Smaller is Better as Global Packaging Growth is Shaped by Variation in Pack Sizes

Euromonitor International has recently completed the full publication of its 2016 Packaging edition, with the final research installment – the Beverage Packaging 2016 edition data – published in May 2016.

Our latest research affirms a widespread solid performance for packaging in 2015, as global retail unit volume demand rose 2.2% to reach 3.35 trillion packs. The food industry remains the largest end-user for packaging and a key driving force behind total packaging growth, recording a further 2.6% increase in its need for packaging materials in 2015.

retail packaging demand volume growth

However, 2015 was not the rosiest of years for all industries using packaging. While all registered positive growth for packaging at a global level, this has been at a slower pace, a consequence of some of the economic instabilities and political turmoil, most notably in Brazil, China, Russia and Ukraine. The slowdown in packaging demand was felt most potently in the alcoholic drinks industry, where packaging growth just about scraped into positive growth territory with an advance of just 0.2% in 2015, compared to a more robust CAGR of 1.3% in 2010-2014. Glass packaging sales were hardest hit here, clearly shown by fall-offs in the purchasing of beer and spirits by Russian and Ukrainian consumers. Apart from these countries, 2015 was a good solid year for the global packaging industry across the food, drink, beauty and home care industries. The top growth countries for packaging in 2015 were China, India, Indonesia and the US.

Smaller pack sizes, a winner for health and wealth

The provision to consumers of a more customised diversified brand offering through pack type and pack size supported positive packaging volume growth in 2015. This trend is about ensuring consumer products are packaged appropriately to meet consumers’ needs and relevant to the time and occasion of consumption. A shift to smaller pack sizes is widely proving to be an outright winner in packaging volume growth through “rightsizing”.

Snacking, portion control and consumer mindfulness over sugar intake are pertinent trends in foods and soft drinks behind the movement to buy in smaller quantities and supported by a number of government initiatives that address national health concerns like sugar intake and obesity. Affordability is another factor that strengthens the success of the ongoing smaller pack size trend, also apparent in beauty, home care and premium alcoholic beverages.

Within foods, the impact of snacking and portion control is a trend that now also goes beyond the traditional snacking echelons of the confectionery, biscuits and savoury snacks categories, as a greater array of products are sold as snacks and often in rigid plastic or flexible packaging for that all-important consumer convenience, as witnessed in new product launches.

For instance, in the UK, there have been a number of new single-serve breakfast-positioned drinks for on-the go consumption in the past year, including Up&Go “98.5% fat-free” protein-enriched drink, sold in a 250ml shaped liquid carton, while ubiquitous UK breakfast cereal brand Weetabix launched its Weetabix On The Go, in a 275ml HDPE bottle.

global drinks food packaging size performance

The importance of “rightsizing” is evident in soft drinks in the shift towards single-serve soft drinks and smaller variants over larger standard pack sizes, especially noted in categories like carbonates, where obstacles to growth lie on health grounds. Reducing the pack size has proven valuable to enable consumers to better measure and regulate their soft drink and calorie intake. For instance, in 2015, Coca-Cola introduced in Canada a 500ml PET bottle to replace its 591ml size for its flagship Coca-Cola brand and the 310ml slimline beverage can in place of the former 355ml size, while, at the same time, reducing the sweetness of the syrup formulation, thereby reducing portion size and calorie and sugar intake even more. Reduction in pack size is not exclusive to single-serve sizes, there is also evidence of family packs shrinking in size with a shift from 2-litre to 1.5-litre bottles and both 1-litre and 1.25-litre bottles also doing better to suit smaller households in Europe seeking to regulate a bit more how much of their favourite carbonated soft drink they consume. In Switzerland, Rivella’s launch of its non-cola carbonate Rivella Cliq in a 1-litre PET bottle is just one more example of downsizing from the past year.

global leading pack types

Plastics industry is central to further packaging growth

The importance of the plastics industry to the global packaging industry leader board continues to strengthen through the performances of the leading formats flexible plastic and the PET bottle. Flexible plastic, as the most versatile of packaging materials, consolidated its position as the most important pack type in global consumption terms, at 988 billion units in 2015, with consumption set to exceed one trillion packs in 2016. A widespread strong performance across food, beauty and home care industries and across the pack size spectrum, from a 5ml shampoo sachet to a 5kg bag of rice, underlines this pack type’s versatility and importance to the consumer goods landscape. Flexible plastic’s position is further secured by the rise of consumers buying in smaller sizes in food categories like biscuits and snack bars, sweet and savoury snacks and confectionery, a trend also witnessed within beauty and home care, with the benefit of buying in a smaller size with a lower unit price, thus also kinder on the pocket.

The PET bottle ranks among the most successful consumer packaging formats, as the second most-sold pack format to the global consumer goods marketplace, and a pack format that continues to record well-above-average packaging growth. Ranked number one and the clear pack of choice for the soft drinks industry, the PET bottle globally accounted for 57% of all soft drinks sold in 2015, its penetration and growth being positively impacted by its dominant presence in the strongly performing bottled water category. Per capita consumption of bottled water continues to rise as part of the health-driven shift from sugary carbonates in Europe and North America, and is being furthered by the purchase of smaller bottles of 500ml and below, as a healthy lunchbox size and convenient handbag size for practical hydration on the move. Smaller single-serve bottled water launches range from 200ml Masafi bottled water in the United Arab Emirates, to the 250ml SantAnna La Baby in Italy and a 330ml size for Morshynska Sportyk fitted with sports cap in Ukraine.

The greatest volume growth in 2015 for PET came from the Asian markets of China, USA, Vietnam and Indonesia, underpinned by a need for safe drinking water and further buoyed by the greater degree of urban living in the Asian countries and middle-class population growth, which is creating a growing consumer base that can afford to buy bottled water and other packaged soft drinks in PET. In the US, consumers are continuing to buy bottled water for its health benefits compared with carbonates and juices. PET is also showing some interesting progress in dairy, with the clarity of PET enabling brand differentiation from the more established liquid carton and HDPE bottle and supporting a forecast 7.7% CAGR for PET over 2015-2020 for milk products. Important growth regions are Asia Pacific and Latin America – Asia today accounts for 31% of global milk consumption, set to account for 35% by 2020, as household consumption of milk rises and is therefore important to consider – led by India and China – for onward opportunities for brand owners and packagers.

Metal secures its best success through beer and functional beverages

Within metal packaging, the metal beverage can shows especially good promise, despite challenges being faced in carbonates. In 2015, the beverage can accounted for 89% of metal packaging growth and 10% of total retail packaging growth. Beer, RTD tea and energy drinks were the principal providers of growth in 2015, enjoying a global 1.8% rise in demand, an increase of 7.1 billion cans, benefiting from pack innovation in the form of a diversified pack sizing strategy, with more mini-cans and bigger cans available alongside the use of slimline designs.

For beer in Russia, for instance, 2015 saw Moskva-Efes Pivovarnya ZAO, innovatively launch Amsterdam Navigator beer in a 237ml pocket size in a country where the considerably larger 500ml glass bottle, 500ml beverage can and 1.5-litre PET bottle represent the most common pack purchases. While 237ml is an unusual size, to say the least, it was launched in a bid to engage with consumers through this novelty mini-size and help on affordability grounds too amidst all the pressures from excise duties. Gains in market positioning from glass is another contributor to the beverage can’s success, as has been noted for beer in China and Brazil.

The metal aerosol can is another highlight of the metal industry in 2015, recording 4.3% increase in global sales in the beauty industry, benefitting from an increasing penetration of deodorants, with Brazil and India proving the strongest growth providers. For Brazil, a favourable pricing strategy supported aerosol deodorant growth, as has the development of the compressed aerosol can, now also available in Brazil, as launched by both Unilever and Natura Cosmeticos in 2016. In India, there continues to be a cultural shift from talcum powder and local fragrances to deodorants to account for its strong current growth and very strong onward potential to 2020, as familiarity with deodorants encourages further take-up among consumers.

And for the coming year…

Global packaging demand is expected to record growth of 2.7% in 2016, with 71% to come from the fast-growing Asia Pacific region. Within an ever more competitive global marketplace and as players seek to grow brand sales by engaging more closely with consumers, the importance of packaging as a tool to achieving growth will remain strong. We expect to see again variation in brands’ packaging portfolios in the coming year through pack type selection, pack design and the range of pack sizes being made available to consumers.