more elevated offerings. This change has been fundamental in shaping the language of premium. Consumers have warmly accepted this differentiation as they already trusted the retailers. Now this level of trust makes it a little easier to buy a product that: is maybe a little riskier; maybe they know less about; maybe they are not aware of the brands in the more premium end of the market. Hence, existing premium offerings now have another competitor, one that sets the expectations (certainly price wise) of premium. Retailer B saw two aspects to premiumisation – intentional and unintentional (and undesirable). They gave the example of mincemeat being something that, if ‘premiumised’ would put consumers off due to connotations of higher price. Along with other respondents they also saw premiumisation as being very sector specific. The company acknowledge the existence of tiers of premium and use their own-label segmentation to make these tiers clear to consumers. Retailer C tries to offer premium produce through improved product quality rather than through packaging. Alcoholic Drinks Brand H defines everything they do as premium, although some of their products are more premium than others. They define premium in a number of ways including quality, history, and story telling and define ‘ultra premium’ as drinks retailing at £145 or over. Alcoholic Drinks Brand G, when talking about wine, define premium as £7 - £8 and above, but note that this varies from one country to another. They see premiumisation as a way of moving customers up from lower-priced wine to higher priced – and should get a better product for their money. Beer Brand D defines premiumisation in a simple way – as a way of describing products that have been produced to be (or marketed as) better quality and of a higher standard than the average product in the category. This


creates a problem when the entire category is ‘premiumising’ and therefore further differentiation is increasingly difficult. It also creates a race for the top and as part of this packaging is sometimes enhanced. Beer Brand E defines ‘premium’ (in terms of lager) as enhanced user experience, for example it could include being served in a branded glass at the pub. They commented that the marketing of a premium beer may relate to heritage, tradition and ingredients. There are new lower alcohol ‘premium standard’ beers on the market which use new manufacturing techniques, which has effectively created a new category of lower strength premium beers. Bottled Water Brand I defines ‘premium’ as when the packaging design and structural content far exceed the requirements of the contents. They also went on the define ‘premium’ as excessively packaged. Retailer B identified the emergence of ‘super-premium’ products within the Champagne and vodka sectors. Within spirits generally there was an awareness of the existence of innovation and novelty as a way to create ‘premium’. However, Retailer B perceived that innovation and novelty may not sit well within categories where heritage and quality are seen as more important, for example the whisky sector. Functional Water Brand J were unable to define ‘premium’ in terms of the overall market but did talk about the target market for their premium product. Their aim was to specifically target women, give the product a considerable price premium and give the consumer unique benefits that come from additives in the water. Interestingly, they were very keen to define what was not ‘premium’. In their mind a product cannot be seen as ‘premium’ if it is sold through certain supermarket chains. This was a unique view but did correlate to the broad acceptance that ‘premium’ is about being more exclusive (in some way) than other products. This consumer elitism appears to be at the heart of premiumisation. However, the vector of elitism is not consistent across all drinks categories. They also articulated a common paradox – the desire to be premium and affordable to large number of people. They felt that better packaging design was an extremely important part of creating a premium image. Whilst definitions of ‘premium’ are incredibly difficult to define all respondents acknowledge the existence of ‘premium’ as a trend and its growing importance. Another interesting view that was expressed by many was the thought that as the UK enters a period of austerity the demand for value products will grow but so too will the demand for premium products. The middle-market will experience shrink and as experienced by some, this has already started to occur. This reflects the view that consumers cutting their spending on bigger items such as holidays and cars will continue to reward themselves with everyday premium (for example, chocolate) or weekend premium purchases. This was the view held by the majority of respondents. Summary points: there is no single definition of premium; premium is generally seen as offering ‘better’ products; definitions of ‘better’ are complex and diverse; however, premium is recognised as a general trend that is becoming more prevalent; and as it becomes more prevalent, brands wanting to premiumise need to super premiumise in order to

differentiate from existing premium drinks products, which are becoming more core.


3.3 Tiers of premium Whilst the influence of supermarkets’ own-label ‘budget’, ‘core’ and ‘premium’ ranges – also known as ‘good, better and best’ – have led to a clearer understanding of what is ‘premium’, this particular definition of ‘premium’ is normalised to the range of products stocked in supermarkets and indeed varies from one retailer to another. What becomes ‘premium’ by this definition is quite affordable for most consumers, although perhaps only as an occasional purchase. The continual drive to make products more ‘premium’ since the end of the Second World War has driven down the price of premium products and increased the proportion of products that are ‘premium’. This has led to the need for more terms at the top end of the market to describe more expensive and premium products. There is a general consensus in written articles (for example Wine and Spirits Daily), in marketing reports (for example, Mintel and Verdict) and from interview respondents that above the ‘premium’ tier there is an addition tier - ‘super premium’ - and above this is the top end of the market - ‘ultra premium’. The market can therefore be split into tiers as shown below:

Figure 4: Price tiers

Note that ‘premium’ rather than ‘mid range’ is actually the middle price tier. ‘Premiumisation’ is defined by a number of commentators as the creation of a ‘luxury’ version of a product or brand. Others, however, see it as distinct from ‘luxury’. ‘Luxury’ is something unattainable to the majority of consumers, whereas premiumised products are within the reach of all consumers and can be seen as an attempt to bridge the gap between the current and the aspirational lifestyles of the consumer. For a brand, ‘ultra premium’ and ‘luxury’ probably mean the same thing, but to a supermarket, ‘ultra premium’ may fall within their own price banding, whereas ‘luxury’ may be deemed too expensive, so that these products are not stocked. At the other end of the scale, it is also interesting to note here that Tesco, during December 2008, introduced a new own-label range at an even lower price point than its existing ‘budget’ range, again shifting the balance of the diagram above. The American internet-based magazine, ‘Wine & Spirits Daily’ gives price brackets for certain drinks sub-categories in US dollars which have been visually summarised in the chart below. This figure clearly illustrates the variation between price and start points for premiumisation across the drinks categories.


Figure 5: U.S. spirits and wine price tiers

3.4 Premium themes In this section, key themes have been drawn out from brands’ marketing strategies for conveying the message that a product is premium. These cover the entire drinks category and most are more extensively used in certain sub-categories than others. On the following pages, eight themes (or ‘types’ of premium drinks) have been described with a name, a written description, key words and boards showing examples of products that illustrate the themes. Note: The listing or featuring of a particular product or company does not constitute an endorsement by WRAP and WRAP cannot guarantee the performance of individual products or materials. The eight premium themes below are described on the following pages: ‘designer premium’; 'quality premium'; 'luxury'; 'responsible premium'; 'health premium'; 'exotic premium'; 'functional premium'; and 'premium functional packaging'.


3.4.1 ‘Designer premium’ The growth of the premium sector has been fundamental to the growth of the designer alcoholic drinks market. Buying these products represents buying into a lifestyle. Their associated advertising and branding is about glamour and image. The audience is primarily younger, fashion conscious consumers who value novelty. These products can be celebrity endorsed (for example, Pinky Vodka and Paris Hilton wine) and rarely maintain long-term popularity. See examples of drinks that characterise this type of premium, in the illustration below.


3.4.2 ‘Quality premium’ These products are deemed premium because of the quality of ingredients, purity, taste or manufacturing method is perceived as better than ‘budget’ and ‘core’ offers. The consumer is led to believe that they are getting a better product. Supermarket own-label products such as Sainsbury’s ‘Taste the Difference’ and Tesco ‘Finest’ would fall into this category. Many brands’ core products are considered ‘quality premium’ such as Coca-Cola, Tropicana and Copella Apple juice. See other examples of drinks that characterise this type of premium, in the illustration below.


3.4.3 ‘Luxury’ Luxury drinks are considered the highest price bracket of all premium types. They are not considered inessential, unaffordable for most, sometimes rare and can be seen as status symbols, and often attract celebrity promotion. The number of high net worth individuals (HNWI) is growing steadily worldwide and is a driving force behind these luxury, high-end alcohol purchases. See examples of drinks that characterise this type of ‘premium’, in the illustration below.


3.4.4 ‘Responsible premium’ Deliberately appealing to the growing number of environmentally and ethically conscious consumers, these drinks make claims such as having recycled or biodegradable packaging, are carbon neutral, support fair trade or charities, are organic or promote reuse of the packaging. See examples of drinks that characterise this type of premium, in the illustration below.


3.4.5 ‘Health premium’ Being marketed at a nation of increasingly health-conscious consumers, these products include those claiming to contribute to the Government’s 5-a-day programme, healthy drinking or those avoiding, for example, artificial sweeteners and flavourings. See examples of drinks that characterise this type of premium, in the illustration below:


3.4.6 ‘Exotic premium’ These products are, to some extent, cultural tourism and often sold as gifts or in tax-free environments. Brands play on being different, associated with the country of origin. These products are mainly imported and emphasise their country or region of origin and its traditions, not only in the product itself but also through design – such as animal print to represent Africa. See examples of drinks that characterise this type of premium, in the illustration below.


3.4.7 ‘Functional premium’ Additives in these drinks are marketed to the consumer as having additional functionality, giving the consumer a reason to trade-up. These drinks offer energy, altertness, youth, muscle building, mental health, health, beauty, re-hydration and even sex drive qualities. See examples of drinks that characterise this type of premium, in the illustration below.


3.4.8 ‘Premium functional packaging’ Packaging can be used to provide an additional function for premium drinks. Whether this is as a drinking vessel, travel container for the drink, thermal insulation or temperature indicator this approach can provide retailers and brands with an opportunity to create a niche within the sector. Packaging designed to have a second use (such as re-use) adds value and can be argued to be environmentally friendly. See examples of drinks that characterise this type of premium, in the illustration below.


3.5 Premiumisation strategies by sub-category The matrix below shows which premium types or strategies retailers and brands within each drinks sub-category have adopted or can be aligned to. This has been put together based on input from all areas of research undertaken during this project. Lighter colour ticks indicate a less frequent use of a strategy.

Figure 6: Relation between premiumisation strategy and sub-category


4.0 Evidence of the premiumisation trend Even in today’s climate of economic downturn, premiumisation seems to be surviving as the strategy for continued success in the drinks sector, as illustrated by Claire Weeks, editor of ‘TalkingDrinks.com’ at this year’s Tax Free World Association Fair in Cannes: “in the conference centre, with its swish stalls stuffed with premium products and luxury brands, you'd be forgiven for forgetting all about the credit crunch”. By day three of the fair she was reporting that ”drinks companies are putting their focus on their most pricey brands, because the mantra is that people with money will still spend money during the downturn”. 4.1 Premiumisation trends outside of the drinks sector There does not appear to be any of the food or fast moving consumer goods (FMCG) sectors that are not moving towards more premiumisation. It is possibly most noticeable in the drinks sectors; however, there is significant activity in most other food-based sectors. Furthermore, whilst it is often seen as a recent trend, the natural evolution of products and packaging over the last 40 years has been for them to become more sophisticated in terms of function or packaging. Furthermore, times of financial constraint may serve to drive premiumisation into lower-value sectors through the consumers rewarding themselves with everyday treats, such as chocolate or wine. Respondents from the interviews carried out as part of this project identified the premiumisation trend present in all categories. They identified a number of examples where a product had been premiumised but the environmental impact, recycled content or weight of the packaging had been reduced – without compromising the product’s premium standing – for example Method cleaners; Holsten Pils, Adnams ales, Innocent Smoothies, Dorset Cereals, Grolsch and Carling. The key drivers for this shift include: increased affluence; changing aspirations and increased desire for indulgence. Consumers reward themselves as an antidote to

stress and also use many more types of products as new status symbols. This was perceived by some of the interview respondents as recession-proof; and

abundance of choice and the age of materialism. Increasingly consumers use products to convey their own identity and aspirations. A transfer of brand value.

At the end of September of 2008 the Australian Food Network published an article ‘Affordable premiumisation and healthy innovation boost Britain’s biggest brands’ 48 in which it discussed how the results of the TNS Worldpanel’s annual Biggest Brands Surveys for Marketing Magazine show significant growth for brands who offer innovation in the areas of healthy eating and/or ‘affordable’ premium products. Cadbury came out on top of the year’s biggest brands list with sales of up to £590 million. Heinz, Kellogg’s, Walkers Crisps and Warburtons rounded out the top five biggest brands in Britain. The article then went on to show that the attraction for consumers seems to be ‘affordable premium’ products that offer superior quality at affordable prices. This trend isn’t just in the food and drink sector - some pet food and personal care brands have also undergone premiumisation. The report notes that “Notable growth has come from the likes of Whiskas and Pedigree, as well as Colgate and Andrex; suggesting consumers are spending more on quality products in all areas of the market” and that it “remains to be seen whether the credit crunch and the increasing prices - currently confined to limited sectors of the FMCG arena - will cause consumers to re-evaluate their preferences in 2008 and the coming year”. 48 In November of 2008 in an interview with the Yorkshire Post Andy Bond, the Chief Executive of Asda said 2009 would be a "very, very tough year" for Britain's economy, with increasing unemployment. But he said Asda would be well-placed to perform well during the downturn and said supermarket giants had a duty to deliver good, honest value. He went on to criticise the premiumisation of goods that has taken place across a range of sectors, which he said was about "increasing margins and ripping off customers". Andy Bond’s view does seem to contradict the industry view though. In an article ‘Whose turn is it in the sun?’ published in the Grocer in July of 2008, Mark Choueke looks at the fortunes of the UK’s top 150 food and drink manufacturers. The top five companies all seem to align themselves with trends such as health and premiumisation and these are seen as long term and pre-date both the credit crunch and the rise in food inflation. 49


The consumer must not be forgotten when considering the premiumisation issue; The Australian Wool Innovation Limited published an article on consumer trends and insights focussing on premiumisation. In it they noted that ”Today’s consumers are discovering that the premiumisation trend is apparent whether buying expensive cars, designer clothes or premium drinks. Premiumisation is the key trend behind recent innovative product launches, with consumers continually seeking better quality products, services and experiences across the board” 50 The article then goes on to identify a number of key drivers and issues for premiumisation. These include: Preserving premium credentials: As premium becomes more accessible, global brands dominate and

grow, continue downward brand extensions (prestige for the masses) and shift their production offshore.50

The report highlights that the increased premiumisation of everyday goods has ‘led to the artisan community banding together to protect luxury as it used to be known. Hand crafting, best quality ingredients, natural, provenance, time; heritage, exclusivity and authenticity are enduring signs of prestige’.50 Planned scarcity: Products become premium and desirable not only by being financially out of reach of

the masses, but also by not being widely available. Planned scarcity is a way of ensuring exclusivity. Limited edition products are sure to gain sales as people are drawn to exclusive offers with limited time, numbers or distribution. Ethical products deliver on exclusivity, status and experience, and often come at a premium price. The market for ethical goods and services is growing rapidly. 50

So it seems that premiumisation is a core theme in retail across most sectors. It has shown growth in the past and even in difficult economic times many manufacturers and retailers see it as the answer to survival. The Food and Drink Industry Network (FDIN) has suggested that premiumisation is changing. “No longer does it simply refer to luxury goods and high-end, rich food that is only bought on special occasions. Increasingly, premiumisation is referring to a wide and diverse range of issues within the food industry.” 51 The article goes on to highlight how, in recent times, the term premiumisation has come to stand for a range of new and old concepts in the food sector. Not least, there is the growing importance of provenance. ”While at one time provenance meant little more than brands and products relying on their status to prove their worth, now there is a growing shift towards having some knowledge of the history of an individual product as an important reason for it to be considered a premium item.” 51 Other commentators, such as Ian Caulder of consultancy Caulder Moore, have observed that the terms ‘luxury’ and ‘premium’ are now overused and have become almost useless. He argues that there are so many different levels of premium and luxury in the market that it’s beginning to feel diluted. As a response to this, he continues, the market is anticipated to change further and adapt to provide bespoke products, an example of which is Nike ID customisable trainers (below): IMAGE Nike ID customisable trainers

The development of exclusive and bespoke products is set to continue with personalisation of the retail experience becoming more important. Research by Coley Porter Bell into ‘luxury’ and ‘premium’ identified that consumers rated experience as the key definer. The research suggested that retail environments are set to


become more like galleries with products becoming one-off art pieces. This is likely to filter down into premium products and their packaging. Please see Appendix 9 for more information relating to premiumisation in specific non-drinks categories. 4.2 Evidence of premiumisation within the drinks sector The following information was gathered on this trend, from interviews with key representatives from retailers, brands and design agencies across different drinks sub-sectors and also different sizes of organisation, from micro-organisations to large multinationals: There is clear evidence of premiumisation within all sub-sectors of the drinks sector. The trend is evident across all income groups with lower income groups being targeted in a slightly different way to higher income groups. For lower income groups it is thought, by Design Agency L, that celebrity based cues are used more frequently to encourage purchase. Furthermore, there was a consensus by Design Agencies L and M, Premium Fruit Drink Brand K, Glass Sector Association N, and Retailer A, that premiumisation of everyday items will become an increasingly important trend in the economic downturn in order to try and shift customer spend upwards. This is a very obvious manifestation of premiumisation moving down the cost-curve. However, there can be a tendency to confuse the premiumisation of the product with the premiumisation of the packaging. These changes to packaging backed up the clear message coming from Retailer A and Design Agencies L and M that they integrate both premiumisation and resource efficiency in their brief, although Retailer A did feel that this was less important for their own-label top-tier products. Design Agency L saw the advent of a tiered retailer offering as the key to stimulating premiumisation across the board for drinks. Design Agency M agreed, and mentioned that premiumisation is now a factor in almost all the packaging briefs that they receive. However, they also noted that when their clients were quizzed further there was a lack of clear definition of the term ‘premium’. Design Agency M also stated that there are tensions within society’s expectations and aspirations, and that premiumisation of the packaging can be used to address some of these contradictions. For example, they state that premium packaging can be used to satisfy the tension which may exist between high aspirations and low income, by communicating the premium message without compromising budget. Likewise specifying packaging materials which the consumer perceives as natural in an indulgent product with no inherent health benefit may ease the tension between aspirations of healthiness and treating oneself. Beer Brand D saw evidence of premiumisation manifest itself in two ways:

Premiumisation driven by health: the consumer is buying less but better quality products; and

Premiumisation driven by reward: the need to reward the consumer (for example by buying luxury chocolate

treats) was seen as still being important in difficult economic times.

Beer Brand D see most evidence in the drinks sector, and the growth of bottled beers is testament to this. Within spirits there has been a historic premium tier within whiskies. The small brewers noted that this has now spread to other spirit categories, such as vodka. Within drinks categories, respondents noted direct evidence of premiumisation in beers, wines, Champagnes, and soft drinks. In the latter category the advent of niche brands such as Duchy Original, Bottlegreen, Rocks and Fever Tree are on the increase. Furthermore, in the smoothie market premiumisation of product has been evident for a couple of years yet packaging is simple and functional. Functional Water Brand J saw the development of the functional water category as evidence of premiumisation. They quote the rise of products such as Firefly and V Water as evidence of the emergence of this premium water sub-category. The company felt that design is the great determinate of premium and invested 90% of their seed funding on label design. Retailer B identified a trend whereby premium products are designed to recreate the restaurant experience at home, for example premiumised ‘straight to table’ bottled water, bottled beers and cook-at-home prepared foods. The retailer felt that premiumisation was equally important and evident in all drinks categories. They gave the example of premiumisation within the cordials sector by becoming more ‘adult’ via the introduction of more sophisticated flavours and a shift in some cases to glass bottles.


Beer Producer D has seen an 8% increase in sales of premium bottled ales. Beer Brand E has also seen an enhanced demand for premium products and they relate this to a growth in bottled beer sales in pubs. Alcoholic Drinks Brand H was not aware of any appreciable increase in demand from consumers for premium ready-to-drink products over the last few years. Retailer C had not experienced premiumisation of their own-label ready-to-drink ranges over the last few years, perhaps due to their positioning as a premium retailer. Alcoholic Drinks Brand G has seen very slow growth (1%) in core wine sales, whereas premium wine sales have increased by between 1% and 3%, and there has been a reduction in sales of sub £2.99 wines as people begin to understand wines more. They illustrated the example of buying a £3.99 bottle of wine and getting £0.30 of wine, whereas by buying a £4.99 bottle, you get £1.30 of wine. Their explanation was that this is due to the cost of transportation, bottling and tax being independent of the quality of the wine. Therefore the proportion of the total cost that is spent on the wine itself is very small for bottles retailing at £2.99, but increases rapidly as the consumer trades up to £3.99 or £4.99, meaning better value for money at these higher price points. Summary points

There is clear evidence of premiumisation within all sub-sectors of the drinks sector (and indeed other

categories);

There is also clear evidence of premiumisation moving down the cost-curve;

Both product and packaging is subject to premiumisation;

In some cases packaging is used to communicate the premiumisation message although some respondents

highlighted that resource efficiency and premiumisation are both integrated into the NPD brief;

Premiumisation helps to satisfy customers aspirations (image, health, luxury); and

Many respondents feel there is evidence of consumer demand for premiumised products.

4.3 Premiumisation and new product development claims in the alcoholic drinks sector Mintel have produced the following chart showing what claims have been made by new products launched in the alcohol market as a whole, during the period 2005 to 2007.5

Figure 7: Claims accompanying new alcoholic drinks product launches 2005 to 2007 5

It is interesting to note that ‘premium’ makes up more than half the claims of new products launched within wine, spirits & liqueurs and cider during this period, which is a clear indication of premiumisation happening within these drinks categories.


4.4 Conclusions Premiumisation is not a new trend. It is a continual evolution of product offerings and packaging reflecting brand values and consumer expectations. The coming period of economic downturn is likely to have a significant impact on shopping habits. However, this doesn’t mean an end to premiumisation. Indeed, many commentators and respondents predict that the trend may increase further. It is also likely that the spread of premiumisation strategies into other sectors will continue in order to differentiate between offers in the market and to match changing customer aspirations. The following industry players back this up: John Sunderland, Select: "The value sector is often counter-cyclical, because when people are up against it they spend more carefully and become more value conscious. During a recession it is the top and bottom of the market that fare OK and the middle that gets squeezed." 52 Peter Holder, partner at risk consultancy company Kroll: “With disposable income getting tighter, consumers are going to be much more selective in their spending. This will seriously undermine the fast-fashion culture. Mid-market retailers that do not articulate a clear value proposition will suffer. On the upside we will see a phenomenon of 'reward spending', whereby consumers will make purchases in a more considered manner as a reward for the good husbandry that will be required. Fashion retailers with clearly defined quality, value and brand propositions will benefit from this trend.” 52 Adrian Mountford, Business Unit Director, Sainsbury's Tu: “Shoppers will move away from really cheap clothing and look for premium value clothing – consumers want value for money. Sustainability will be even higher on the industry's agenda, with retailers looking to increase their carbon-neutral sourcing and organic and fair trade ranges.” 52 Curtis Jacoby, Owner of Womenswear agency The Jacoby Partnership: “With every retail sector, from Peacocks to Austin Reed, talking about premiumisation, I think our relationship with independent retailers means we have to offer an ever-greater point of difference. To succeed against heavier competition from own-label multiples we have to produce more highly designed and labour-intensive collections that stand out." 52 Peter Ruis, John Lewis: “People will still want value but are more inclined to look for quality, and conspicuous consumption is in decline. They want something made in the right place and a little bit special. Organic and ethical is here to stay, but it still has to be fantastic product.” 52


5.0 Drivers for premiumisation: Findings from interviews From the interviews for this project, unsurprisingly, there were many and varied opinions as to who, or what, are the greatest drivers for premiumisation. Design agencies L and M hold the opinion that the producer to be the key driver for premiumisation as it is part of the broader drive for innovation that they perceive is required to enhance the offering to the customer and increase sales or income per unit. That said – both agencies also suggest that premiumisation reflects the changing aspirations of customers and that the producers are only responding to these changing aspirations. The views expressed below are those of respondents and were their perceptions of market drivers. Design Agency L interestingly described packaging as a new information channel that has come of age and is beginning to be used more effectively by producers. It is used to communicate brand values – on the shelf, but increasingly at the home as well. Design Agency M stressed the importance of consumer expectations around occasion. This could be an occasion such as a birthday, holiday etc, or even something as mundane as a weekend. This could be the difference between buying tinned beer in the week and bottled beer at the weekend, or value sausages in the week and premium sausages at the weekend. The glass sector body felt that it was also a mixture of the producer and the consumer who were responsible. Premium Fruit Drink Brand K felt that the key driver was the consumer. Whilst they don’t demand premiumisation per se they do demand the attributes associated with it as they demand points of difference. Alcoholic Drinks Brand H was of the opinion that the key driver was other producers’ launching enhanced products. Whereas the Wine Brand F felt the consumer was the key driver but that the retailer also was interested as they a diverse and innovative product range in order to increase margins. The Alcoholic Drinks Brand G sees premiumisation as driven by marketing in an attempt to move consumers up the rungs of the ladder, and also driven by increasing affluence and an increase in people eating in rather than out (no evidence provided). They stressed the risk of becoming too successful as a premium brand by quoting the experience of Stella which successfully became the most popular lager in the UK and then saw this eroded by retailers reducing price outside of the control of the producer. The other example given was Magners, who invested heavily in premiumisation and ‘over-ice’ marketing, which resulted in both increased sales and increased value for the whole sector. Bottled Water Brand I felt that the key driver was the producer, although the producer is in turn being driven by the retailer who will assess the value of a supplier by the number of units shifted. If this falls there may be pressure to innovate in some way. This may result in premiumisation. The Water Producer also identified that different customers/products will have different premium values. For example, in a perfume the anticipation may be one of ostentatious packaging whereas in the health-food sector premiumisation of packaging would be more concerned with compostibility, minimisation, recyclability etc. They talked about their own approach that was more to do with telling the consumer a story and communicating provenance than enhancing packaging structure. Functional Water Brand I implied that the drivers for premiumisation were increasing customer affluence and desire for natural products and products providing well-being. Retailer A felt the key driver was the customer although it is a complex mix of consumer, producer, and retailer. The retailer view is that both the producer and the retailer ultimately respond to consumer needs. Retailer B views the consumer as the key driving force behind premiumisation. In some cases there is no common sense behind premiumised products. They found the case of premium waters ‘hilarious’ but felt the need to respond to consumer demands. Within the beers sector, the company felt the shift to glass bottles (seen as a premium) was a reflection of the desire to “recreate the pub experience at home” and the fact that pubs are selling more product in bottles. It is difficult to take much of this seriously. Are consumers seeking to recreate the pub experience or are they simply buying what is available? Or do they just prefer beer from bottles? Beer Brand D considers all three to drive the trend: Economic growth has increased consumer’s aspirations; Retailers have maximized the opportunity by producing premium own-label options across all product categories, often at a higher price point than the branded equivalent. Producers have reacted to this trend by increasing their offering of higher quality products.


Beer Brand E sees the demand coming from consumers who increasingly want more value for money. Retailer C, who views premiumisation as relating to product quality and not packaging, felt that food innovation and producers of food products drive it. Design Agency L felt that premiumised packs were constructed around the values of the identified customer group and that structure, colour, texture, and font were used to link the product to these values. This more tailored product then allows the consumer to convey status in some way. Premium Fruit Drink Brand K also shared some of these thoughts but was aware that all consumers did not share these aspirations and status projections. Therefore it is feasible to have 10 consumers with 10 different definitions of premium. This hints at a flexible specialisation of product or mass-clusivity. Nike and their NikeID service have taken this to the ultimate level. Wine Brand F also felt that premiumised products answer different consumer needs and appeal to different trends. They focus on the development of a complete offering of wine and packaging. Their customers fall broadly into 2 categories. The first understand the Apellation Control system and are more experienced – by default these search a more premium product but one that is differentiated by knowledge rather than packaging. The second set of customers may be more used to buying new-world wines and as producer of old-world wines the producer has chosen to simplify the way in which information and quality cues are applied. This would draw more heavily on packaging design in order to convey a premium product. Knowing their customer’s requirements and aspirations is key. Design Agency M stressed this further and explained that brands have levels of insight in terms of motivating consumers. They also recognise that premiumisation has created many layers of product and that this allows consumers to trade up and down depending on how affluent they are feeling. Retailer A also stressed the importance of solid customer research and testing. All of the respondents stressed the importance of rigorous customer research and testing and have their own detailed development process that needs to be satisfied before any product/packaging is launched. Interestingly development can happen at the producer end, at the retailer end (for own-label) or simultaneously. Premium Fruit Drink Brand K sells a premium product but didn’t focus on premium packaging at all. Indeed they wanted a package that reflected their product and hence were focused on its environmental performance and the perceived naturalness of the pack. They also wanted a pack that showed the product off to its full. This pack was made of the same material as many carbonated drinks bottles but a change in shape and size and the use a more natural looking label served to lift the premium feel of the product. Summary points

The drivers for premiumisation vary widely;

There is no clear agreement on whether it is customer, retailer or manufacturer driven;

It is mainly based around the need to enhance the offering to the customer; and

Premiumisation has created many layers of products.


6.0 The implications of premiumisation on packaging weight In many cases, the format and design of structural packaging plays a strong part in the communication of the ‘premium’ message, in particular for products retailed for gifting. Therefore, it may be reasonable to presume that there could be an increase in packaging associated with premium drinks, when compared to drinks from the core sector. If premium drinks tend to be heavier or have more packaging, then the trend towards premiumisation could result in increased packaging being generated from the drinks sector. This development may threaten government, retailer and brand policies and agreements to reduce absolute packaging, such as the Courtauld Commitment. Some examples of packaging weights taken from premium and core product samples are compared in Table 4. Please note, these figures are from individual samples and do not represent the sector average. Table 4: Example packaging weights for both premium and core products

PREMIUM CORE

Pack size &

format Packaging weight (g)

Weight per litre

Pack size & format

Packaging weight (g)

Weight per litre

Premium weight

increase Still wine 75cl glass bottle 591 788 75cl glass bottle 488 651 21%

Lager 4x330ml glass bottles

848 643 4x440ml aluminium cans

204 116 635%

Ale 500ml glass bottle 329 658 4x500ml aluminium cans

159 79 730%

Bottled water 1.5l PET bottle 41.1 27.6 2l PET bottle 50.5 25.3 9%

Cordial 1l PET bottle 55.6 55.6 1l PET 40.5 40.5 37%

Fruit juice / smoothie

1l liquid carton 43 43 1l liquid carton 35 35 23%

Gin 70cl glass bottle 570 814 70cl glass bottle 360.5 515 58%

Whiskey 70cl glass bottle + carton

665 950 70cl glass bottle 558 797 19%

Carbonates 75cl glass bottle 339 452 2l PET bottle 50 25 1,708%

Although accurate data is difficult to access as datasets for premium drinks are not available, a basic comparison of packaging weights in Table 4 and a range of assumptions would suggest that premiumisation does lead to an increase in packaging weight. However, despite the apparent weight increase associated with premium products, some products achieve their premium status without using heavier packaging, and techniques for achieving this are outlined in Section 10 ‘Premium drinks design guidelines and case studies’.



7.0 Barriers to the adoption of resource efficient packaging for premium drinks 7.1 Interview responses All respondents felt that there was not necessarily a contradiction between premiumisation and resource efficiency. Furthermore, all were engaged in activity around resource efficiency, and all held this up with considerable pride. Design Agency L sees resource efficiency in the briefs provided by many clients, although this is often due to financial constraints rather than environmentally driven. They note that resource efficiency is important at both the lower end of the market and the higher end. The value end is all about functionality and simplicity and the high end is still about simplification but with an emotional connection for example ‘here are some lovely beans from lovely people’. Wine Producer F sees resource efficiency being targeted at the lower end of the market in the form of cheaper seals and labels. Premium Fruit Drink Producer K also sees more of a focus on resource efficiency at the lower end of the market. The same is true of the Retailer B who sees initiatives such as the Courtauld Commitment targeting lower end and core own-label rather than higher-end own brand. Resource efficiency is still an issue for higher-end product packaging but scope for reduction is considered less. Many own-label home products such as bedding are now subject to premiumisation. Most respondents considered the main barrier to the adoption of resource efficient packaging to be the ability of the pack to still perform its core function. There are limits to weight and gauge reduction that if breached will result in failure of the pack and waste of drink within it. Additionally the constraints of the production process to handle thinner or lighter or different packaging materials may also limit resource efficiency. Beer Producer E also saw the cap-ex required for the production of lightweight bottles as a significant barrier, although they were interested in a trial for re-introducing refillable bottles. They also saw a barrier in that the more efficient bottle shapes have a stubbier neck and this can affect the premium appearance of a bottle. Retailer B drew an interesting point of difference between developing new products as a brand owner and as a retailer. Retailer own brand product development would probably involve the sourcing of a bottle rather than the designing of a bottle. This, they argue, creates a constraint to innovating more environmentally friendly packaging as they can only chose from what is available. They did concur with other respondents, however, that there was no conflict between resource efficiency and premiumisation, and felt that adding more packaging to convey premiumisation was “the lazy way to do it”. Instead they would rather “let the product be the hero”. They felt a big barrier was the risk of the customer not accepting new designs and also the lack of technology. They are continually trying to drive up recycled content of packaging materials, and would like to see a move away from non-recyclable materials. Their ideal would be a PET bottle or a home compostable plastic bottle made from sustainable materials and processes. This is interesting and on the last point regarding compostibility it runs counter to the views of other retailers and most environmental bodies. Some of the drinks producers interviewed admitted that they did not have sufficient knowledge of the environmental benefits of different packaging options. For example, whether there was an energy saving from using rPET (recycled PET) instead of virgin PETD, as there is a variety of information available which could be confusing. Alcoholic Drinks Producer G felt that there was a significant barrier to maintaining brand equity whilst reducing packaging, they felt that there was a contradiction between the sustainability and the need to achieve high-perceived value. There are opportunities to remove this apparent contradiction and the company claim to be embedding sustainability into their design process as they feel that design is the key to achieving both goals. Again, most respondents felt there was no conflict between resource efficiency and premiumisation yet Retailer A saw it as less applicable to the higher end of the market. Design Agency L saw the challenge of embedding resource efficiency into premiumisation as a fantastic opportunity. They see premiumisation and resource efficiency as sharing something really important: they both need thinking about and they both tell a story.

D There is a significant energy saving when using rPET instead of virgin PET. Some sources, for example ‘University of Bath’s Inventory of Carbon and Energy’ estimate 80% less embodied energy. However, this saving occurs during raw material production rather than bottle manufacture therefore bottle producers may not be aware of the benefits.

Summary points

It is generally agreed that premiumisation and resource efficiency are not mutually exclusive, although one

respondent saw a tension;

There appears to be a lack of knowledge within some parts of the sector to fully exploit these opportunities;

Resource efficiency seems to be more prevalent at the lower end of the market and less applicable at the

higher end;

Respondents felt that resource efficiency offers some exciting design opportunities.

7.2 Summary of factors cited as barriers to the adoption of resource-efficient premium

packaging 7.2.1 Technical barriers Natural limits of materials and pack formats in terms of strength; and

Limitations of existing production lines to handle minimised packs.

7.2.2 Economic barriers Premium lines are lower volume so retailers favour core ranges for lightweighting activity as it gives greater

returns in terms of tonnes of packaging saved;

Smaller retailers and small producers do not have the necessary buying power or financial ability to request

revised mould changes;

Large drinks and packaging producers may not have CapEx available for new technologies and processes; and

The recession may be a less favourable time to invest the capital required in NPD.

7.2.3 Knowledge barriers Lack of understanding of resource efficiency benefits, methods and capabilities;

Lack of knowledge of which material or pack format is better for the environment;

Misconceptions that lightweight packs are not strong enough, look too different or don’t offer UV protection;

and

Fear that the consumer will not accept ‘eco’ or lightweight packs;

Consumers may lose interest in eco-friendly packaging as their priorities change.


8.0 Premium packaging and the environment 8.1 Packaging Packaging is a commonly used way of communicating the premium qualities of a product. Premium packaging could also be used as a way of lending quality cues to the product without improving product, although all respondents spoke in terms of developing a premium ‘whole’ rather than just premium packaging. Packaging was seen as just one element of the mix, which can be used to great effect in communicating premiumisation. Design Agencies L and M recognised packaging as a central communication medium that continues to work past the point of sale. This communication is incredibly varied and can be either quite subtle (Fudges Biscuits), flamboyant (Absolut), minimal (Innocent), traditional (Guinness), or healthy (Bottlegreen). IMAGE A variety of communication styles – subtle, flamboyant, minimal, traditional, healthy

There are a number of ways of using packaging to convey premium cues. These include choice of font, the use of graphics, application of brand, use of historic or traditional cues, etc. All respondents agreed that it was a careful mix of all rather than a domination of one way that was the key to successful premiumisation. Retailer A described packaging as the ‘silent salesman’ whilst Functional Water Producer I believed packaging design to be the key element in the premium mix – investing 90% of their seed funding in label design. Beer Producer D felt that its packaging – glass bottles – are already considered premium. Glass Sector Association N supported this view. Retailer B also felt that maintaining beer in glass was an attempt to premiumise, but that this has increased packaging weight considerably. This view was shared by Beer Producer E who felt that plastic does not assure quality in the same way as glass and cans. Retailer C said that it does not use extra packaging to convey premiumisation. Instead they focus on product quality. They differentiate through print quality. They use high quality packaging that shows the product off to its best effect. Visibility of product is very important and hence materials such as plastic and glass are widely used. The company have reduced the impact of the packaging around many products but have identified that the impact of waste food is more important than the issue of waste packaging. Alcoholic Drinks Producer H felt that packaging was very important in terms of communicating premiumisation as it added a lot of value to the product. For wines and spirits they felt that the key issue was to use glass for historic reasons. Their big question was how do they make packaging premium? They felt that packaging could be premiumised without using more packaging, for example by combining the smart application of design (to label specification, structural design, use of shape, colour, texture and so forth) with the use of materially efficient processing (such as narrow neck press and blow glass moulding, which gives a more consistent wall thickness). Alcoholic Drinks Producer G felt that consumers subconsciously see heavier bottles as adding more value but have no research to back this up. More premium wines tend to come in heavier bottles as they are bottled at source. In order to tempt the customer up the quality ladder they use better closures, foil blocking, gold labels and embossed bottles. They gave the example of the successful introduction of screw cap wines despite public perception being against them. They felt this was successful due to initiative coming from New Zealand, who are associated with quality wines. Interestingly, they felt that the key driver for plastic bottles for wine related to ability to take plastic packaged wine into venues and events that did not allow glass rather than any environmental aim. This company also ships wine from suppliers in bulk and now puts all products into lightweight bottles in the UK in order to cut material and transport costs.


Furthermore, and of great significance, was the agreement by all that premium packaging and resource efficiency need not be contradictory. Although one of the retailers felt that resource efficiency was not a major concern for the top-tier of its own-label products. Summary points Packaging is the central communication medium and works past the point of sale; Although packaging is a key way of communicating premiumisation generally premiumisation is seen as an

approach to the whole product and not just the packaging; and There is an agreement on the view that premium packaging and resource efficiency need not be

contradictory.

8.2 Environment All respondents see environmental performance as important. However, Design Agency L sees some approaches to premiumisation of packaging as being over opulent and over-layered – presenting significant opportunities for resource efficiency. There has been a natural focus on lightweighting in glass drinks. A number of respondents identified that resource efficiency and lightweighting have been going on for years but have only recently been termed sustainability. Design Agency L feel that the consumer has little tolerance for over-packaged product but at the same time finds environmental issues confusing. Wine Producer F also highlights the difficulty in getting clarity on environmental issues. For example, which is best, wine shipped by boat from Australia or wine shipped by lorry from Southern France? Glass Sector Accociation N take this one step further by stressing the benefits of bulk shipping wine to the UK and bottling it here to reduce the transport derived impacts of glass. Retailer A felt that moving from glass to plastic may be viable for low and mid range products but not for higher-end products. Both Wine Producer F and Premium Fruit Drink Producer K broadened the environmental debate by also focusing on the environmental impact of growing, harvesting and production. In this context packaging, although important, is only one element of the total environmental impact. It has helped that resource efficiency has become more important as raw material prices have risen. These prices are now falling but most respondents felt that resource efficiency and environmental improvement are too embedded within industry, retailers and the consumer not to remain central. Recent research by the Retailer C identified that environment was the key area of concern for customers. Retailer C has a strong environmental strategy and it is embedded within the organisation. They are reducing packaging weight by 25% over 5 years and are increasing recycled content where possible. Beer Producer D sees lightweighting as the key area of concern in the beer sector. This is where they have focused their attention. This view was shared by Bottled Water Producer I who have invested considerably in lightweighting, taking the weight of a 50cl PET bottle down by 2g and the weight of a 2 litre PET bottle down by 5g. Beer Producer E has commissioned research which concluded that whilst the consumer wants a more ecological product they are not willing to pay any more for it. The Functional Water Producer J felt that the water sector as a whole had fallen out of favour with consumers in relation to environmental issues. Therefore they were very keen to enhance communication around these issues. In particular they were keen to source raw materials from the UK and communicate that the product contains organic botanicals. Alcoholic Drinks Producer H felt that the key drivers for environmental improvement were pressure from retailers and legal drivers. They felt that some producers were making claims that couldn’t be substantiated and they also felt that there were many examples of ‘greenwash’ in the market, although no examples were given. Alcoholic Drinks Producer G have begun giving a per-unit-sold donation to an environmental charity as the country of origin is suffering significant drought. This was done to create a point of difference in marketing terms as well as to support important projects. Summary points All stakeholders see environmental performance as an important issue; There is some confusion over how to measure environmental performance as it can include many different

issues; Some see a number of perceived barriers to enhanced environmental performance whilst others believe it is a

requirement and makes good financial sense; and Consumers want improved environmental performance but will not always pay any more for it and maybe

misunderstand what an environmental improvement looks like.


9.0 Assessing the environmental impacts of premium drinks packaging 9.1 Methodology A selection of drinks, in different packaging formats, were compared using Eco3’s packaging analysis tool. Some of the products were ‘premium’ whilst others were not. The packaging assessment tool allows the comparison of different packaging alternatives through the measurement of four indices:

Recycled content;

Recyclability;

Product / pack ratio (weight);

Volumetric efficiency.

‘Recycled content’ considers the information presented on the packaging itself, as well as generally accepted industry figures for recycled content. ‘Recyclability’ is measured in relation to the current recycling practices in the UK. ‘High’ recyclability refers to packaging that is readily recycled by more than 65% of the local authorities in the UK. ‘Medium’ refers to those which are readily recycled by between 20 and 65% of local authorities and ‘low’ refers to packaging that is readily recycled by between less than 20% of the local authorities in the UK. 46 ‘Product / pack ratio (weight)’ is a simple measure of the weight of primary packaging used for each litre of product. This enables a normalised comparison of packs with different volumes. ‘Volumetric efficiency’ is a measure of the total cubic volume of the primary packaging used for each litre of product. This enables a normalised comparison of packs with different volumes of product. The following categories of drinks were analysed:

Lager, ales and cider;

Bottled water;

Soft Drinks;

Wine; and

Spirits.

9.2 Lager, ales and cider The variety of packaging reviewed for lager, ales and ciders included 330ml glass bottles, 600ml glass bottles, 1 litre glass bottles, PET bottles of various sizes and various sizes of aluminium cans (440ml and 500ml). The following observations were made on the different packaging formats used for lager, ales and ciders as a result of the assessment:

Recycled content: There was no specific on-pack information available for any of the packaging as to the

content of recycled materials. However, it can be assumed that glass bottles and aluminium cans contained at

least some recycled content;

Recyclability: All the packages assessed had a high recyclability due to the use of materials such as glass

aluminium and PET, all of which are readily recycled in the UK;

Product / pack ratio: The weight of packaging per litre of lager, ales and cider varied from 659g per litre

for some of the premium bottled drinks to just under 66g per litre for 440ml aluminium cans;

Volumetric efficiency: The volume of packaging per litre varied form approximately 1200cm3 per litre for

larger PET bottles to over 2000cm3 for glass bottles used in premium drinks.


In general those packages that had a higher packaging weight per litre of drink were also less efficient in terms of volume of packaging per litre. However these tended to be the packages with high recyclability. 9.3 Bottled Water The packaging used in the bottled water sector was mainly PET or glass. The following observations were made on the different packaging formats used for bottled water as a result of the assessment:

Recycled content: There was no specific on-pack information available for most of the packaging as to the

content of recycled materials. However, it can be assumed that glass bottles contained at least some recycled

content. A very small number of manufacturers use recycled PET in some bottles but the overall market share

of these is not significant in relation to this assessment;

Recyclability: All the packages assessed had a high recyclability due to the use of materials such as glass

and PET, both of which are readily recycled in the UK;

Product / pack ratio: The weight of packaging per litre of bottled water varied from over 480g per litre for

some of the premium bottled waters in glass bottles to under 90g per litre for the core waters packaged in

PET;

Volumetric efficiency: The volume of packaging per litre varied from 1300cm3 per litre of water for a PET

bottle to over 2000cm3 for some of the premium glass bottles.

In general those packages that had a higher packaging weight per litre of drink were also less efficient in terms of volume of packaging per litre. All packages were of a high recyclability. 9.4 Soft Drinks Soft drinks include carbonates, cordials and smoothies. The packaging used in this sector is varied. Examples assessed were packaged in PET, glass, aluminium cans, laminate pouches and liquid cartons. The following observations were made on the different packaging formats used for soft drinks as a result of the assessment:

Recycled content: There was no specific on-pack information available for most of the packaging as to the

content of recycled materials. However, it can be assumed that glass bottles and aluminium cans contained at

least some recycled content. A small number of premium drinks producers use recycled PET in their bottles –

some up to 100% rPET – and they provide good on-pack communication to express this. However, the overall

quantity of these packs is very small in relation to the entire sector;

Recyclability: The majority of the packaging assessed had a high recyclability due to the use of materials

such as glass and PET, glass and aluminium all of which are readily recycled in the UK. Liquid carton

packaging is becoming much more widely recycled in the UK but the laminate pouches are not recycled at this

time. Pouches are only a very small proportion of the market;

Product / pack ratio: The weight of packaging per litre of bottled water varied from over 480g per litre for

some of the premium cordials in glass bottles to under 35g per litre for drinks packaged in laminate pouches;

Volumetric efficiency: The volume of packaging per litre varied from approximately 1,100cm3 per litre for a

liquid carton pack to over 2,500cm3 for some of the more ‘stylised’ glass bottles used by some cordial

manufacturers.

In general those packages that had a higher packaging weight per litre of drink were also less efficient in terms of volume of packaging per litre. However, again, these tended to be the packages with high recyclability.


9.5 Wine The variety of packaging used in wine was the widest. It included PET (2 different shapes), liquid carton, laminate pouches, aluminium bottles, aluminium cans, bag-in-box and a ‘convenience’ pack containing 2 PET glasses pre-filled with wine. The following observations were made on the different packaging formats used for wine as a result of the assessment:


content of recycled materials. However, it can be assumed that glass bottles contained at least some recycled

content;

Recyclability: Recyclability of the different packages used varied as a result of the materials used. Over 60%

of the packages assessed had a high recyclability, 10% were considered to be of medium recyclability

(recyclable but need to be sent overseas to do so) and just over 20% of the packaging was of low

recyclability;

Product / pack ratio: The weight of packaging per litre of wine varied from 25g per litre for a 1.5 litre

laminate pouch to just under 880g per litre for 750ml of sparkling wine in a glass bottle;

Volumetric efficiency: The volume of packaging per litre varied form 1176cm3 per litre of wine for a carton

package to over 3500cm3 for glass bottles and ‘convenience packs’ which included 2 disposable plastic wine

glasses.

In general those packages that had a higher packaging weight per litre of wine were also less efficient in terms of volume of packaging per litre of wine. However these tended to be the packages with high recyclability. 9.6 Spirits and Liqueurs The predominant packaging type used in this sector is the glass bottle. The main difference between premium and core drinks is the weight of the bottles used and the inclusion of gift packaging, such as outer boxes or tubes on many of the premium spirits and liqueurs.


content of recycled materials . It is presumed that the glass bottles would contain recycled material, and that

the cartonboard used in some of the outer boxes would have recycled content;

Recyclability: Recyclability of the different packages used varied as a result of the materials used. All of the

packages assessed had a high recyclability due to the high proportion of glass – even with premium drinks,

glass made up the vast majority of the packaging weight despite a variety of gift packaging being used. Some

of the more common types of outer gift packaging included cartonboard with plastic (mostly PP) or metal

(mostly steel) end caps – unless these components can be easily separated, they render the whole item non-

recyclable. Some gift packaging used non-traditional materials, such as fabrics, ribbon, string – even neoprene

and sequins – which are currently not recyclable;

Product / pack ratio: The weight of packaging per litre of product varied from less than 500g per litre for a

core product in a 70cl bottle to over 1kg per litre for the premium lines using glass bottles and outer gift

packaging;

Volumetric efficiency: The volume of packaging per litre varied from approximately 1,900cm3 for a

standard core product in a 70cl glass bottle to over 3,500cm3 for the premium drinks.

As with many of the other categories, in general those spirits and liqueur packages that had a higher packaging weight per litre of drink were also less efficient in terms of volume of packaging per litre of drink.



9.7 Summary The packaging analysis tool showed that packaging formats and materials varied considerably in their assessment against the four environmental indices highlighted: recycled content, recyclability, product to pack ratio and volumetric efficiency. Additionally, it was noted that performance in one of the indices had an affect on performance in another of the indices – for example some packaging formats performed very well in recycled content and recyclability but poorly in product/pack ratio and volumetric efficiency, whilst other pack formats performed well in product/pack ratio and volumetric efficiency but poorly in recycled content and recyclability. This highlights the need for packaging developers to strive towards good practice within as many of the indices as possible, for example by using the tools and techniques provided in Section 10, ‘Premium drinks design guidelines and case studies’.

Recycled content: There are examples from sub-categories of the premium drinks sector with up to 100%

recycled content, proving that high recycled content in packaging for premium products is both technically

and commercially viable.

Recyclability: Recyclability varied by packaging material and type, although most of the packaging assessed

was consider to have a ‘high recyclability’ (see Section 9.1 for definitions of recyclability). Due to improved

recycling technologies and the increased availability of kerbside collections over the last few years, plastic

bottles may now have improved recycled content, and alongside glass, steel and aluminium cans, and liquid

cartons are also classed as ‘widely recycled’ 46. Therefore as recyclability – and quality of recyclate –

improves, more recycled content should become available.

Product / Pack Ratio: WRAP’s Packaging Benchmarking Data highlights the significant opportunities that

exist for weight reduction for many products. Clearly there are significant opportunities presented through the

lightweighting of glass and other materials, and WRAP is already making great advances here. The challenge

comes with material substitution, as although this may present the opportunity to reduce weight,

environmental impact isn’t all about weight, and currently there is not a widely accepted method of comparing

material types.

Volumetric efficiency: Is closely related to material and packaging shape, and can impact overhead costs

relating to space taken up on shelf, in storage, and in transit.

One of the barriers associated with changes to packaging formats or materials is consumer acceptance. Consumers are not always aware of the environmental indices highlighted above, or of how one might affect the other. For example, for consumers with a traditional understanding of recyclability, glass bottles are perceived as easy to recycle, and likely to have a high recycled content – however, consumers may not appreciate how this impacts on the transportation impact of the material, as it is heavier than most materials. Similarly, although laminate pouches may achieve a low product to pack ratio, they currently do not perform well with regards to recycled content or recyclability. There are certain similarities that are apparent across both drinks sub-categories and core/premium drinks. In many of the sub-sectors such as, spirits and lagers, ales and ciders, the material types used for packaging materials and formats are similar but the weight of the packaging is greater for the premium brands. In some cases the addition of an extra level of packaging is apparent in the premium sector. This might not necessarily affect recyclability or volumetric efficiency but it does affect the product to pack ratio (weight). The variety of materials used in other sub-categories is much more varied. The wine and soft drink sub-sectors both use a very wide range of packaging materials such as glass, aluminium, PET laminates and liquid cartons. The use of these materials was seen in both core and premium drinks. Recyclability is compromised when using materials such as flexible laminates but this format was not particular to core or premium. This analysis has shown that packaging materials used for premium and core drinks tend to be very similar. The main differences are the weights, volumes and particular physical design. Neither recycled content nor recyclability are particularly affected by premiumisation, however volumetric efficiency tends to be lower in premium products as does product / pack ratio. On the whole, the premiumisation of drinks seems to have affected packaging volume and weight most significantly.

10.0 Premium drinks design guidelines and case studies 10.1 Introduction This section of the report investigates best practice in terms of premium drinks packaging design. Design guidance is presented that is intended for packaging designers, technologists, buyers, specifiers and marketers. Guidance is both general, relating to all drinks packaging and there are also sections that are specific to certain pack formats. International case studies are included to illustrate points. Packaging undoubtedly plays a big part in communicating the ‘premium’ status of a product on shelf and its role in communication is becoming more and more important. Good packaging design uses visual cues to ensure that the brand positioning is clearly communicated to the consumer – some examples of this are given in Section 8.1. Building on the work done in Section 3 ‘Definitions and Themes’, cues are therefore likely to relate to the following premium product claims: Fashionable and trendy; High quality, relating to its taste; Technologically advanced manufacturing method (for example, triple filtered); Made using an age-old traditional method with a story (Heritage); Rare or only manufactured in small batches; Expensive, extravagant and difficult to afford (Luxurious); Ethical (fair trade or supporting community or environmental projects); Environmentally friendly (Packaging); Organic; Natural; Healthy; Grown-up, sophisticated, mature; Exotic, fun, innovative, quirky, novel; High performance, relating to energy, concentration, stamina; Has additional benefits (for example, younger looking skin, energy, vitamins, antioxidants); or Packaged in a way that gives additional functionality or convenience.

At the same time, from a functional point of view, packaging has to: Protect the product throughout the supply chain and reduce damage rates; Extend shelf life as much as possible; Safeguard the public’s health by preventing contamination of the contents; Identify the product on shelf (both the brand and the type of product); and Give additional information such as best before date, company info, recycling information.

Whilst premiumisation is a key current trend, the move to minimised and ‘environmentally friendly’ packaging is another key trend – so what is the relationship between these two important trends? Are they contradictory or can they work together? Interviews were carried out with key brand owners, producers and retailers as part of this project. It was clear from these interviews that there is a general belief that packaging can be made premium without compromising environmental sustainability and a belief that this is the direction that packaging design will need to go in the future. One major producer interviewed had a group called ‘Premium and Sustainable’, specifically tasked with looking at how to achieve this. Despite the apparent level of consciousness in the sector, store walk-throughs carried out under this project suggest there is still significant room for improvement. Some premium drinks packaging clearly sacrifices environmental performance in order to appear ‘premium’ and attract consumers’ attention on the shelf. Examples of this might include a crystal-encrusted vodka bottle or an inch-thick glass base on a whisky bottle. Interview respondents generally felt, however, that clever design could deliver both of these at the same time. Ensuring that both are clearly written into the design or sourcing brief at the start is key. 10.2 Disclaimer WRAP, Sprout Design and Eco 3 believe the content of this report to be correct at the date of writing. However, whilst every attempt has been made to ensure this is so, please note the disclaimer at the start of this report.


10.3 General packaging guidance The advice presented here is taken from a number of current sources, including a draft document entitled “Packaging and Recyclability: A guide for industry” from the Packaging Recycling Action Group (PRAG), due to be published in late Spring 2009 53. It also references “Plastics Packaging - Recyclability by Design (2009 update)” by Recoup 54, a leading authority on plastics waste management. 10.3.1 The waste hierarchy There are many versions of the waste hierarchy. Figure 8 shows one used by WRAP. Simply put, it is a list of approaches to waste ordered in terms of their impact on the environment:

Prevention: The best approach is to prevent the production of waste in the first place, by eliminating

packaging elements, for example.

Minimisation: Reducing the quantity of material used reduces environmental impact, and normally material

and transport costs.

Re-use: Reusing primary packaging (for example, glass milk bottles) avoids the need for extracting raw

materials, postpones waste going to landfill and avoids the resource and energy consumption associated with

recycling. However, washing may require detergents and a reusable pack may need to be more robust than a

disposable one.

Recycling: Recycling uses less resources than extracting new virgin materials. Aim for closed loop recycling

where components can be continuously recycled. The principals of designing for recycling are:

1 Use fewer packaging materials, in any one pack, to allow for ease of recycling. 2 Design for ease of separation to allow recycling. 3 Clearly communicate the pack material and recycling message. 4 Design packs so that all the contents can be easily extracted – reduces waste and eases

recycling. 5 Use recognised and/or standardised recycling labels, for example the BRC’s On-Pack Recycling

Label’ scheme, which is supported by WRAP46. 6 Avoid logos and icons that could confuse the consumer. See Defra’s ‘Green Claims Code’55 for

information. 7 Avoid extraneous or additional items on primary packs as they may contaminate recycling

streams.

Energy recovery: Incineration allows energy to be recovered from packaging materials.

Disposal: Landfill is the last option as this can result in reduction of productive land, leaching of chemicals

into water systems and greenhouse gas emissions.

Figure 8: WRAP-approved waste hierarchy


10.3.2 Overview of premium drinks packaging formats Recently there have been a considerable number of new drinks products being launched in packaging formats that are generally associated with different subcategories. Wine, in particular, is being retailed in almost every type of drinks packaging format, with some interesting designs which allow products to be positioned as ‘premium’ despite the format’s previous associations with non-premium products (for example wine in liquid cartons or doy sachets) – see image below, as an example. Image French Rabbit premium wine – See case study in Section 10.8 ‘Liquid cartons’

Figure 9 below shows a matrix which maps which drinks types are currently packaged in which formats. This gives an indication of the range of proven formats available for packaging drinks.

Figure 9: Pack types currently available to consumers, by drinks sub-category


10.4 Glass packaging 10.4.1 Design guidelines Lightweight the packaging, and considering the following:

For wine bottles, consider reducing the punt size;

Use optical spotting instead of physical registration marks;

Take the opportunity of mould-tool renewal to switch to a lightweighted format; and

Consult WRAP’s report ‘Protection from Lightstrike in Lightweight Glass Beer Bottles’ 57 for more

information about how lightweighting can be achieved without compromising glass’s ability to protect

the product from UV degradation.

Specify recycled content:

See the BS EN ISO 14021:2001 Environmental labels and declarations for clarification and definition of

recycled content by material, see www.bsi-global.com

Design for recyclability:

It is not necessary to suggest that consumers remove metal collars, caps etc. before recycling.

Avoid the use of ceramic stoppers and caps. This can contaminate the recycling stream.

Direct print onto glass and labels is better than full body sleeves.

Avoid RFID tags on glass; and

Use recognised and/or standardised recycling labels, for example the BRC’s On-Pack Recycling Label’

scheme, which is supported by WRAP46.

10.4.2 Lightweighting Strength of lightweighted glass bottles: One of the major concerns within the wine sector is ‘If a wine bottle is made lighter and thinner, will it not be weaker and therefore break more easily?’ To address this concern, an assessment was carried out by Glass Technology Services (GTS) that demonstrated that lighter, thinner bottles can be manufactured to a strength equal to that of more commonly used heavier bottles. 62 In recent times significant advances have been made in design, forming, inspection and testing techniques - all of which have contributed to the safe production of lighter glass containers:

Computer Aided Design (CAD) and Finite Element Analysis (FEA) that predicts stresses in virtual bottles have

both contributed to more efficient bottle design being possible;

Manufacturing Process Control has improved, partly due to the introduction of the Narrow Neck Press and

Blow (NNPB) that allows a more consistent wall thickness and avoids the need for such a large safety factor in

the amount of glass used;

New inspection technology based on high-speed imagery can detect faults including thin walls. This helps

ensure all bottles are strong enough. 39

Lightweighting and consumer perceptions: Manufacturers, retailers and brand owners need to be confident that sales and brand image will not be put at risk before lightweighting containers. The Institute of Psychological Sciences at the University of Leeds carried out extensive consumer research for WRAP’s ‘Container Lite’ project.37 It discovered:

Most consumers struggle to tell the difference between lightweight bottles and their heavier counterparts;

The biggest concern about lightweight glass relates to perceived issues of fragility and safety (addressed in

‘Strength of lightweighted glass bottles’ above);

Most consumers felt that lightweight glass would be suitable for expensive, premium products, as well as

value goods; and

Consumers take a positive view of lightweighting if the environmental benefits are clearly presented.37


http://www.bsi-global.com/

UV and lightweighted glass bottles: Beer and wine bottled in glass can be susceptible to damage by light. UV light is particularly harmful, but some regions of the visible spectrum also have a detrimental effect. WRAP’s GlassRite projects found that the relationship between glass thickness and the protection it affords to light protection is not linear – a relatively large reduction in thickness will result in a much smaller fall in protection. The small reductions in protection that arise from the use of thinner glass could be alleviated through a number of different approaches, such as in-store measures relating to the intensity and direction of lighting; use of coatings or additives to the glass or more widespread use of amber glass – which has excellent light-blocking properties.38 For further information, please also see WRAP’s report ‘Protection from Lightstrike in Lightweight Glass Beer Bottles’.57 Lightweighting glass case studies: Coors Brewers Ltd: Grolsch Beer company Coors Brewers Ltd. have lightweighted its 300ml bottle for its premium lager brand Grolsch. The first iteration of the process saved 13% of the weight of the bottle, saved 4,500 tonnes of glass each year and retained the shape of the original quite closely. The second, which achieves a further 10% reduction, is a little bolder in its redesign and features embossing a smaller label on the neck. Coors Brewers Ltd, together with glass manufactures O-I and Rockware, used the Container Lite project to explore a wide range of new design options and these were put through rigorous consumer perception trials.41 David Wiggins, head of packaging development at Coors Brewers Ltd said: “The new bottle looks superb. It proves that a lightweight bottle can be cost-effective, practical, and retain strong commercial appeal. We’re delighted with the results.” 41

IMAGE Two stages of lightweighting Coor’s Grolsch Lager Bottle

Coca-Cola Enterprises: Contour bottle Carbonates are an interesting case study as price points often depend more upon packaging than the products inside them. Coca-Cola, for example, is available in 330ml aluminium cans and also in its iconic 330ml glass ‘Contour’ bottle and buying the same amount of the same product in glass commonly commands double the price – thus, in this case, the product is ‘premiumised’ through the design of the packaging. According to Coca-Cola’s website, “Coca-Cola Enterprises Ltd (CCE) is reducing the weight of its iconic 330ml glass 'Coca-Cola' Contour Bottle by a fifth, which will lead to savings of over 3,500 tonnes of glass raw material and an estimated 2,200 tonnes of CO2. All new glass bottles of 330ml 'Coca-Cola', diet 'Coke' and 'Coca-Cola Zero' are now being made to the new specifications, known as the 'Ultra' design. The new bottle weighs 20% less, having been reduced from 263g to 210g, and, in order to maintain its trade-marked dimensions, is 0.1mm wider and around 13mm shorter than the original.” 64


IMAGE New Coca-Cola 300ml 210g ‘Contour’ bottle

Kingsland Wines & Spirits: Wine bottles Kingsland Wines & Spirits is one of the UK’s leading independent wine suppliers, providing wines from Europe and the New World under a wide range of well-known brand names. The company worked with Quinn Glass to rationalise its bottle range, by introducing lighter versions of two of its wine bottles. A 650g bottle was reduced to 484g, while a 460g bottle was reduced to 400g. The move has saved more than 1,600 tonnes of glass and 1,140 tonnes of CO2 each year.38 The appearance of the packaging has not changed significantly in either case. IMAGES Lightweighted wine bottles from Kingsland: Boulders Petite Sirah (Left) and Balance Cabernet Sauvignon & Shiraz (Right)

10.4.3 Use of recycled content The use of recycled content is not visually apparent in green or amber glass, but can introduce a coloured tinge in clear glass, as can be seen in the 360 Vodka case study in section 10.11.2. The maximum recycled content that can be specified in glass is currently: green glass: up to 95%, clear glass: up to 60%, amber glass: up to 65%.53 Bulk importation of wine facilitates the use of recycled content. According to a WRAP press release from May 2008, “199 million 75cl glass bottles are now filled with bulk imported wine each year in the UK instead of being bottled at source – an increase of 79 million glass bottles. The use of recycled glass has increased by nearly 24,000 tonnes per year, because (as a consequence of more bulk imported wine) more wine bottles are being made in the UK.” 60


10.5 Plastic packaging 10.5.1 Examples of plastic packaging used in the premium drinks sector Premium Australian wine Wolf Blass Green Label in a PET bottle (below, left) shows the viability of PET as a packaging material for premium wine. The bottle weighs 54g, which is significantly less than the average glass wine bottle – which weighs 500g. The bottle can also be recycled, and could contain recycled PET.38 IMAGE Wolf Blass in 750ml PET bottles

10.5.2 Design guidelines Lightweight or optimise the packaging by considering the following options:

Simplify shape to achieve even wall thickness;

Reduce cap weight and size; and

Optimise label coverage.


Recycled PET (rPET) is food safe and has a very high level of transparency and clarity so is perfectly

suitable for premium products such as Sainsburys ‘Taste the Difference Orange Juice’ (see Section

10.5.4).


Using clear or natural versions of materials such as HDPE or PET (without direct printing) allows them to

become part of a closed recycling loop and avoids the needs for chemical additives to increase opacity or

change colour. SIP water has taken this approach and produced a very premium pack (see Section

10.5.3).

Designing plastic bottles with a wide neck (to drink from) can often give them a premium feel as well as

allowing them to be fully emptied for recycling easily (see SIP example in Section 10.5.3).

Use recognised, standardised recycling labels, for example the BRC’s On-Pack Recycling Label’ scheme,

which is supported by WRAP46.

Identify polymer with SPI identification symbols (1 to 7) on polymer itself, not label, and where it can be

seen.

For bottles, sleeves and wraparound or collar labels that are only glued to the container at a few points

are optimum.

Using HDPE, LDPE and PP caps for plastic bottles is better than metal, PS and PVC as these materials

are easier to recycle. If caps are same colour as bottle they’re more likely to become high value

recyclate. Dark, opaque colours are hardest to recycle.


IMAGE SPI Polymer Identification Symbols IMAGE ‘On Pack Recycling Label’

10.5.3 Lightweighting and optimised packaging case studies: SIP water SIP is an interesting case study where a premium image has been achieved through the use of graphics, branding and through the simplicity of the structural pack chosen for the water. SIP is a flavoured, functional water aimed at women which included additives such as vitamin C, botanical extracts, white tea tincture and selenium and claims to help achieve younger-looking skin. The lighter of two standard PET bottle options was chosen, as the owners of the company didn’t see the thickness as an important factor in terms of consumer perception. The cap is left natural rather than being coloured, making it easier to recycle and avoiding the need for chemical additives. SIP, due to their relatively small volume product, were unable to source 100% recycled PET, although as recycling rates continue to rise, we would expect to see more and more rPET becoming available. IMAGE SIP Functional and Flavoured Water

Coca-Cola WRAP worked with Coca-Cola Enterprises (CCE) to test the feasibility of lightweighting their range of 500ml PET bottles. The successful project resulted in a weight reduction of the bottles from 26g to 24g - a saving of 8% – resulting in the lightest 500ml PET carbonated soft drink bottles that CCE has used in Great Britain. The amount of PET packaging saved each year by CCE as a result is of using the new lighter bottles in the first phase of roll out is 700 tonnes. The amount of PET that would be saved each year by CCE as a result of using the new lighter bottles if rolled out across all CCE production is 1,400 tonnes. 56

IMAGE Cola-Cola’s lightweighted 500ml PET bottles


Highland Spring According to the bottled water producer, Highland Spring have invested considerably in lightweighting and have developed taken the weight of their 50cl PET bottle down by 2g and the weight of their 2 litre PET bottle down by 5g. IMAGE Highland Spring PET bottles

10.5.4 Use of recycled content case studies: Sainsbury’s ‘Taste the Difference’ orange juice Sainsbury’s moved to 100% recycled PET for its ‘Taste the Difference’ own-label orange juice. The packaging retains its premium feel due to the RPET’s high transparency and clarity and the 100% recycled message is clearly displayed on the bottle. IMAGE Sainsbury’s Taste the Difference orange juice in 100% Recycled PET



10.6 Metal packaging 10.6.1 Examples of metals used in premium drinks sector This range of premium wines is packaged in cans for convenience. According to the Barokes websiteD, “Barokes Wines are the inventors of the innovative and patented Vinsafe™ wine packaging system which enables premium quality wine to be canned with stability and longevity.” Barokes have used a sophisticated graphic to position the wine as premium, despite the format being unfamiliar to a lot of wine drinkers. IMAGE Still and Sparkling Wine in cans from Barokes

Volute ‘premium portable wine’ Californian-based wine producer Volute packages its product in aluminium single-serve bottles and exploits the capabilities of the material to give a highly distinctive and premium image. The Volute websiteE says “We chose aluminium not only because it brings qualities identical to glass in terms of compatibility with wine, but it also protects the wine from light, which accelerates the (bad) aging process.” IMAGE Volute ‘premium portable wine’ in aluminium bottles

10.6.2 Design guidelines Lightweight, or optimise, the packaging, by considering the following options:

Opportunities exist for continued reduction of can body walls and ends, for example optimise wall

thickness of cans (see Coca-Cola case study in Section 10.6.3)


Use recognised and/or standardised recycling labels, for example the BRC’s ‘On-Pack Recycling Label’

scheme, which is supported by WRAP46;

Avoid bonding or fusing metal components onto other components made of different materials

D Website visited March 2009: http://wineinacan.com/about_us

E Website visited January 2009: http://blog.volutewine.com/blog/2008/08/about-carbon-fo.html


10.6.3 Lightweighting case study: Coca-Cola Enterprises A consortium including Coca-Cola Enterprises and WRAP launched a new can design in 2008 that was 5% lighter than the previous design. The body of the can was lightweighted in the EU, with the wall being 0.097mm wide – which is about the width of a human hair. The cans are lighter but just as strong and robust as before. The new can design will save 15,000 tonnes of aluminium across the EU each year and approximately 78,000 tonnes of CO2 - the equivalent to taking nearly 25,000 cars off the road every year. 42

IMAGE New lightweighted Coca-Cola can

10.6.4 Recycled content Packaging made from steel or aluminium contains a significant amount of recycled material as standard. Over 50% of cans are recycled in the UK. Cans are collected through a well established recycling infrastructure and capable of handling 100% of cans consumed in the UK. This figure is expected to rise annually. 53 Cans are infinitely recyclable without loss of quality and there is no ‘down-cycling’ of material to lower grade applications. Each can recycled substantially reduces the carbon footprint of the next can. Steel cans made from recycled material require only 25% of the energy needed from virgin material and if the can is an aluminium one, only 5% of the energy is required. Cans are made from materials produced with 50% or more recycled metal. 53 Recycled content case study: Volute ‘premium portable wine’ Volute claim on their websiteF that aluminium bottles demonstrate certain benefits when compared to traditional glass bottles: “The Volute bottles are made of aluminium, which is recycled at a rate of over 50% in the US (and over 90% in Sweden) vs. 20% for glass. … for the same volume of wine, the volute bottles weigh 4 times less than glass bottles…. Producing a Volute bottle from recycled aluminium requires about 90% less raw materials, 50% less water and pollutes 50% less air. Then comes the transportation. Due to its lower weight, transporting Volute Wine - remember it's imported from France - generates 30% less carbon emissions than transporting the same volume of wine in glass bottles.”M

IMAGE Volute ‘premium portable wine’ in aluminium bottles

F Website visited January 2009: http://blog.volutewine.com/blog/2008/08/about-carbon-fo.html


10.7 Flexibles and bag-in-box Flexibles and bag-in-box formats offer a lightweight packaging solution, but are not very common in the drinks industry . Historically these were limited to bulk or budget products, however this section highlights some examples of premium products in these packaging formats. In the UK, there are no currently significant recycling facilities for flexibles, although that may well improve considerably over the next few years53. However, the card boxes that make up the heavier part of bag-in-box formats are recyclable, and often made with a high recycled content. 10.7.1 Examples of flexibles and bag-in-boxes used in the premium drinks sector Flexibles Funkin is a range of quality cocktail mixers with modern graphics printed on silver film, and is a good example of premium drinks packed into lightweight pouches, which communicate a premium image. IMAGES from Funkin website (http://www.funkin.eu/funkinprofessional/), Feb 2009

Although not a ‘core’ wine, according to its websiteG Arniston Bay is “the recipient of many local and international awards and is consistently one of the top four wine brands in the UK”. In additional to glass bottles, the wine is available in doy sachet packs with environmental claims both on the front of packaging and on the company’s website. The graphics do very well in adding perceived value to the product. IMAGE Arniston Bay wines in pouches

Bag-in-box The standard of design has improved considerably in recent years for drinks sold in bag-in-box format (mainly wine, but also premium ciders and fruit juice). Some examples are shown below:

G Website visited March 2009: http://www.arniston-bay.com/v2/default.asp


IMAGES (Left to Right): Balance wine, Block Wine, DTour Wine, Weston’s Organic Cider, and Walther’s Grenadine Fruit Juice

10.7.2 Design guidelines Lightweight, or optimise, the packaging, by considering the following:

Consider flexibles as a lightweight alternative as they are generally the lightest weight solution available;

Consider removing the box from traditional bag-in-box formats, and use the pouch alone (see Arniston

Bay example in 10.7.1);

Consider reducing the tab size / flap overlap on cartons;

Consider reducing the seal seam on flexibles (see WRAP Case Study Report ‘Cardboard packaging

optimisation: best practice techniques’ 64)


For bag-in-box, maximise recycled content


Avoid or minimise the use of adhesives if possible;

Label cardboard boxes as recyclable using recognised and/or standardised recycling labels, for example

the BRC’s ‘On-Pack Recycling Label’ scheme46.

If using plastic laminated card, avoid double sided laminates as they are not suitable for recycling.

The bag-in-box format is versatile, and can be used for many different products, not just wine (see Walther’s

Grenadine Juice example in Section 10.7.1).

10.7.3 Recycled content case study Boho is a particularly interesting example of bag-in-box as it positions itself as an environmentally responsible brand. According to website www.thedieline.com, Boho “has converted all its glass bottles to the lighter wine casks and estimates a resulting 55% smaller carbon footprint and 85% less landfill waste. With the BIB system, no bottle labels or corks are needed, and shipping costs are reduced by the lighter weight of the casks versus glass bottles.Boho Vineyards winemaker Adam Richardson created the environmentally responsible packaging, which uses only soy-based inks on 95% recycled kraft paper. The resulting new lightweight box features paisley swirl graphics, and the interior bags provide an excellent oxygen barrier. The wines stay fresh for at least six weeks after opening.” H IMAGE Boho Wine in 95% recycled kraft paper

H Website visited April 2009: http://www.thedieline.com/blog/2008/09/boho-brownbox-w.html

10.8 Liquid carton packaging 10.8.1 Examples of liquid carton packaging used in the premium drinks sector IMAGE French Rabbit premium wine IMAGE Innocent orange juice IMAGE Tropicana orange juice

Liquid cartons provide an all-over print surface for graphics, and this creates an opportunity for brands to differentiate themselves with high quality graphic design in order to convey the premium message. Examples include core wine brands, below, as well as the premium wine brand French Rabbit (above left) and premium smoothies and juices (above right). IMAGE (left to right) Range from South Africa’s premiere wine producer Distel, Two Oceans wine in liquid carton, Vendange range of wines

10.8.2 Design guidelines Liquid cartons are recyclable although facilities do not exist everywhere in the UK. As most of these packs are cuboid, they tend to offer good volumetric efficiency on shelf and in transport, reducing transportation costs.

Lightweight, or optimise the packaging;

Specify recycled content;


Label liquid cartons clearly for recycling using recognised and/or standardised recycling labels, for

example the BRC’s On-Pack Recycling Label’ scheme 46

Provide details for websites with recycling bank locations for example, www.ace-uk.co.uk/recycling.html

or www.tetrapackrecycling.co.uk.

Plastic caps and openings that are attached to the drinks cartons do not disrupt the carton recycling.

Other plastic sleeves, etc. should not be included.


http://www.ace-uk.co.uk/recycling.html

http://www.tetrapackrecycling.co.uk/

10.9 Gift packaging Gift packaging is frequently added to drinks in order to increase their appeal as a gift purchase. Store walkthroughs and market research carried out as part of this project have identified spirits (especially whisky) and Champagne as sub-categories where gift packaging is most common. Premium whiskies are commonly purchased as a gift and Champagne’s association with celebration also encourages gift purchases. The most common formats for gift packaging for whisky and Champagne are cardboard and/or metal tubes and boxes. 10.9.1 Design guidelines Packaging minimisation

Offer the same product both with and without the gift packaging – this reduces costs and packaging

waste and gives the consumer more choice;

Consider whether excellent, attractive primary pack design can replace the need for additional gift

packaging and therefore reduce costs (see Perrier Jouet example, below);

Consider the use of foil blocking (this does not prevent recycling), embossing and the specification of

attractive (recyclable if possible) closures on primary pack to replace the need for gift packaging;

If the secondary packaging performs a useful function, consider whether there are other ways in which

this function can be performed?

Specify recycled content

Where additional gift packaging is necessary, specify a material with high recycled content

Design for recyclability

Make sure that if more than one material is used in the gift packaging, the materials are recyclable and

easily separable;

Ensure materials are clearly labelled for recycling using recognised and/or standardised recycling labels,

for example the BRC’s ‘On-Pack Recycling Label’ scheme46.

Interviews with representatives from key producers and retailers were conducted during the course of this project. It was a common belief amongst interviewees that as pressure to reduce packaging continues to increase, we will see more emphasis on the product itself and less additional packaging being used to convey premium status. Perrier Jouet The Perrier Jouet Champagne bottle is decorated with flowers that are present throughout the graphic treatment of the brand, the image below being taken from the Perrier Jouet website. This graphic lifts the bottle in terms of perceived value and could negate the need for additional gift packaging. IMAGE Premium graphic treatment of Perrier Jouet Champagne bottle


10.10 Biopolymer packaging 10.10.1 Official WRAP stance on biopolymer packaging 43 WRAP believes that the introduction of biopolymers should be done in a way that can demonstrate benefit to the environment. Pending a full life cycle assessment, it is likely that a benefit will be demonstrable in the following circumstances:

Products using the new materials are designed to minimise the amount of material used;

Use of the material provides improved performance or technical benefits for example, a reduction in food

waste;

It is compostable – and preferably home compostable. Packaging should be certified as compostable and

conform to EN 13432;

It is clearly identified and differentiated from oil-based polymers;

Users of the material are fully informed about how to distinguish it from other polymers and enabled to

dispose of it appropriately at end of life;

Practical arrangements can be made for the collection and appropriate treatment of the new materials; and

considering applications where established recycling systems are not in place.

The principal risks arise at the end of life phase. Instead of being composted, biopolymers may find their way into the recyclables stream which would increase the cost of recycling or prevent it completely. Alternatively biopolymers could be added to the residual waste stream and increase the biodegradable waste sent to landfill, making it harder for the UK to meet its legal waste obligations and increasing the amounts of methane gases generated. 43 10.10.2 Case study – Innocent In 2007 premium drinks company Innocent took the decision to change from making smoothie bottles from biopolyers to using 100% recycled PET – this was a reaction to an article in a newspaper according to Innocent Drinks’ website.61

IMAGE Compostable PLA Innocent bottle 2007 IMAGE Replacement recycled PET bottle



10.11 Reusable packaging 10.11.1 Guidelines – reusable packaging Consider using returnable packaging but remember that there needs to be the infrastructure to support it. In

some cases there are cost savings to be made from using returnable packaging for both retail and transit

packaging, which can be returned and re-used to reduce waste. For further examples of WRAP’s work in this

area see www.wrap.org.uk/retail/case_studies_research/case_study_1.html .

Promotion of re-use by the consumer should be highlighted where secondary packaging is unavoidable (for

example, whisky tubes: “artists! use me for paintbrushes!” or “chefs! Use me for pasta!”, depending on the

tone of voice that fits the brand)

Remember that reusable packaging that uses more material than non-reusable and which consumers end up

collecting more of than are practically useful may well have greater environmental impact than single-use

packaging.

Label components so that they can be properly recycled at the end of their re-usable life. Use recognised

and/or standardised recycling labels, for example the BRC’s ‘On-Pack Recycling Label’ scheme46.

10.11.2 Reusable packaging case studies 360 Vodka 360 Vodka describes itself as “the World’s first Eco-Luxury Vodka”. It has been included here because it is an example of how the fact that packaging is returnable can help convey that it is a premium product. Also contributing to the product’s premium status are the facts that the glass is made from 85% recycled content and the label from 100% post consumer waste. The product is locally sourced and the bottle is reusable. The 360 website requests you ‘close the loop’ by posting the closure back to the company in a pre-paid envelope. Packaging and promotional materials are 100% recycled. Swords Wine Sold in Victoria, Australia, this refillable wine bottle system is another example of how reusable packaging has been used to add value to the product and convey a premium image. The following information is taken from an existing WRAP case study document: “Empty 1 litre wine bottles are returned by the customer to the supermarket. The incentive is a $3 deposit. Bottles are collected from stores in bulk; washed and refilled in the Swords depot from large stainless steel tanks. The Swords wine range is mid-market and slightly above. The refill bottles are designed to provide an upmarket image rather than a cheap option. Swords achieves high customer loyalty and choose products carefully to ensure their reputation for quality is maintained. Wine tasting events are often held to demonstrate the quality of the wine.” I IMAGE 360 Vodka in reusable, recycled bottle IMAGE Swords wine

I Source: Swords Wine WRAP case study http://www.wrap.org.uk/templates/packaging_photo_library_details.rm?id=7849 59


http://www.wrap.org.uk/templates/packaging_photo_library_details.rm?id=7849

11.0 Conclusion This project has looked at two important drivers for change in drinks packaging: premiumisation and resource efficiency, and whether the two can be achieved simultaneously or whether they are at odds. ‘Premium’ and ‘Premiumisation’ as terms do not have commonly agreed definitions and this project found that both terms mean different things to different people and to different organisations. ‘Premium’ clearly relates to actual or perceived product quality as well as to price, but there is no common understanding of exactly how. ‘Premiumisation’ of a sub-category generally refers to an increased demand for and proportion of premium products, but it can also describe the trading up of consumers from lower to higher price points. ‘Premiumisation’ has been an evident trend in and outside of the drinks industry since the Second World War. Branding, marketing, packaging, design and production methods have all been advanced by retailers and producers competing to produce better and better products. As quality improves, consumers’ expectations are raised accordingly, resulting in further demand for premium products. As a result, these premium products have become more mainstream and affordable. Rather than being limited to a small number of more affluent consumers, premium ranges in supermarkets now offer every customer the chance to trade up as part of their normal shop, whether it’s a weekend purchase or a special occasion. In more recent years ‘premium’ has entered the mainstream and there has been an increase in the proportion of products launched as ‘premium’. This is partly due to increasing consumer affluence and partly due to producers seeking higher margins. Simultaneously, retailers have been driving prices down with heavy promotions and mass discounting. Although this latter trend was evident before the recent ‘credit crunch’, current economic conditions are likely to exacerbate it. These two influences have resulted in a ‘polarisation’ of the market and subsequently fewer core products have been introduced at mid-level prices. A common method used to tier products within a supermarket is by using the “Good, Better, Best” system of value, core and premium own-label products. The introduction and improvement of this methodology in the last five years or so has changed the market by benchmarking to some extent what consumers see as ‘premium’ or ‘budget’ offerings. According on one design agency interviewed, brands are more likely to position new products in relation to own-label products rather than the other way round. Brands can position products as ‘premium’ through making claims and communicating brand values that justify the higher price than the equivalent ‘core’ product. This project has distilled these into eight key themes or types of premium within the drinks sector: 'Designer', 'Quality', 'Luxury', 'Responsible', 'Health', 'Exotic', 'Functional' and 'Functional Packaging'. Some of these types are expanding in popularity for example, Responsible and Functional premium, and their growth is contributing to the overall premiumisation of the drinks sector. Twenty key representatives from the drinks industry were interviewed about definitions of ‘premium’, evidence of premiumisation, drivers for premiumisation, about their companies’ approaches to resource efficiency and any barrier they might face. Interviewees included heads of deparment, buyers, designers, marketers and packaging technologists and represented retailers, producers, design agencies and industry bodies. All but one of the interview respondents saw that premiumisation and resource-efficient packaging need not conflict. There was a high level of awareness of ecodesign methodologies amongst the respondents and a rapidly increasing number of public commitments to packaging reduction and recycling targets from corporations. A number of barriers to resource efficient drinks packaging have been encountered throughout this project, some of which are real and some of which are perceived. Although in some cases, moving towards more environmentally friendly packaging will take considerable investment or time, many barriers can be easily overcome and in fact are due to misconceptions that exist as a result of this area still being in its infancy. These barriers identified are presented in the table below, beside responses to each barrier and sources of further information:


Table 4: Barriers and opportunities for resource-efficient premium drinks packaging design Perceived Barrier Response Further Information 1. Technical Barriers Lightweighted pack is not strong enough to survive entire supply chain

- Lightweighted cans, glass bottles and PET bottles can be just as strong because of modern production, inspection and design methods.

- Manufactured products, such as glass bottles, go through stringent performance test before sale, to ensure they’re fit for purpose.

- Where the supply chain sends multiples, outers or SRP to the retailer, strength can be added to the transit packaging to effectively protect the product in transit, enabling the primary pack to be optimised.

- ‘Make or break: Bottle Strength and the Manufacture of Lighter Weight Wine Bottles’ WRAP Information Sheet 39

- ‘Lighweighting the can pack’ Coca-Cola can lightweighting WRAP Report. 66

- ‘Minimising packaging: Coca-Cola’s lightest ever PET 500ml bottle in GB’, WRAP Case Study Report 56

Existing production line cannot handle lightweighted packs

- Run a trial to determine whether this is or is not the case for your line.

- Many producers have invested in modern lines in order to get lower unit costs – only question of payback period.

- Try to rationalise container shapes to minimise filling part changes, thereby making change more efficient.

- ‘Lightweight Wine Bottles: Less is More’ WRAP Case Study Report. 38

- ‘Lighweighting the can pack’ Coca-Cola can lightweighting WRAP Report 66

- ‘Minimising packaging: Coca-Cola’s lightest ever PET 500ml bottle in GB’, WRAP Case Study Report 56

- Section 10.4.2 of this report Thinner glass walls means greater UV penetration which affects life of product

- Reduction in glass wall thickness is not proportional to increase in UV penetration.

- Often the colour of a material has a stronger correlation with UV penetration.

- ‘Protection from Lightstrike in Lightweight Glass Beer Bottles’, WRAP ‘GlassRite’ Report 57

2. Economic Barriers Premium lines are lower volume therefore only lightweight core or high volume products to meet targets.

- Premium is increasingly high volume and to meet newer packaging reduction targets, a larger proportion of total range will need lightweighting or optimisation.

- Implementing dramatic changes on premium lines has the benefit of creating product differentiation which could be of benefit to the brand

In the recession, it’s not a good time to invest in packaging reduction

- Optimised packaging can generate significant business rewards with surprisingly short payback times. These may include reduced materials usage, optimised pallet, storage and transport costs, improved CSR credentials and customer perception.

- Those with the foresight to see the value of resource efficiency may put themselves in a stronger position to ride out difficult economic times

- WRAP case studies and support - see www.wrap.org.uk/retail/

I’m a small producer or retailer and don’t have the buying power to get recycled or lightweighted packs

- Work in collaboration with the manufacturer and other retailers and brands to lightweight jointly owned/used containers.

- Availability will improve as more large-players invest.

I am a small producer and a mould change will be costly

- Check when the mould will need replacing and take the opportunity to redesign for optimisation when it does.


3. Knowledge Barriers Consumers will think there is less product in the pack

- For wine bottles, height is more of a determining purchasing factor than weight.

- Typically, consumers can very seldom detect a 10-20% reduction in glass bottle weight, especially if the original bottle was heavier than average.

- Use other options to communicate and encourage purchase – such as graphics, embossing, label design etc

- If shape or size does change significantly, inform the consumer either on pack or through merchandising

- ‘Lightweight Wine Bottles: Less is More’ WRAP Case Study Report. 38

If new pack is different, consumer won’t recognise the brand

- Maintaining brand and product equity is vital. Key brand features should be identified and incorporated into new design to maintain consumer recognition.

- Consumer testing of a new product design can be beneficial

- ‘Lightweight beer bottles: setting a bold new standard’, WRAP Case Study Report. 41

- ‘Lightweighting beer and cider Packaging’ WRAP Case Study Report. 67 (Includes examples from premium lager, ale and cider brands)

- ‘Iconic Coca-Cola Glass Bottle Sheds Tonnes Of Weight In Environmental Makeover’ 63

- Section 10.4.2 of this report Consumers aren’t so bothered about eco-friendly packaging in the recession.

- There is research to indicate consumers are still looking for green products (Oct 2008).

- Resource efficient packaging can provide significant business benefits in the long term.

- Some long term changes may take a while to implement, by which time economic conditions may have improved.

- 'Capturing the Green Advantage for Consumer Companies’ 58

I don’t know which pack format is best for the environment.

- Whichever pack format is chosen for your product, ensure that good practice is followed for that material or format. Ask the following questions before making a change: - Does the new design offer product protection and

minimise product damage? - Is the packaging really required? - Is the optimum amount of material being used? - Can the packaging be re-used or returned? - Can the packaging be recycled? - How much recycled content does it contain, and

could it contain more.

My supplier is resistant to packaging reductions / My customers are demanding changes to packaging which my company cannot achieve

- Work with your supply chain at the onset of discussions on packaging changes – this could be mutually beneficial.

- Many packaging manufacturers have designers who can assist with exploring optimisation and recycled content opportunities.

Lightweighted pack or reduced packaging won’t look ‘premium’ any more.

- By investing in careful design, a premium look can be achieved with minimal materials. Good design can be used to ensure that less really is more!

- Section 10.4.2 of this report: Coca-Cola and Grolsch case studies

Good packaging design has the power to position a product as premium whilst at the same time help producers and retailers take advantage of resource efficiency in terms of reduced costs and good CSR. This project has identified a large number of examples of excellent packaging design that communicate a ‘premium’ message whilst at the same time reducing environmental impact. However, there is a huge number of examples of drinks


packaging which are not resource efficient or recyclable and where the desire to be ‘premium’ has clearly compromised these things. Some examples of packaging across premium and core sub-categories were weighed, which showed a difference in packaging weight between these premium and core products. This exercise illustrated that on the whole (although not entirely) premium drinks tended to have more or heavier packaging than their core equivalents, even when packaged in the same material and format, for example a 75cl glass bottle. This suggests that, without careful control, the trend towards premiumisation could result in increased packaging being generated from the drinks sector, going against any targets to reduce packaging such as the Courtauld Commitment. However, excellent progress is already underway in the drinks sector - both premium and non-premium - and packaging reduction is already on the agenda for many companies. Independent producers like Innocent are also driving the sustainability agenda into the drinks industry and introducing new packaging designs that have been developed with reduced environmental impact in mind. During the current economic uncertainties, resource efficiency could be considered as one method of driving business costs down, as well as rewarding customers with good value. Coca-Cola’s new can, for example, will save 15,000 tonnes of aluminium across the EU each year and approximately 78,000 tonnes of CO2. Coca-Cola’s new lightweighted PET bottle can save 1,400 tonnes of PET plastic if rolled out across all CCE production.56 Also, Coors Brewers’ new lightweighted 330ml glass Grolsch bottle saved 13% of the weight of the bottle and 4,500 tonnes of glass each year. These savings clearly help reduce material costs, transports costs and energy costs for companies.41 Readers are encouraged to think what opportunities there are for their organisation. These could include:

Consider the business benefits of investing in a new lightweight structural packaging solution for your product

(see Section 10, ‘Premium drinks design guidelines and case studies’);

Consider whether perceived barriers are actual barriers or whether the technology exists to overcome them

(see Table 5 above);

Understand opportunities for resource-efficient design (see Section 10, ‘Premium drinks design guidelines and

case studies’);

Invest in experienced graphic and structural designers, whether employees or outsourced agencies, to ensure

that your product communicates premium effectively to the consumer whilst at the same time using resources

efficiently and achieving high recyclability and low environmental impact. Include these things in the design

brief and offer designers guidance such as that found in Section 10 of this report;

Encourage careful specification within your business to ensure products are not over-specified or over-packed

Whilst there is a sense of change in the air, a lot of discussion and some excellent progress being made, there is still a lot of work to do in order to meet challenging waste reduction targets. Careful design and specification has a key role to play here in reducing material and costs and increasing recyclability and recycled content, whilst also maintaining the premium presentation of drinks and their packaging.


References 1 ‘Wine Report 2008’, Off Licence News / Neilsen 2 ‘Wine Retailing’ Retail Intelligence, Mintel, June 2007 3 ‘Champagne and Sparkling Wine’ Market Intelligence, Mintel, March 2008 4 ‘Ales and Stouts’, Market Intelligence, Mintel, May 2008 5 ‘Off vs On Trade Drinking’, Market Intelligence, Mintel, September 2008 6 ‘Premium Soft Drinks’, Market Intelligence, Mintel, January 2008 7 ‘UK Retail Briefing’, Food and Drink Focus’, Mintel, August 2008 8 ‘Alcoholic Drink Packaging and Labelling’, Market Intelligence, Mintel, February 2008 9 ‘The Grocer’ 5th May 2007 10 ‘Marketing’ 24th Sept 2008 11 ‘Cider’, Market Intelligence, Mintel November 2008 12 ‘Drinking Habits Report UK’ Mintel Dec 2006 13 ‘Sports and Energy Drinks’, Market Intelligence, Mintel, July 2007 14 ‘Lager’, Market Intelligence, Mintel July 2007 15 ‘Spirits Report 2008’, Off-Licence News, 5th September 2008 16 ‘Liqueurs’, Market Intelligence, Mintel, June 2008 17 ‘Low-Alcohol and Alcohol-Free Drinks’, Market Intelligence, Mintel, January 2007 18 ‘Uplift at last - as consolidation begins’, European Furniture Retailing, Sector Report, June ‘07

http://www.verdict.co.uk/Marketing/dmvt0390m.pdf 19 ‘Home Fragrance - Fanning the flames’, Cosmetics Business, Sector Report, SPC April 2006

http://www.cosmeticsbusiness.com/story.asp?storyCode=394 20 ‘Drinks International’ Magazine, May 2008 21 ‘The Rise of Functional Water’ By Neil Merrett, 14-Jun-2007

http://www.beveragedaily.com/Industry-Markets/The-rise-of-functional-water 22 ‘Flavoured Alcoholic Beverages’, Market Intelligence, Mintel, October 2007 23 ‘Drinks Off-Trade Trends’, VERDICT, January 2008 24 ‘Whiskies’, Market Intelligence, Mintel, August 2008 25 ‘Alcoholic Mixables’, Market Intelligence, Mintel, July 2008 26 ‘Spirits in the UK to 2010’, VERDICT, Aug 2006 27 ‘Bottled Water`, Market Intelligence, Mintel June 2007 28 ‘Soft Drinks in the UK to 2011’, VERDICT, November 2007 29 ‘Cordials’, Market Intelligence, Mintel, June 2008 30 ‘Fruit Juice and Juice Drinks’, Market Intelligence, Mintel, November 2008 31 ‘Smoothies’, Market Intelligence, Mintel October 2008 32 ‘Water Innovation Magazine’ http://water.foodbev.com/ArticleDetail.aspx?contentId=322 33 ‘Premium Foods’ Market Intelligence, Mintel, September 2006 34 ‘Shopportunities, “Premium” Issue 4’ Institute of Grocery Distribution, 2005 35 ‘On-Trade Soft Drinks’, Market Intelligence, Mintel, September 2007 36 'Ethical water brands may boost flagging UK sales’ (of Water), Neil Merrett, April 2008 37 ‘Lightweight Glass Containers: Understanding Consumer Perceptions’, WRAP Case Study Report, March 2007 38 ‘Lightweight Wine Bottles: Less is More’ WRAP Case Study Report 39 ‘Make or break: Bottle Strength and the Manufacture of Lighter Weight Wine Bottles’ WRAP Information

Sheet 40 ‘The Benefits of Importing Wine in Bulk’ WRAP Case Study Report 41 ‘Lightweight beer bottles: setting a bold new standard’, WRAP Case Study Report 42 Coca-Cola Press Website http://presscentre.coca-cola.co.uk 43 ‘Biopolymer Packaging in UK Grocery Market’, WRAP Information Sheet 44 ‘NovusVinum’ Website http://www.novusvinum.com/features/prestigecuvees.html 45 ‘Inventory of Carbon and Energy (ICE)’, Version 1.6a, SERT, University of Bath 46 ‘On-Pack Recycling Label’ scheme, managed by BRC and supported by WRAP

www.onpackrecyclinglabel.org.uk 47 ‘The Random House Unabridged Dictionary’, Random House, Inc. 2006 48 ‘Affordable premiumisation and healthy innovation boost Britain’s biggest brands’, Australian Food Network,

Sept 2008 49 ‘Whose turn is it in the sun?’, The Grocer, July 2008 50 ‘Trends/insights: consumer insight’, The Australian Wool Innovation Limited, Dec 2008


http://www.verdict.co.uk/Marketing/dmvt0390m.pdf

http://www.cosmeticsbusiness.com/story.asp?storyCode=394

http://www.beveragedaily.com/Industry-Markets/The-rise-of-functional-water

http://water.foodbev.com/ArticleDetail.aspx?contentId=322

http://presscentre.coca-cola.co.uk/

http://www.novusvinum.com/features/prestigecuvees.html

http://www.onpackrecyclinglabel.org.uk/

http://www.merinoinnovation.com/awi/en/Home/trends+and+insights/consumer+insight/insights_premiumisation_0408_en

51 The Food and Drink Industry Network (FDIN) article: http://www.fdin.co.uk/news/features-premiumisation.html

52 ‘Executive predictions: The 2008 outlook from fashion’s forecasters’, Drapers OnLine, January 2008 http://www.drapersonline.com/news/executive-predictions-the-2008-outlook-from-fashion’s-forecasters/437603.article

53 ‘Packaging and Recyclability: A guide for industry’, Packaging Recycling Action Group (PRAG), due to be published in late Spring 2009

54 ‘Plastics Packaging - Recyclability by Design’, Recoup, 2009 update 55 ‘Green Claims Code’, DEFRA, 2000 http://www.defra.gov.uk/environment/consumerprod/gcc/pdf/gcc.pdf 56 ‘Minimising packaging: Coca-Cola’s lightest ever PET 500ml bottle in GB’, WRAP Case Study Report 57 ‘Protection from Lightstrike in Lightweight Glass Beer Bottles’, WRAP GlassRite Report, March 2008 58 'Capturing the Green Advantage for Consumer Companies’, The Boston Consulting Group, Jan 2009 59 ‘Swords Wine, 1 litre bottles’, WRAP on-line case study Report, Jan 2006

http://www.wrap.org.uk/templates/packaging_photo_library_details.rm?id=7849 60 ‘Wine Industry Lightens Up and Builds Bulk to Cut CO2 Emissions’, WRAP press release, May 2008 61 ‘An update on our compostable bottle’, Innocent Drinks on-line blog entry for October 2007

http://innocentdrinks.typepad.com/innocent_drinks/2007/10/a-bit-about-our.html (viewed March 2009) 62 ‘Demonstrating glass lightweighting’, WRAP Container Lite Final Report, April 2007 63 ‘Iconic Coca-Cola Glass Bottle Sheds Tonnes Of Weight In Environmental Makeover’, Coca-Cola website,

http://presscentre.coca-cola.co.uk/viewnews/ultra_contour_bottle (viewed March 2009) 64 ‘Cardboard packaging optimisation: best practice techniques’ WRAP Case Study Report, June 2008 65 FEVE The European Container Glass Federation http www.feve.org/why_pack_in_glass.html 66 ‘Lightweighting the can pack’ WRAP Report, September 2008

http://www.wrap.org.uk/retail/case_studies_research/report_lightweight.html 67 ‘Lightweighting beer and cider packaging’ WRAP Case Studies and Reports, October 2008





http://www.fdin.co.uk/news/features-premiumisation.html

http://www.drapersonline.com/news/executive-predictions-the-2008-outlook-from-fashion's-forecasters/437603.article

http://www.drapersonline.com/news/executive-predictions-the-2008-outlook-from-fashion's-forecasters/437603.article

http://www.defra.gov.uk/environment/consumerprod/gcc/pdf/gcc.pdf

http://www.wrap.org.uk/templates/packaging_photo_library_details.rm?id=7849

http://innocentdrinks.typepad.com/innocent_drinks/2007/10/a-bit-about-our.html

http://presscentre.coca-cola.co.uk/viewnews/ultra_contour_bottle

http://www.feve.org/why_pack_in_glass.html

http://www.wrap.org.uk/retail/case_studies_research/report_lightweight.html


Appendix 1: Wine, sparkling wine and

Champagne

1.0 Market survey 1.1 Still wine The year ending 14th June 2008 saw the value of the UK off-trade wine market increase by 5% to £4.7bn with the average price of a bottle of wine increasing above £4 for the first time to £4.08.1 This puts the total volume at 1.15bn bottles and makes still wine a significant sector in the UK in terms of volume. 9 of the top 10 brands and 38 of the top 50 brands are in growth1 but the majority of these wines would not be considered premium. Constellation Europe owns 5 of the top 10 brands in the UK, including Hardy’s (No. 1 brand), Stowells and Echo Falls. Own-label wines dominate the brands, making up 57.6% of the market by volume in 2006. The majority of these are selected by, and exclusive to, the retailer. It is also interesting to note that 5 of the top 10 brands are Australian and are therefore transported large distances. According to the Head of PR at one major international wine producer, the last few years have premium wines (£7 or £8 bottles and above) grown from representing 1% to 3% of the market. Whilst premium wines are gaining in popularity, they are still fairly insignificant in relation to the entire wine market in the UK. Contrary to many areas of food and drink, which have seen strong growth in premium product sales, wine retailing has become caught in a cycle of discounting. Branding has given the consumer greater confidence when choosing wine. The consumer has not, however, had to acquire any real degree of knowledge about wine, varieties or regions, making it difficult for them to move on to more adventurous products that might command a premium price.2

Table 6: Top ten UK off-trade wine brands, 2006

Taken from: UK leading wine brands, by volume and value, 2006 (Mintel) Price data taken from Tesco website, Dec 2008

Brand

Market Share 2006 shares (by volume)

Price per 750ml Parent Company

Stowells 4.6 £3.99 Constellation E&J Gallo 4.6 £5.49 Gallo family vineyards Blossom Hill 3 £3.86 Diageo Jacob’s Creek 2.8 £5.88 Pernod Ricard Hardy’s Stamp 2.2 £4.63 Constellation Kamula 1.5 £7.99 Constellation Rosemount 0.5 £6.47 Fosters Group Banrock Station 1.6 £4.25 Constellation Piat d’Or 0.9 £3.88 Diageo Hardys VR 0.9 £4.63 Constellation Own label 57.6 - - Others 19.6 - -


Table 7: Top ten uk off-trade wine brands, 2008 Taken from: ‘Wine Report 2008’, Off Licence News / Neilsen Brand Market Share Supplier

% change

2007 to 2008 1. Hardys 8 Constellation 2. Blossom Hill 9 Percy Fox 3. E&J Gallo 3 Gallo family vineyards 4. Jacob’s Creek 6 Pernod Ricard 5. Stowells 10 Constellation 6. Wolf Blass 14 Foster’s EMEA 7. Lindemans 2 Foster’s EMEA 8. Echo Falls 27 Constellation 9. Kumala -6 Constellation 10. Banrock Station 4 Constellation

1.1.1 Store walkthrough findings Glass bottles, especially with ‘premium’ wines, largely dominate wine packaging. Most of the ‘core’ brands are available in bag-in-box packaging, but this is generally seen as a defining feature of ‘budget’ wine, and likely to be the reason that no ‘premium’ wines are available in bag-in-box packaging. There are also a couple of ‘core’ wines available in tetrapak and aluminium bags. There were no ‘premium’ wines present in any of the retailers that used an alternative to glass bottles. However, there are some ‘premium’ wines available in PET bottles and Aluminium bottles that are also featured in the case studies section. Most of the brand leaders offer a boxed version, and seem willing to experiment with alternative packaging solutions. This is somewhat due to the fact they are ‘new world’ wines and they do not have long standing associations with any one packaging solution, whereas, ‘old world’ wines tend to keep their heavy glass bottles and corks. 1.2 Champagne The UK Champagne Market, representing 39% of the global Champagne market20 grew by 8% in volume and value between 2005 and 2007, generating £958m in 2007.3 All of the leading Champagne brands retail above £15 per bottle and it could be argued that this entire category is ‘premium’. However, premiumisation within this category can be seen from the rapid increase in sales of Prestige Cuvees (116% increase from 2005 to 2007 by volume) and Vintage Champagnes (up 21.7% in the same period). For the purposes of this report it may be helpful to describe these sub-categories as ‘super premium’ or ‘ultra premium’ Champagnes. Market leader Moët is powering ahead in adding value through premiumisation and its key position in the on-trade, while Veuve Clicquot achieved greatest growth over 2003-07.3 Another thing notable about this sub-category is the absence of the leading brand owners such as Diageo and Pernod-Ricard.

1.2.1 Store walk-through results All of the champagne brands seen in the retailer walk-throughs are in the traditional glass bottle and wire / cork format. The largest variation in packaging is seen in secondary packaging solutions, most common in the form of a card box, neoprene jackets, tin tubes and clear plastic bags are also available. The most excessive secondary packaging is used by Veuve Clicquot, who offer a carry case with a set of glasses.


Table 8: Champagne, by brand Taken from: Champagne brand shares, by value, 2005-2007 (Mintel) Brand Market Share Volume change Parent Company

2007 shares (% by

value)

2005-07 (% change by

volume) Moët & Chandon 19.7 up 9.2 LVMH Lanson 12 up 16.2 Lanson Veuve Clicquot 11.8 up 7.6 LVMH Laurent-Perrier 6.7 up 6.6 Laurent-Perrier Bollinger 5.2 up 11.1 Mentzendorff Own-label 4.4 up 10.5 Other 40.2 up 4.1

Table 9: Champagne, by style Taken from: UK volume sales of Champagne, by style, 2003-07 (Mintel)

Style Market Share Volume change

2007 Shares (% by

volume)


volume)Brut 89 up 3.5 Rose 8 up 116.3 Demi-sec 1 down 38.3 Prestige cuvees 2 up 116 Other down 56.7 Non-vintage 95.5 up 7.6 Vintage 4.5 up 21.7 Total 100 up 8.1

1.3 Sparkling wine In the UK, Sparkling wine has been growing faster than Champagne or still wine. Sparkling wine sales rose 20% in volume and 17% in value between 2005 and 2007, reaching £385 million.3 Although sparkling wine growth has doubled that of Champagne over the past two years in volume and value, Champagne commands two and a half times the value on lower volumes. ‘New world’ sparkling wines are growing and these brands are more often owned by the leading brand owners than ‘old world’ sparkling wines. This indicates that this sub-category may be more susceptible to change due to the brands being newer. This category is dominated by premium brands, largely because compete with champagne and are therefore priced accordingly. Retailers are increasingly stocking these premium wines which is why Sparkling Wines, as a category, is undergoing ‘premiumisation’.3 Similarly to Champagne, this sector seems permanently attached to the traditional glass bottle and cork. However, the sub-sector is more susceptible to change and innovation and this is evident with one brand that has changed to a beer-style top. This product is featured in the case studies section.


Table 10: Sparkling wines Taken from: Sparkling wine brand shares, by value, 2005-2007 (Mintel) Brand Market Share Volume change Parent Company

2007 shares

(% by value)


value) Freixenet 6.1 up 3 Freixenet Martini Asti 5.5 down 2.8 Bacardi-Martini Jacob’s Creek 9.7 up 26.9 Pernod Ricard Hardys* 4.8 up 30.3 Constellation Lindauer 4.2 up 32.8 MontanaGroup Codorniu 5.3 up 63.2 Codorniu Own-label 40.1 up 21.2 - Other 24.3 up 4.2 - Total 100 up 16.6 -

2.0 Definitions and themes (wine) Within still wine, ‘premium’ or ‘fine’ wines are generally defined as those retailing above a certain price point, but that price point itself depends on the organisation. Typically, a supermarket would draw the line at a lower price point and as such, a £10 bottle may be ‘premium’ to a supermarket whereas it would not be premium to a specialise wine wholesaler. Constellation Europe have a division of their company known as ‘Premium Wine Estates’ which is responsible for wines selling for £7 or £8 or more, and that’s how Constellation Europe defines ‘premium’. According to the Head of PR at one major international wine producer, ‘premiumisation’ as a term is used more within their business to mean ‘trading up’ by consumers to more expensive wines rather than a shift towards larger numbers of premium products. Premium wines are differentiated from core by producers generally through giving the consumer more information about heritage for example, stories about the winemaker and the region the wine has come from. Wine is an interesting sub-sector for a number of reasons. There is already a broad view that glass is a premium packaging material in its own right. The vast majority of wine packaging is glass bottles and there is a resistance from the sector to embrace PET bottles due to the potential impacts upon customer perception. This is borne out by a review of other sectors. For example premium cordials use glass, core cordials use PET. So despite the significant weight and transport benefits of moving to PET the resistance within the sector is significant. The wine sector have embraced lightweighting to some degree, but there is evidence that some producers (for example JP Chenet) do use a heavier bottle to differentiate premium from core, or as a strategy to up-sell core wine as premium. However, this wasn’t the strategy of the producers interviewed for this exercise. They preferred to use heritage, provenance, age and quality as a mechanism for creating premium. This approach is probably more relevant in the wine sector as the quality of the product is very closely associated with provenance, particularly for old-world wines.


3.0 Implications of the trend (wine) Lightest in class data for the sector indicates that there is a considerable difference between lightest in class (304g) and heaviest (905g). Consequently there is considerable opportunity to improve performance simply through improved design. Furthermore, there are considerable opportunities to enhance premiumisation and embed quality cues in products from this sector through:

Choice of font;

Label design;

Communication of heritage and personality;

Use of Apellation Controlee and other certification systems;

Bottle shape.

All of these options can be done without compromising resource efficiency. A move to PET would reduce weight considerably. The average weight for a PET (wine shaped) bottle is 75 g. This compares favourably with glass. Other options include the use of a tetra pak (45 g), a 1 litre wine box (121g) and the use of a plastic pouch (25g). Whilst there are significant weight reductions in all of these options there are issues with some in terms of recyclability. The consumer likes glass, understands that it is recyclable and associates it very strongly with a quality wine. In many ways there is perceived to be a greater public resistance to change in this sector than in the other. 4.0 Market drivers According to the head of PR at one major international wine producer, the cost structure of producing a bottle of wine means that it is far more profitable for producers to sell premium wines than lower price wines. The costs of tax, transporation, bottling etc. remain fairly constant whatever the quality of the wine. If a consumer buys a £3.99 bottle they may get 30p’s worth of wine whereas if they pay £4.99 they get £1.30’s worth, for argument’s sake. So, by paying an additional 25%, the value of wine goes up by 433%. The challenge is therefore to educate the consumer in order to give them more reason to trade up. Gifting occasions are driven by middle-aged women of high income and socio-economic standing, resident in London or East Anglia/the Midlands. Close to a third of females support Champagne’s suitability as a gift, but, at a quarter, a significant number of men do too, with their partners being the likely recipients. Accordingly, secondary gift packaging on Champagne bottles is generally feminine, from crystals to Jean Paul Gaultier corset-style covers. Only at the super premium end of the market do more technical, masculine-skewed packaging innovations emerge. Third-agers (among the affluent) are also more likely to make a present of bubbly, and would welcome gift packaging across a wider range of repertoires. Shift towards home entertaining is boosting volume sales of Champagne and sparkling wine in the retail sector and inspiring NPD in ultra-premium styles and secondary packaging for gift occasions.3 Lavish spending by wealthy Brits, Russians and Indians in London is boosting the value of on-trade sales, and contributing to premiumisation of the UK market, as is growth in fine dining, style bars and food-led pubs. 3 Affluence, greater discernment and desire for exclusivity are boosting sales of vintages and prestige cuvées in the Champagne category, as well as pricey mini bottles and magnums.3


5.0 Wine sector response to demand for more ‘premium’ packaging Philip Malpass, Head of PR at Constellation Europe was interviewed about how Constellation encourage consumers to ‘trade up’ to more expensive wines. This is done through a mixture of marketing, branding and packaging design. A more ‘premium’ feel is given through the use of better closures on the corks, foil blocking on the labels, embossed bottles and better graphic design. Constellation has a new bottling plant in UK and are shipping wine from South Africa, NZ, California and Australia in bulk in sea containers. This cuts transport costs and means the wine can be on shelves quicker. It means a better quality product. All bottles are lightweight in the new plant therefore carbon and waste savings can be made. The real driver, however, is reduced materials costs. There is also a move to ‘founts’ in pubs for distribution of still wine (like draft beer). The main driver for this is speed of serving the customer but it is also cheaper to distribute and the wine is not exposed to the air. Currently this distribution method is restricted to fairly low quality wines. Within the still wine market, there has been some adoption of modern materials, particularly in terms of seals and cork alternatives. We have seen the widespread adoption of synthetic corks and also screw tops. These both offer significant benefit in terms of the wine quality and reduced risk of spoiling with age. One opportunity to enhance resource efficiency and yet retain glass as a packaging medium within the sector is the bulk import of wines and bottling in the UK. This ensures that the largest element of the transit impact is minimised. The weight of the wine bottle is only added for the short element of the distribution. Furthermore this will stimulate the UK glass manufacturing and recycling industry by stimulating demand. The Champagne sector is taking a proactive approach to cutting down on carbon emissions, however, and has become the first French appellation to publish its carbon footprint, along with a reduction strategy of 25% by 2020 and 75% by 2050.3 At least 25 of the Grande Marques are thought to be reviewing their luxury packaging, with more environmentally friendly materials and design in mind.3


Appendix 2: Lager, ale, stout and cider 1.0 Market survey 1.1 Lager At around 4 billion litres a year, lager is the second largest sub-sector of drinks in the UK after carbonates and the largest sector of alcoholic drinks. When taken together with Ales and Stouts, Lager makes up 66% of the alcoholic drinks market in the UK5. Similarly to wine, lager is dominated by ‘core’ brands. In fact it may be reasonable to say that within Beer as a category, lager is the more affordable option, and Ales and Stouts are the ‘premium’ options. This is evident in the packaging options, with lager being readily available in Aluminium cans and sometimes even PET bottles, but Ales and Stouts are rarely offered in anything other than glass bottles. The ‘core’ lager brands are gaining market dominance, with ‘other’ brands losing out.

Table 11: UK retail sales of lager, by type of packaging, by volume Taken from: Lager, Market Intelligence, Mintel, July 2007 14 Brand Total Volume

2006 Percentage of

Total MarketChange from 2004 to 2006

Million litres % % Draught 2223 54.4 -9.6% Glass 1218 29.8 +17.1% Cans 638 15.6 +4.2% PET 8 0.2 -67.3% Total 4087 -1.2%

Table 12: Top lager brands Taken from: Lager, Market Intelligence, Mintel, July 2007 14 Brand Market share Volume change Parent Company

2006 shares (%

by value)


value) Carling 18.4 up 3 Coors

Foster’s 16.3 up 10 Scottish and Newcastle

Stella Artois 13.1 down 10 InBev Carlsberg 9.1 up 13 Carlsberg Budweiser 4.6 down 1 Anheuser-Busch

Kronenburg 4.6 up 1 Scottish and Newcastle

Tennents 3.9 up 8 InBev

Beck's 3.6 up 32 Scottish and Newcastle

Carlsberg Export 2.8 up 22 Carlsberg Grolsch 2.5 down 21 Coors Others 21.2 down 4 - Total 100 up 1 -


The following is taken directly from Mintel’s 2006 report 14: "Premium Lager: The stronger-tasting premium lagers are mainly based on Continent-sourced lagers, for example, Grolsch, Beck's, Heineken. This group of lagers especially exploits the interest in imported lagers, especially European-brewed lagers, although it includes lagers brewed in the UK (Stella and Kronenbourg) at lower price points. There has been a shift towards lighter premium beers led by Corona Extra. Other brands being supported in this market include San Miguel and Coors Fine Light. Each of these brands has shown strong growth in 2006, which is expected to continue into the future. Lighter lagers with a citrus taste have been launched. Foster's Twist and Carlsberg Edge are the principal brands in the sub-category. Occasional Lagers: These lagers are less familiar but provide an alternative choice for occasional drinking. This sector includes some of the strong lagers, Artois Bock as well as Leffe Blonde. It also included products with provenance, for example Peroni, Budvar and Tiger lagers." 14 1.2 Ales and stouts Recently Ales and stouts are enjoying renewed popularity as consumers turn from mass-produced, national brands towards niche, regional labels. However, the revival has yet to stem the total market decline. In terms of volume, the UK Ales and Stouts market has been in decline over the last five years. Mintel’s forecast for 2008 showed the size of the UK ales and stouts market to be at 1.43bn litres, down 6% from 2007 levels. Similarly, total market value was forecast at £5.5bn, down 3% from 2007.4 As we are entering recession, this decline is forecast to accelerate. Value is falling at a slower rate than volume due to ‘premiumisation’ of the market despite a strengthening of the less lucrative off-trade sector vs. on-trade. Estimated average price per litre over ales and stouts (inflation adjusted) has risen from £3.19 in 2003 steadily to £3.81 in 2008 and is expected to continue to £4.91 by 2013, showing significant premiumisation of the market.4 The only two sub-categories currently in growth are premium cask ale in the on-trade and premium bottled ales in the off-trade and these are driving this premiumisation. Both standard and premium ale have been falling, at least partially due to the pub trade being in decline.4 Speciality premium beers such as Pedigree, London Pride, Abbot Ale, Bombardier and Hobgoblin are among premium brands performing well and, to date, only the premium sub-category is managing to attract interest from younger drinkers. Organic ales are growing in line with a wider trend of increased demand for green food and drink and this is one of the leading organic alcoholic drinks categories.4 Mintel’s ‘Ales and Stouts UK’ (May 2008) Report has some interesting insights into premiumisation within this sub-sector. The following is taken directly from the report: “While the UK ales and stout sector is welcoming a market backlash against the lager sector, it is also facing increasing competition from other speciality lager and ale imports. Belgian beers such as Leffe and Heogaarden are the beer of preference for upmarket drinkers looking for a more sophisticated alternative to the likes of Stella and Foster's, while Coopers Pale Ale from Australia is another popular import. Further, as Polish immigrants swell the ranks of the British population, Polish beer trade is rising accordingly, with Tesco reporting sales of brands such as Tyskie, Lech and Zywiec tripling y-o-y. British ale brewers are targeting younger customers favouring fashionable Continental beer brands with Greene King, for example, boosting sales of its Old Specked Hen by lowering the abv and re-branding its Beer to Dine for as Hop. NPD focused on provenance, heritage and green / ethical credentials is striking a chord with consumers, and creating new niches within ales and stouts.


Brewers are reaching out to female drinkers with lighter brews and elegant glasses, while also seeking wider appeal through food matching opportunities. Belgian import Duvel Triple Hop can be aged for up to 20 years and is created using a dry hopping process to increase arome and taste. The limited edition 9.5% abv beer was launched in Sainsbury's for Christmas 2007, priced at £12.99 and presented in a gold pyramid-shaped gift box". Sales of bottled ales in supermarkets rose by approx. 8% in 2006-07 with sizes ranging from 330ml to 750ml and four-packs are increasingly common. PET bottles have little impact on the sector and are generally sold for events where glass is not allowed.4

Table 13: Ales and stouts brand share (on-trade) Taken from: Ales and Stouts, Market Intelligence, May 2008 (Mintel) Brand Volume

million litres 2007

Value£million

2007

% change by vol

2005 to 2007

Parent company

John Smiths 194 681 2.1% S&N Guinness 172 814 -8.0% Guinness Tetley’s 82 347 -18.0% Carsberg Worthington 81 315 -13.8% Coors Boddingtons 36 137 -25.0% InBev Caffrey’s 36 155 -16.3% Coors Greene King IPA 34 133 3.0% Greene King Stones 24 96 -17.2% Coors McEwan’s 22 87 -15.4% S&N Banks’s Bitter 18 78 -18.2% Marston’s Others 380 1726 -4.5% Total 1079 4569 -12.6%

Table 14: Ales and stouts brand share (off-trade) Taken from: Ales and Stouts, Market Intelligence, May 2008 (Mintel) Brand Volume

million litres 2007

Value £million

2007

% change by vol

2005 to 2007

Parent company

John Smiths Extra Smooth 34 69 13.3% S&N John Smiths Original 12 20 -7.7% S&N Guinness Draft 27 78 3.8% Diageo Guinness Original 13 33 -13.3% Diageo Boddingtons Draught 17 34 -5.6% InBev Tetley’s Original 12 14 0% Calrsberg Caffrey’s 12 19 0% Coors McEwan’s Export 11 18 0% S&N

Old Speckled Hen 10 34 25% Greene King Newcastle Brown Ale 9 28 50% S&N Others 311 782 5.1% Total 468 1130 4.7%


1.3 Cider The cider and Perry Market in the UK is worth over £1.8bn and is one of the few alcohol categories to be growing. It has grown by 25% since 2003 and despite growth being slower recently, it still saw 10% growth from 2007 to 2008.11 Cider has certainly seen significant ‘premiumisation’ and growth since the mid 2000’s with ‘over ice’ being the most significant phenomenon during that period and many brands repositioning as premium and many innovations in packaging. In around 2005 Magners changed the market and introduced cider, specifically to young, single men, as a refreshing alternative to draft and bottled lagers. Brands like Bulmers and Gaymers then also introduced ‘over ice’, repositioned and also did well. Cheap high strength ciders are in declined with brands trying to distance themselves from binge drinking. Growth is expected to continue but slow in premium and over-ice sub categories over the next few years.11 Big player dominate and are expected to continue to dominate the cider market. Scottish and Newcastle has 55% of the total cider market, dominating on and off-trade markets.11

Table 15: Top five cider brand shares in the off-trade, by value 11

Taken from: Cider, Market Intelligence, November 2008 (Mintel) 11

2008 Strongbow 36% Lambrini 10% Magners 7% Bulmers 7% Frosty Jack’s 5% Own-label 9% Others 25%

The table below shows a 7% increase in the proportion of cider sold in bottles between 2003 and 2007, almost certainly due to the premiumisation of the category and the ‘over ice’ phenomenon. The decline in super-strength cider has been responsible for the reduction in the proportion sold in PET bottles.

Table 16: Trends for format of cider drinking, 2003 to 2007 Taken from: Cider, Market Intelligence, November 2008 (Mintel)11

2003 2005 2007 Change 2003 to

2007 % % % % Small bottles 3.3 3.8 10.0 +6.6 Draught 6.7 7.2 8.6 +1.9 Cans 7.0 6.7 8.5 +1.6 PET 5.7 4.6 4.4 -1.3


1.4 Non-alcoholic and low-alcohol drinks

Table 17: Low alcohol and alcohol free drinks Taken from: Low-alcohol and alcohol-free drinks brand shares, by volume, 2002-06 (Mintel) Brand Market Share

(% by volume)2006

Parent Company

Kaliber 40 Diageo Beck’s 17 InBev Clausthaler 7 Dr. Oetker Holsten 5 Carlsberg Eisberg 3 Halewood International Sutter home Fre 3 PLB Cobra 2 Cobra Bavaria 1 Bavaria Limonesco - Shaw-Ross Other 22 -

2.0 Definitions and themes There was a broad consensus from interviewees that premiumisation is a significant trend within this category. Of particular interest was the observation that weekend choices display signs of premiumisation with a number of interviewees seeing a different decision making process for mid-week purchases for consumption at home without guests and weekend purchases for consumption with guests. There was also broad consensus that premium was associated with the following characteristics:

Heritage;

Provenance;

Purity;

Tradition;

Small scale production;

Taste.

This was interesting in that strength was not considered to be part of the mix of premium attributes at all. Indeed, the example of Stella Artois reducing strength as part of a wider strategy to change their image was cited by many interviewees. The second example given by a number of respondents was that of Magners. Although sales are now in decline the launch of the drink not only ensured that it was seen as premium but it had the knock-on effect of lifting cider as a sub-category and in many ways making it a more acceptable drink and taking it away from its unfortunate “park-bench” connotations. 3.0 Implications of the trend According to Mintel, from 2010 onwards, the decline of the ales and stouts market is expected to stabilise to around 1% year on year. A predicted UK recession will exacerbate the cultural shift from pub visits towards in-home entertaining, with consumers limiting their entertainment budget further, hampering an on-trade recovery.

The sector is expected to adapt to the burgeoning off-trade and also to address perceptions of ales and stouts being unhealthy and/or fattening.4 Clearly weight reduction of glass bottles offers significant further opportunities and the lightest 330ml ranges from 180g to 200g, which is replicable across the sector. Heaviest in class weight is about 300g. Even within the canned beers there is considerable scope to improve the heaviest in class (36g) to 18g (lightest in class for 440ml).


These opportunities are significant in their own right, yet if the sector also changes packaging materials from glass to aluminium or PET then further improvements could be made. The weight of a PET beer bottle (330ml) is around 22g, this represents a 181g reduction when compared with the lightest in class beer. The use of embossing (Grolsch, Kronenburg, Holsten Pils) has been successful in providing quality/premium cues whilst reducing packaging impact. The use of heritage branding (Peterman, Moretti) can also create quality cues as can use of font, label, and branding. The lesson from the cider sector is very interesting. Producing a product in new packaging (glass) and communicating heritage, quality and a new way of drinking (over ice) has regenerated an entire sector. 4.0 Identification of barriers There is a limit to how much lightweighting can be done as there is a basic requirement of packaging to protect the product. Stella have been in discussions with WRAP and with other producers about reintroducing a bottle take back scheme to encourage re-use rather than recycling of bottles. A clear barrier to lightweighting is the investment required. This is exacerbated by the fact that there are so many different bottle sizes, each needing lightweighting separately. However, there is also an expected reduction in material costs. A barrier to lightweighting bottles is that shorter stubbier necks to bottles is more efficient with glass, but doesn’t look like there is so much product in the bottle. Resolution of this problem is down to the bottle designer and also technical R&D. All above taken from an interview with Senior Brand Manager responsible for a well-known lager brand. 5.0 Sector activity Beers and ciders have an advantage over wine in that there is already an acceptance of alternative packaging materials, particularly metal cans. Consequently there are less customer barriers to packaging materials. Moving from glass to steel or aluminium massively reduces weight and therefore transit impact. Furthermore the energy saving from aluminium recycling is significant (virgin aluminium uses 7.5 times more energy to process than recycled aluminium45) whilst energy savings from recycling glass are minimal (mainly due to its weight and therefore transit impacts). However, beers in a can were thought to feel less premium than those in a bottle by respondents. That said the price per litre of canned beer is significantly less that than bottled beer. Hence, given the changed economic climate there is a chance that consumers will “down-grade” to canned beers. The contents, heritage, etc are exactly the same after all. There have also been significant advancements in the application of resource efficiency within the sector, particularly in terms of a focus on lightweighting and the Glassrite project. New lightweight bottles from Adnams, Kronenburg, Black Sheep, Cobra and others have recently been introduced with up to 30% savings in weight. The Co-op has become the first retailer to lightweight its own-label range. There is further scope to roll this approach out to other producers. Stella Artois have down-gauged their glass bottle to a lighter one and are aiming to more to all products in 100% recycled cardboard. “Recent developments in the beer sector have seen first Adnams, then Marstons’s beers and Hall & Woodhouse adopt 300g half-pint bottles. O-I has followed these up with lightweight 500ml and one-pint standard containers to complete its range from 200 to 568ml bottles. The lightweighting represents a weight reduction of around 33 per cent on previous standards.”


Appendix 3: Spirits & liqueurs 1.0 Market survey The Spirits and Liqueurs market is leading the way in terms of premiumisation in the UK. The total size of the spirits and liqueurs market in the UK was £2.9bn in 2008, up 6% on 2007. By volume, it was 210m litres, up 5% on 2007. (Source: Neilson years ending Aug 9th 2008 and Aug 11th 2007).

Table 18: Top ten spirits & liqueurs 2008 Taken from: Spirits Report, Off-Licence News, 5th Sept 2008 15

Brand Owner Sub-Category 1. Smirnoff Red Label Diageo Vodka 2. Glen’s Vodka Glen Catrine Vodka 3. Famous Grouse Maxxium Blended Scotch 4. Bell’s Diageo Blended Scotch 5. Gordon’s Diageo Gin 6. Bacardi Bacardi-Martini White Rum 7. Baileys Diageo Cream Liqueur 8. Jack Daniel’s Bacardi-Martini Tennessee Whiskey 9. Williams Grant’s First Drinks Brands Blended Scotch 10. Teacher’s Beam Global Blended Whisky

The extent of producers’ desires to communicate the idea of ‘premium’ through product claims is clearly visible from looking at the number of different types of claim made within the Spirits and Liqueurs Category. The table below shows ‘premium’ as being three times as frequently used as the second most popular claim, ‘Seasonal’:

Table 19: New product launches in the UK spirits and liqueurs market by claim, Jan 2007 to April 2008 SOURCE: ‘Alcoholic Mixables’, Mintel, Jul 2008 Premium 66 Seasonal 22 All-Natural 12 Female 8 Vegetarian 3 Organic 2 Low/no/reduced sugar 2 Ethical – environmentally friendly packaging 1 Functional - digestive 1 Total Sample 229

According to MINTEL, the sample of 229 product launches used for the above table was taken from “the wider spirits and liqueurs market” in the UK. There is no information as to the spread of sub-categories used in the sample. The vast majority of spirits are sold in glass the exception of some vodkas (for example, Danzka in an Aluminium bottle).


1.1 Vodka Vodka brands are seeing the largest growth in consumption out of all spirits, vodka sales having risen by 13% from Aug 2007 to Aug 2008 to 61.6m litres15 and there is a huge expansion in the number of premium vodka brands coming onto the market. Also apparent is an increase in the number of flavoured vodkas coming onto the market This sub-sector is dominated by the big brand owners, with Diageo having the leading vodka as well as the leading Gin, and Bacardi-Martini and Pernod-Ricard also featuring. Despite all the new ‘premium’ vodka and Gin brands on the market, the core brands are growing more rapidly that these ‘other brands’. So if anything this sub-sector, in terms of market share, is becoming de-premiumised. Flavoured vodkas are increasingly popular and make up complementary market to traditional vodka. In the May 2008 edition of Drinks International magazine, there is an article describing a polarisation of the vodka market due to the introduction of flavoured vodkas in the 1990’s. There are those who value the bringing of colour and flavour to a sector traditionally devoid of either (70% of whom are women) vs. those purists who believe colour and flavour is contaminating a good product. According to Maureen Brekka, Finlandia Vodka global managing director, “Flavour is definitely what is driving category growth, although not on its own.” 20 Functional vodkas have also come onto the market as a way of premiumising the category. In two years, Van Gogh’s coffee-based flavours have come to account for half the brand’s sales across its 19 variant. The one shown below claims ‘Double Caffeine’, 20 IMAGE Van Gogh “Double Espresso, Double Caffeine” flavoured vodka


1.2 Gin The total volume of gin sales in the UK is 11.94m litres15

Table 20: Top ten gin brands 2008 Taken from: Spirits Report, Off-Licence News, 5th Sept 2008 15

Brand Owner % change in

sales 2007 to 2008

1. Gordon’s Diageo Up 9% 2. Bombay Sapphire Bacardi Up 7% 3. Greenall’s Gin Down 21% 4. Plymouth Gin Pernod Ricard Down 4% 5. Tanqueray Diageo Up 11% 6. Beefeater Pernod Ricard Up 21% 7. Richmond London Gin Up 6% 8. London Silk Up 22% 9. Royal London Up 38% 10. Henrick’s William Grant Up 67%

Gordon’s, partly helped by celebrity endorsement from Gordon Ramsay, saw sales of over £100m in the year ending Aug 2008. 15 Bacardi’s premium brand Bombay Sapphire is in the no. 2 slot but has less than one fifth the sales of Gordon’s. Tanqueray, also owned by Diageo is another premium brand showing growth. Hendrick’s is a premium gin sold in distinct packaging and flavoured with cucumbers and again reflects premiumisation of this sub-category, showing the strongest growth of any of the top ten gins.15

IMAGE Hendrick’s gin has shown exceptional growth helped greatly by the packaging.

There are a couple of white spirits that are now featuring secondary packaging, such as Lord’s gin in a card box, and Blavod vodka with a neoprene jacket. Vodka being a fast growing drinks sector, and having many modern brands, it seems to be a good opportunity to set new packaging conventions.


1.3 Whisky The UK Whisky market is clearly split into blended, malt, deluxe and imported whiskies by Nielsen:

Table 21: Volumes comparison of whisky sub-categories Taken From: Off-Licence News Spirits Report 2008 16

Type of Whisky UK Market (litres)

(year end Aug 08, Nielsen)Change Aug 2006 to Aug

2007 Blended 52.5m -2% Malt 4.8m -3% Imported 5.56m +6%

Edrington’s Famous Grouse has finally overtaken Diageo’s Bell’s brand during 2008, perhaps partly helped by the introduction of the premium ‘Black Grouse’ to the brand. The rest of the market is split between traditional whisky producers and larger international brand owners, such as Maxxium, Fortune, Pernod-Ricard and LVMH. Market shares show us that the blended whiskies Bell’s, Famous Grouse and Grant’s are the market leaders. Looking at the volume change data for whisky styles, we can see that they are losing market share to more premium options of malt, deluxe and imported, from 2001-2005. This implies that this sub-sector is undergoing premiumisation. So there must be growth in ‘other brands’. The Whisky market has a lot of small players, i.e. independent distilleries, and if these are gaining market share, especially in premium products then the larger brand owners will have decreasing influence on packaging standards. The whisky market seems confined to glass bottles, with the main variations being in secondary packaging, similarly to the Champagne and Brandy sectors. A large number of malt whiskies come in card boxes and this seems to define ‘premium’ in this sector. The whisky market is also dominated by ‘heritage’ branding, again in a similar way to Champagne and Brandy, and therefore seems likely to resist change to ‘traditional’ packaging formats. 1.4 Rum The Rum market shifted 11.34m litres in the year from Aug 2007 to Aug 2008, up 5%. 15 Rum is dominated by top brand Bacardi with 44% of off-trade sales in the UK, up 3% on 2007.15 Diageo are again the Dark Rum market leaders with the top two brands accounting for almost half of the market. The more popular sector of Brandy has a larger number of key players. This sub-sector is generally more expensive than other spirits with the market leader Courvoisier being priced around £17 per 70cl bottle compared to Smirnoff vodka at around £13 per 70 cl bottle. All of the key players are international brand owners; Fortune, Pernod-Ricard, First drinks, LVMH and Maxxium. 1.5 Brandy The Brandy market was 11.71m litres in the year ending Aug 2008, up 1% on the previous year15. The Brandy sector is highly traditional, and the main variations are in secondary packaging. It is also seen as an ‘occasion’ drink and there is a strong emphasis on gift packaging. Top brand in 2008 was Courvoisier VS followed by Three Barrels and then Martell. Brandy is one of the few sub-categories where Diageo or Pernod Ricard do not have controlling shares. 1.6 Liqueurs The Liqueurs market is showing a steady and slow rate of decline. Cream liqueurs, representing 16.4m litres out of the total 30.95m litres of liqueurs sold, represent the bulk of the Liqueurs market by volume. Diageo has the market leader, Bailey’s, which is priced at around £16 per bottle, and could be described as a ‘premium’ liqueur (and is by Diageo). Smaller players have a share in this sub-sector, with brands owners such as Allied Domecq, Drambuie Liqueur Co. Ltd. and Brown-Forman Corporation having presence. Cream liqueurs are loosing market share to Traditional and Shooters, threatening Bailey’s top position.


The liqueurs sector is also very traditional and suffers from and old-fashioned image and there is a high variation in the aesthetics of the packaging. The various brands seem to distinguish themselves using the shape of the bottle, for example, Bailey’s Irish Cream. There is a high variety of secondary packaging, for example, Amarula cream has a small rope tied round the neck of the bottle, and Disaranno Amaretto has an additional plastic ‘hat’. These features are synonymous with the brand and most likely aim to communicate familiarity from the shelf in on-trade environments.

Table 22: Liqueurs sub-sectors Taken from: UK Volume and Value Sales of Liqueurs, by type, 2003-07 (Mintel) Style Market Share Volume Volume change

2007 shares (% by volume)

Litres (2007) 2005-07 (% change by

volume) Traditional 34 10.63m up 7.2 Cream 53 16.58m down 9.2 Shooters 13 4.07m up 5.9 Total 100 31.27m down 2.3

2.0 Definitions and themes The Spirits and Liqueurs sub sector has recently seen some of the most extreme examples of premiumisation of packaging, using large amounts of packaging materials in order to attract attention – sometimes very successfully. Furthermore, the sector is also subject to a high level of gifting around occasion, particularly Christmas. Some parts of the sector use a second tier of packaging as standard. This is particularly true of the Whisky sub-sector. Premium whisky offerings (generally single malts) often have a box or presentation tin. This sub-sector is so broad that there are many elements of the product attributes that are used to communicate premium. For whisky this tends to relate to: Heritage; Geographical area of the distillery; Age of the whisky; Type of barrels used to mature the product; and Shape of the bottle.

Whereas for vodka it is more centred around: Country of origin (Russian and Finnish vodkas considered more premium); Strength; Purity; Packaging; and As it’s a drink drunk when out the links to type of night out are important, advertisers either opt for party

scenarios or “James Bond” type scenarios.

The Scotch Whisky Association 'Questions and Answers' booklet includes a question on the definition premium:- “The terms 'premium' and 'deluxe' are not formally defined within the UK Whisky industry. A premium or deluxe Blended Scotch Whisky would normally contain a higher proportion of carefully selected older and, therefore, more expensive whiskies. Furthermore 'Luxury' within the UK could be defined as 10-18yrs single malt, cork capsule with carton/ tube.” Other sub-sectors of this sub-sector use different elements to convey premium. Martini, for example have recently redesigned bottle shape and amended the label in order to enhance sales and premiumise.


3.0 Implications of the trend The opportunity to further lightweight glass whilst using graphical and label based premium cues is massive. Heaviest in class weights are as high as 905g and consequently opportunity to reduce weight and remain in glass is significant. There has been a move to changes in bottle design and shape. There has been a move to a tapered bottle rather than a straight-sided bottle. Some of these have moved to a tapered oval bottle (as have some wine producers). Whilst this is perceived to provide premium cues it can create labelling problems in the bottling process. Most miniatures tend to be bottled in PET and there are some quarter-bottles that are bottled in PET. 4.0 Identification of barriers The following information was supplied by the Scotch Whisky Association with regard to barriers to adoption of resource efficient design and also consumer demand for premium packaging: “There are both technical and commercial limitations on our industry with regard to further developments in lightweighting. In terms of Premium branded spirits, the bottle is heavier than the minimum, because they are, for the most part in branded glassware. For the vast majority of designs, our industry tries to utilise the best available technology to make the branded glassware as light as possible. Our industry will find it a real challenge to take the weight down further, if at all, because our bottles have features on them such as spotting bars, embossing and shape which generate physical limitations and therefore dictate the wall thickness of the glass. A further barrier for our industry is the smaller volumes of bottles our industry uses compared to the beer and wine sector. This generally means that the glass manufacturing process used for our products is single gob. To date the glass industry has not developed a single gob lightweight production process. We believe any future developments in lightweighting must involve the glass industry and should focus on understanding and identifying solutions to the technical limitations on how to produce bottles with embossing etc whilst still lightweighting. Furthermore any change in bottle dimensions will require significant change-part costs for the industry, therefore any new bottle design would need to be introduced at the same time as planned re-pack work to make it economically viable. Consumer Demands Some of our brands are the finest luxury spirits produced in the world and therefore the packaging must reflect this to the consumer. Currently exports represent around 90 per cent of all Scotch Whisky sales and the Scotch Whisky industry is experiencing growing international demand particularly from the BRIC nations for example, Brazil, India and China etc. These consumers may have very different requirements and needs from the UK market and also a different opinion with regard to sustainability. The consumer is a strong driver on the direction of the packaging and the premium end of the Scotch Whisky business is very competitive. Furthermore the packaging and packaging materials are integral to the brand identity. On the whole our industry has found that consumers prefer luxury products with more elaborate or sophisticated packaging. There is also a strong gifting element within the premium market, and consumers expect bottles to be presented in tubes and carton packaging.”

SOURCE: SWA Environment and Scientific Affairs Dept. Statement made for the purposes of this project.


5.0 Sector activity As detailed above the producers in this sector respond to the challenge of premiumisation and resource efficiency in many ways. Resource efficiency is simpler and the majority of action has been focused on the lightweighting of glass bottles. The Scotch Whisky Association (SWA) has an active Environmental Committee which works with stakeholders to better understand and minimise the impacts of their activities on the environment and believes that it has led the way in terms of lightweighting within the drinks sector. Light-weighting activity has again been focused around WRAP’s Glassrite program and weight reductions of 25% to 30% have been achieved. The Co-operative and Ardagh Glass produced a lightweighted generic 70cl bottle - 298g - for use in the spirits sector. One member of the SWAW is participating in a WRAP funded project which is focusing on luxury products, including Scotch Whisky and exploring alternative secondary packaging options which reduce the packaging weight whilst delivering on the customer requirements to purchase a premium product. There have been a limited number of forays into plastic alternatives. For example Skyy Vodka have PVC vodka bottle (see below) and Brown Foreman have used PET for some of its brands (Southern Comfort, Canadian Mist and Early Times) but only in certain countries. IMAGE SKYY vodka bottle made from PVC


Appendix 4: Alcoholic mixables and RTD’s 1.0 Market survey 1.1 Alcoholic mixables This market has grown in volume by 6.6% to 38million litres between 2003 and 2007 but it is still a small sub-category and growth has recently stagnated.25 A large number of brands are present, the top three players again being owned by the big players of Bacardi-Martini, Diageo and Pernod Ricard. The growth of Diageo’s Pimms brand looks likely to top the ranks in the near future. Although brands like Malibu and Martini have updated their bottle and labelling design to improve their premium feel, alcoholic mixables is seeing much less premiumisation than other categories. Alcoholic mixables are generally packaged in glass but don’t vary in form to the extent of liqueurs, and seem to have similar conventions to the spirits sector.

Table 23: Alcoholic mixables Taken from: Leading alcoholic mixables brand shares, by volume, 2005 and 2007 (Mintel) 25 Brand Market share Volume change Parent company

2007 shares (%

by volume) 2005-07 (% change

by volume)

Martini 19.5 down 2.6 Bacardi-Martini Pimm’s 18.2 up 12.9 Diageo Malibu 11.2 up 10.3 Pernod Ricard Archers 5.5 down 16 Diageo Taboo 3.9 down 11.8 First Drinks Cinzano 3.6 0 Cellar Trends Campari 1 0 Cellar Trends Dubonnet 0.8 0 Pernod Ricard Noilly Prat 1 0 Bacardi-Martini Others 9.4 up 5.9 - Own-label 25.8 up 1 - Total 100 up 1.9 -

1.2 RTD alcoholic drinks RTD Alcoholic Drinks, previously known as FABs (Flavoured Alcoholic Beverages), have been declining at a considerable rate over the last few years in the UK. Mintel’s prediction for the change in the market by volume between 2007 and 2013 is a massive drop of 34% from 151m litres in 2007 22. The growing number of ABC1 consumers is partly responsible for this decline, as they turn away from Alcoholic RTD’s due to their association with binge drinking and favour more sophisticated alternatives22. Alcoholic RTDs are generally favoured by 20 to 24 year olds in C2 and D socio-economic groups. In fact, this association is the reason that ‘RTD’ is preferable to ‘FAB’ as a term to describe this subcategory of drinks. The smoking ban in the UK is also expected to be partly responsible for the decline. In 2007, 78% of Alcoholic RTD’s were vodka-based. WKD is the top seller by volume, owned by Beverage Brands. In second place is Smirnoff Ice Red, owned by Diageo and in 3rd place Smirnoff Ice Black.


Table 24: RTD alcoholic drinks: top brands Taken from: Top FAB brands' ABV changes, 2002-07 (no share data) (Mintel) Brand Parent company 1. WKD Beverage Brands 2. Smirnoff Ice-Red Diageo 3. Smirnoff Ice-Black Diageo 4. Bacardi Breezer Bacardi-Martini 5. VK Global Brands 6. Archers Diageo

2.0 Definitions and themes Mintel split the alcoholic RTD category into two types: “Alcoholic Carbonates tend to be fruit-, herb-, soda- or water-based, still or carbonated, and have an ABV of 4.5-5.5%, similar to that of many premium beer products. Types of flavour include orange, lemon, lime, pineapple, peach, apple, grapefruit, kiwi, blackcurrant or a mixture of these, and have no proprietary spirit brand and are often wine-based.” and… “Premium Packaged Spirits (PPSs), on the other hand, are often based on a named spirit brand such as Smirnoff or Bacardi – hence the premium price tag – and usually combine more than one mixer or flavour. With an average ABV of around 5%, popular examples of such drinks include Bacardi Breezer and Smirnoff Ice.” Mintel’s 2007 estimate for 2008 was that 88% of the market by volume is PPSs. Prices for the premium end of this market have come down, leaving little room for the middle ground22. The underlying ethos of Ready-to-Drink is one of convenience. The product, is as it says, ready to drink. It is premixed or pre-prepared. Consequently, there is an argument to say that the product is over packaged per unit of drink as each unit is packaged separately. Some sub-sectors (such as wine) package the product in plastic reusable wine glasses (for use at picnics etc), however the majority of the sector use glass bottles or cans (traditional spirit mixes and some wines). 3.0 Implications of the trend Premiumisation’ has not really occurred within alcoholic carbonates. However, due to prices falling, drinks such as Smirnoff Ice (Premium Packaged Spirits) are becoming more mainstream than premium. The vast majority of these products are sold in glass and so premiumisation is not affecting packaging in any significant way. According to one representative from a major retailer that was interviewed during this project, premiumisation within alcoholic RTDs has occurred through the introduction of branded spirits such as Gordon’s and Tonic into canned pre-mixed drinks that have, until recently, been dominated by own-label core products. 4.0 Sector activity Given the fact that the majority of the sector share packaging with other sub-sectors (beers for glass bottles, carbonated drinks for tin cans) then the sector activity from these sectors is transferable directly to RTDs. Hence lightweighting of glass is a key activity and it is anticipated that similar weight savings to those achieved from the beer category are achievable.


Appendix 5: Bottled water 1.0 Market survey All the top ten brands are core brands. The sector is dominated by Danone and Nestle, but with smaller producers Highland Spring holding their own. The premium market for bottled water is very small and, even in premium retailer Waitrose, makes up a small minority of the shelf space. Plastic bottles are the sector standard, however, glass bottles are more common with the ‘premium’ brands. The most prominent ‘premium’ brand is San Pellerino, which is available in all of the supermarket retailers and is also offered in both glass and plastic. Since 2000, the increasing concern for health has led to a shift in consumption away from carbonates and towards alternatives such as flavoured and functional waters. In Western Europe alone, the volume of functional water consumed has seen a nine-fold increase from 30m litres to 273m litres in 200621, according to analyst group Zenith International21. However, it’s not just health concerns which are driving innovation and brands like SIP have identified new gaps in the market – in SIP’s case for a drink targeted at health-conscious women who value the potential benefits the products has for their skin from its combination of vitamin C, botanicals, white tea tincture and selenium. Functional waters now include such additives as:

Vitamins;

Antioxidants;

Botanicals;

Caffeine;

Taurine;

Sugar;

Salt;

Protein;

Calcium;

Plant Sterol; and

Omega 3.

Claiming to give:

Health;

Youthfulness;

Alertness;

Rehydration & ion balancing;

Energy; and

Mental wellbeing.

The sector is also under increasing fire at the moment on environmental grounds due to the transport impact of shipping water around the globe and a BBC ‘Dispatches’ increased awareness significantly of this issue in 2008.


Table 25: Bottled water Taken from: Estimated Brand Shares in the Bottled Water Off-Trade, by Volume, 2004-06 (Mintel) Brand Market share Parent company

2006 shares

(% by volume) Volvic 16 Danone Evian 14 Danone Highland Spring 7 Highland Spring Buxton 4 Nestle Vittel 3 Nestle Aqua-Pura 2 Princes Britvic 1 Britvic Others 19 - Own-label 35 -

Table 26: Bottled water volumes, by packaging type, 2006 Taken from: Bottled Water, Market Intelligence, Mintel, June 2007 Brand Market share Market share Volume change

2006

million litres %age of the

Market 2005 to 2006 Plastic inc PVC & PET 1417 83% +10.6% Glass 287 17% -3.4% Cans 13 < 1% -7.1% Total 1717 100% +7.9%

Table 27: Bottled water volumes, by water type, 2006 Taken from: Bottled Water, Market Intelligence, Mintel, June 2007 Brand Market Share Market Share Volume change

2006

million litres %age of the

Market 2005 to 2006 Natural Mineral Water 951 55% +6.7% Spring / Table Water 469 27% +9.1% Flavoured Water 297 17% +9.6% Total 1717 100% +7.9%

The above tables shows a shift towards an even larger proportion of PET for bottled water and away from glass. Also, in 2006, still water made up 87% of the market by volume compared to 13% sparkling. 2.0 Implications of the trend Given the harsh spotlight that the water sector finds itself under it is likely that they will continue driving resource efficiency as a part of defending their sector. We may also see consumers tire of the vast distances that the more premium waters have been shipped.


3.0 Sector activity The sector has seen the emergence of a number of premium entrants (SIP, Bling H2O, Fiji Water, Cloud Juice) which are positioned very carefully within the market (using celebrity endorsement and product placement) as premium products. There is no clear commentary as to whether this trend will continue in the light of the current economic challenges. As with all drinks categories packed in PET and glass bottles there has been a trend towards lightweighting of bottles with Highland Spring taking 2g off their 500ml PET bottle (from 18g to 16g) and 5g off their 2 litre PET bottle over the last two years. Evian have launched an RPET bottle and have also designed the bottle to be collapsible so as to reduce transit impact when empty. We have also seen Park City IceWater launch water in plastic pouches that reduce weight considerably and challenge consumer perceptions: IMAGE Park City IceWater is sold in pouches

“Ampac and Park City refer to the packaging as recyclable and environmentally friendly saying both its reduction of waste and of resources used in production are its primary benefits. The company says its packaging is better and because of its shape if landfilled it would occupy 96% less space compared to the traditional PET bottle.” 32


Appendix 6: Carbonates 1.0 Market survey The Coca-Cola company hold almost one third of the carbonates market. All the featured brands are ‘core brands’ and would not be considered premium. However, the packaging is a key feature with Coca-cola being available in glass bottles at a considerably higher price. Carbonated drink brands tend to be packaged in aluminium cans and PET bottles. There are premium sparkling drinks and pressés such as those from Belvoir Fruit Farms, Bottlegreen, Thorncroft, Duchy and brands such as Purdey’s, Ame and Shloer, that are packaged in glass bottles. There is one exception in regards to product positioning; Whole Earth Organics, a premium carbonate, uses an aluminium can more akin to ‘core’ brands. Premium sparkling waters are a small but growing part of the market, and are considered alongside bottled water. The carbonates sub-sectory is peculiar in that the top ten brands all sell at pretty much the same price point.

Table 28: UK Carbonates brand share, by volume, 2005-2006 (%) Taken from: (Datamonitor) Appendix 7: Sports and Energy Drinks Brand Market share Parent company 2006 shares (% by volume) Coca-cola 10.6 Coca-cola company Diet Coke 10.3 Coca-cola company Tango/diet Tango 9.4 Britvic Mecca cola 7.8 Mecca cola Fanta/Fanta light 5.8 Coca-cola company Pepsi-cola 5.1 Britvic Irn bru / diet Irn bru 4.7 A.G. Barr p.l.c. 7up/7up light 4.1 Britvic Diet Pepsi 3.4 PepsiCo, Inc. Sprite/Sprite light 2.6 Coca-cola company Dr Pepper 1.9 Cadbury Schweppes plc Private label 28.2 - Others 5.9 - 2.0 Definitions and themes This sector is also known as “fizzy drinks”. There are two main types of packaging: PET bottles and metal cans. The drinks have specific technical requirements due to the carbonation of the product. Furthermore, a large proportion of the sector sells product in single-serving and hence packaging per unit is high. Products in this sector are also sold in one and two litre bottles that give a better resource efficiency per unit of product. The majority of the sector would be deemed as core (there are premium carbonated drinks but these make up a small percentage of the total, estimated at 0.5% (see Section 2.1.4, Table 2). 3.0 Implications of the trend Sales of carbonated drinks have fallen over the last 3 years as health drinks have boomed. Functional drinks on the other hand have grown over the last 3 years. As lightweighting rolls out to other sectors this will undoubtedly impact carbonated drinks and functional drinks. The premium drinks within the sector tended to be packaged in glass. This is different from most core drinks and hence any growth in the premium share could have an impact on resource efficiency per unit, dependent on the weight of the product.


Appendix 7: Functional drinks This sub-category includes health, sports and energy drinks and RTD tea and coffee. 1.0 Market survey 1.1 Sports and energy drinks The Sports and Energy Drinks market has been growing strongly over the last few years and represented approximately 460m litres in 2007.13 GlaxoSmithKline and Red Bull dominate this market. Red Bull is marketed at a substantial premium to own-label stimulant energy drinks – something like a four times premium compared with around a two times premium for the brand leader (Lucozade) in the everyday energy and sports segments.13 This sub-sector appears to utilize the largest range of packaging solutions, in particular with the brand Lucozade using plastic bottles, Aluminium cans, Aluminium pouches and even packets of powder mixes (featured in case studies section). It seems to be a sub-sector willing to change and innovate.

Table 29: Health sports and energy drinks (functional drinks) Taken from: Table 29:UK Functional drinks brand share, by volume, 2005-2006 (%) (DATAMONITOR) Brand Market share Parent company

2006 shares

(% by volume) Lucozade 32.5 GlaxoSmithKline plc Red Bull 26.1 Red Bull GmbH Lucozade Sport 7.2 GlaxoSmithKline plc Overall 4.4 Weider Others 29.8 -

1.2 RTD tea and coffee RTD Tea and Coffee sold 18.4m litres in the UK in 2006, making it a small subcategory of the drinks sector.

Table 30: RTD tea & coffee Taken from: UK RTD tea & coffee brand share, by volume, 2005-2006 (%) (Datamonitor) Appendix 8: Fruit Juice, Fruit Drinks, Squashes, Cordials and Smoothies Brand Market share Parent company

2006 shares

(% by volume) Snapple 76.1 Cadbury Schweppes plc Twinings 3.7 Associated British Foods plc Lipton Ice tea 0.1 Unilever Private label 9.6 - Others 10.5 -


Appendix 8: Fruit juice, juice drinks, squashes, cordials and smoothies 1.0 Market survey 1.1 Squashes and cordials Mintel defines squashes and cordials as follows: “A squash would typically be a drink requiring dilution in the ratio one part concentrate to four parts water, whereas a cordial would typically be in the ratio one part concentrate to eight parts water.” 29 The 2008 squashes and cordials market was estimated at 567m litres by Mintel29. Cordials saw a 50% increase in volume sales between 2003 and 2007 whereas squashes have slightly dropped. Mintel expect decline in the market between now and 2013 by value but an increase by volume, resulting from further discounting in the squashes market29 which will be exacerbated by the recession. According to Mintel, this sector has been undergoing premiumisation which helps explain the increase in cordials consumption over squashes: “Government-backed campaigns such as 5-a-day promoting the use of fresh fruit and vegetables have boosted sales of fruit-based drinks and many adults are now willing to pay extra for drinks that are natural and contain no artificial ingredients. In order to compensate for sluggish consumption and downward pressure on average prices, manufacturers have introduced premium squashes and cordials in order to encourage consumers to trade up and improve margins. Examples of premium launches include: Marks & Spencer Summer Fruits High Juice, which contains 50% fruit juice and is suitable for vegetarians. A new range of premium squashes from Bottlegreen under the Blossom Cottage label, which includes flavours

such as Valencia Orange and Morello Cherry.” 29

Table 31: Squashes and cordials Taken from: Market share for squashes and cordials, 2006-07 (Mintel) Brand Market share Volume change Parent company

2007 shares (% by value)

2006-07 (% change by value)

Robinsons 42 down 2.1 Britvic Ribena 11 down 10.9 GlaxoSmithKline Vimto 4 0 Nichols Jucee 2 down 36.4 Princes

Kia-ora 2 up 16.7 Coca-cola company Bottlegreen 1 up 12.7 Bottlegreen Belvoir 1 down 12.5 Belvoir Fruit farm Roacks 0 down 20 Rocks Organic Others 3 down 49.6 - Own-label 34 down 2.7 - Total 100 down 6.5 -


1.2 Fruit juice and fruit drinks The following definitions are taken from Mintel reports: Pure fruit juice contains nothing but fruit juice at the same strength and consistency as when the fruit was squeezed. Most fruit juices are imported in frozen concentrate, but the sector also includes freshly squeezed products and not-from-concentrate (NFC) juices. 30 Freshly squeezed juices are 100% pure squeezed fruit juices that are sold pasteurised or unpasteurised. They contain no added water, sugar, colour or preservatives and are merely chilled after squeezing. 30 Juice drinks are still drinks that contain less than 100% fruit juice and have added ingredients, mainly water but also sweeteners, flavourings, colourings and/or vitamins. A juice drink must contain a minimum of 2% comminuted fruit, although most have a much greater proportion. This sector also includes ready-to-drink (RTD) versions of concentrated squashes eg Ribena. 30 The total size of the on and off-trade market for Fruit Juice and Fruit Drinks was estimated by Mintel at 1.97bn litres for 2008. This makes it the third largest drinks sub-sector by volume after Carbonates and Lager. The table below shows the top ten brands in the fruit juice and fruit drinks market by volume:

Table 32: Fruit juice and juice drinks Taken from: Datamonitor Brand Market share Parent company

2006 shares (% by

volume) Tropicana 15.4 PepsiCo, Inc. (Overall) 13.4 Del Monte Sunny Delight 4.13 Procter & Gamble St Ivel 3.31 Dairy Crest Ribena 1.44 GlaxoSmithKline Plc Next 1.38 Fresh & Co. Sun pride 1.11 Gerber Foods, Ltd. RDA 1.02 RDA Organics Private label 12.5 - Others 46.31 -

Volume sales have dropped, but premiumisation has resulted in continued value growth.30 1.3 Smoothies The smoothie market has grown in volume from 12m litres in 2003 to 92m litres in 2008 and in the one year from 2005 to 2006, volumes doubled. Growth is now slowing as consumers are swapping to premium juices which have made gains as a result of the credit crunch. 31 This relatively new sub-sector is highly unique and is dominated by the brand Innocent. Innocent is both an independent producer and a market leader in packaging innovations such as its development of 100% recycled PET bottles. It also provides a good example of combining ‘premium’ graphics with liquid carton packaging. PepsiCo’s launch of premium tier Tropicana into the smoothies market came hot on the heels of a repositioning downwards for its PJs brand during 2008. 31


2.0 Definitions and themes Mintel in their 2008 report identify a ‘super premium’ category within smoothies: “Super-premium smoothies remain a tiny niche. Non-pasteurised smoothies are claimed to retain more of their vitamins and minerals than pasteurised brands (which include Innocent). Brands such as Puro have a significantly shorter shelf-life and have yet to gain widespread distribution, although Puro is due to gain listings in 35 Waitrose stores, following success with Tesco and Sainsbury’s in its native Northern Ireland.” 31 3.0 Packaging This sector includes pure juices which tend to be sold in 1 litre or 1.5 litre tetra-paks, juices from concentrates which tend to be sold in 1 litre tetra-paks, cordials that are sold in PET bottles and smoothies that are sold in single portions in PET bottles and multi portions that are sold in 1 litre tetra-paks. 4.0 Sector activity The development of the Smoothie market has impacted this sector heavily as we have seen the use of rPET increase considerable for bottled drinks. This has spilled over into the premium fruit juice market (M&S for example). The Innocent brand has a very strong focus on sustainable packaging and hence this has to be considered by all players in the market.


Appendix 9: Premiumisation in specific non-drinks sectors Confectionary (travel retail) In the first half of 2007 sales of confectionery showed an increase of 7.6% on the previous year. "The trend is in-line with what we have been seeing in the Europe Travel Retail channel with continued strong growth in our dynamic category. The continued premiumisation of the channel has supported the sales growth…" - Steve Brock, General Manager CSITR. Published by Generation Research 1 September 2007 Confectionary is likely to continue to premiumise through the recession as it falls into the category of everyday or weekend treats. It is used by consumers to reward themselves after an austere week in place of larger luxuries. IMAGE Chocolates are an affordable way in which consumers can enjoy premium products

Pet food “In the past year pet owners spent £1.68bn on pet food products, £180m more than they spent on bread with value rising 5.2% and volumes up 3.1% thanks to premiumisation. The big success has been seen in treats though most areas of the market have grown.”

SOURCE – Helen Gregory, The Grocer 1 November 2008 Furniture The polarisation of the sector into premium at one end and a strong discounting segment at the other will continue, as retailers will be forced to choose between volume and premium. Every Day Low Price (EDLP) and discount operators such as IKEA, Conforama and Lutz will continue to expand aggressively and capture further share from other retailers whose value credentials are less clearly communicated. 18 Cosmetic and fragrance Rising demand for individual scents has spearheaded the launch of a plethora of luxury and niche brands. The beauty trade show Cosmoprof dedicated an entire area to showcase super premium and niche beauty brands last year, including candles by prestige brand Diptique. In the UK, London independent perfumery Ormonde Jayne has found great success creating unique scented candles. “There are now three different groups of air care products: mass, prestige air care brands and prestige fashion brands,” points out Erik Troost, marketing manager, home care at IFF. The top end of the market has prices to match; for example, Jo Malone’s latest Fragrance Combining Candle retails at £160.19 Aveda have invested heavily in premium packaging for their limited edition Christmas range for which they used artisan packaging on the products. Other users of premium packaging in this sector include L’Occitane who have premised their packaging through the use of natural packaging materials and effective label design, rather than additional layers of packaging.



IMAGE L'Occitane's Amande, a premium French soap and beauty products brand

Clothing Clothing is a fascinating sector. Whilst there are premiumisation cues emerging in some areas (designer labels by definition project premiumisation). However, we also see the continued growth in cut-price fashion with Primark, Topshop, H&M etc still riding high on the back of affordable fashion. The difference between fashion and style, classic and disposable are all-important here. Reviews of recent literature identified that in a very slow December/January 07/08 designer fashion outperformed the market (BRC, 2008). Verdict Research predicts that premium clothing is likely to be the big retail winner with premium high street brands like Reiss to luxury brands such as Burberry growing nearly four times faster than the overall clothing market. Verdict expects this trend to continue despite the economic downturn. “When consumers have less to spend they are more selective in what they buy. Relying on them to become solely price-driven is too simplistic a response” Maureen Hinton, Verdict. In fact Verdict predict that global expenditure on luxury products will more than double over the next five years to create a market worth £225 billion. Household products Premiumisation is also apparent in the market for everyday products with the emergence of brands like Method changing the way people display and store their products: IMAGE Method Cleaning Products IMAGE Method accessories IMAGE Luxury toilet paper

Interestingly, Method has now diversified into the market for premium housecleaning accessories (above centre). Furthermore, we have now seen the development of premium toilet paper at £10.95 a roll in a presentation tin (above right).

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