Plain packaging could lead to billions in food industry losses, says new study

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12 Dec 2017 --- Following the introduction of plain packaging for tobacco products in some countries and calls to extend the legislation to other sectors, marketing consultancy Brand Finance has analyzed the potential financial impact of such a policy on food and beverage brands.

The reports looks into four categories: alcohol, confectionery, savory snacks, and sugary drinks, analyzing the impact of instantly recognizable and distinctive packaging and logos and how, if they were to be replaced with plain packaging, the value of the brand could be sorely dented. 

The Brand Finance report suggests that US$186.7 billion could be wiped off the combined enterprise value of firms. Eight major brand-owning companies were analyzed (sample based predominantly on the Fortune Global 500 list of the world’s largest companies) and companies with alcohol and sugary drinks brands are most at risk.

It says that PepsiCo has the largest proportion of enterprise value at stake – 27 percent, the Coca-Cola Company would lose most in absolute terms – US$47 billion, while AB InBev, Heineken, Pernod Ricard would see 100 percent of their brands exposed. 

Because of the observed vulnerability of the beverage industry to plain packaging, the results were then extrapolated across all alcohol and sugary drinks brands valued by Brand Finance in 2017, whose parent companies have an enterprise value of more than US$1 billion and, according to the report, there is at least US$293 billion of total implied loss across the beverage industry.

Branding ban or censorship
Brand Finance says that plain packaging is often referred to as a branding ban or brand censorship and by imposing strict rules and regulations, the legislator would 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.

Australia, France, the UK, and Ireland have already implemented plain packaging for tobacco products while many others, including Norway, Georgia, Slovenia, Hungary, and New Zealand have legislated for it. However, the policies have been very controversial.

Advocates claim that plain packaging removes the visual cues that prompt existing users to purchase the product and that it prevents children or other potential new customers from developing brand loyalty and this leads to better health outcomes for these inpiduals and the population as a whole. In contrast, opponents claim there is no reliable evidence that plain packaging works to achieve such aims.

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