UNITED KINGDOM – Businesses stand to lose nearly $300 billion in value if plain packaging regulations are extended to the beverage industry, according to Brand Finance.
Following the introduction of plain packaging for tobacco products in some countries and calls to extend the legislation to other sectors, Brand Finance analyzed the potential financial impact of such a policy on food and beverage brands in four categories: alcohol, confectionery, savory snacks and sugary drinks.
Eight major brand-owning companies are predicted to lose $187 billion should plain packaging be mandated for other products, with alcohol and sugary drinks brands most vulnerable. The firm says that The Coca-Cola Company and PepsiCo are among those corporations with most value at risk; $47.3 and $43.0 billion respectively, equal to 24% and 27% of their total enterprise values.
Entire brand portfolios of companies such as Heineken, AB InBev and Pernod Ricard, would fall within the scope of the legislation, jeopardizing future revenue streams. An extrapolation of the results to all major alcohol and sugary drinks brands, points towards a potential loss of $293 billion for the beverage industry globally.
The estimates refer to the loss of value derived specifically from brands and do not account for further potential losses resulting from changes in price and volume of the products sold, or illicit trade. Therefore, the total damage to businesses affected is likely to be higher.
David Haigh, CEO of Brand Finance, commented: “To apply plain packaging in the food and drink sector would render some of the world’s most iconic brands unrecognizable, changing the look of household cupboards and supermarket shelves forever, and result in astronomical losses for the holding companies.”
Predicted loss of brand contribution to companies at risk is only the tip of the iceberg. Plain packaging also means losses in the creative industries, including design and advertising services.
Plain packaging is often referred to as a branding ban or brand censorship, which imposes strict rules and regulations that require producers to remove all branded features from external packaging, except for the brand name written in a standardized font, with all surfaces in a standard color.
An increasing number of countries are introducing strict regulations on the marketing and advertising of food and drink products to prevent obesity and lifestyle diseases. With calls for more intrusive measures growing, the prospect of further applications of plain packaging looks increasingly likely, suggests Brand Finance.
In 2015, the WHO-backed Tobacco Atlas, called for extending plain packaging to alcohol and some food and drink products. In 2016, Public Health England released a report calling for plain packaging to be considered for alcohol. Also in the past month, Canada’s Yukon became the first territory in the world to introduce sizeable health warning labels on all alcohol products, cautioning against the risk of cancer.
For full findings and methodology, view the full Brand Finance Plain Packaging 2017 report.