Packaged To Be Different

May 1, 2006
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Packaged To Be Different
By ELIZABETH FUHRMAN
Package material and shape matters for every beverage category

Plastic beverage containers are strengthening their grip on the packaging market. While metal beverage cans are still the leader in the U.S. market, with volume at about 92.3 billion units, plastic is gaining ground and is expected to see volume results of more than 53.6 billion units in 2005, reports Euromonitor International, Chicago. Glass follows with volume at about 26.6 billion units, along with flexible packaging at 6.5 billion units, liquid cartons at 2.3 billion units and paper-based containers at 1.3 billion units.
PET is pushing beyond just carbonated soft drink bottles, which still accounted for 27.5 billion containers in North America, up more than 1 percent from 2004, according to Citigroup’s Global Beverage Packaging report. In 2004, total North American resin usage from bottled water, isotonics, fruit juices, alcohol, other beverages and food exceeded 4 billion pounds, which is more than double the total soft drink category.
While plastic containers made gains due to their light weight, transparency and versatility, the trend toward premium products – whether they be imported beers or bottled water – tends to favor glass. Glass containers make up just less than 4 percent, or $4 billion, of the total $105 billion-plus U.S. packaging industry. The United States is the second-largest global glass container market (following Western Europe), with annual capacity of about 9.5 million tons produced at 50 U.S. glass bottle facilities. A decade ago, Citigroup estimates the U.S. market had total capacity of more than 11 million tons produced at 66 plants. The overall U.S. glass packaging market has continued to shrink at the hands of PET, but manufacturers such as high-end microbreweries that use glass exclusively have contributed to overall demand.
For cans, the United States is the world’s largest market, with slightly less than 100 billion beverage cans shipped in 2005, Citigroup reports. The U.S. beverage can market’s annual capacity has shrunk 5 percent since 1995, but energy drinks are helping to capture some growth. With conversions from traditional 12-ounce cans to higher-margin alternative cans, such as 16-, 18- and 24-ounce cans in energy and other specialty drinks categories, the demand for non-12-ounce cans increased 10 percent in 2005, Citigroup reports. While major U.S. producers including Ball Corp., Rexam, Crown, CCL and Exal have all converted lines to larger sizes, 12-ounce cans still make up 90 percent of all domestic aluminum beverage cans.
For the different beverage categories, Citigroup estimates that aluminum cans made up 54 percent of the total packaged beer market in 2005, up slightly from 2004. Glass bottles accounted for 43 percent, with the remainder split between plastic bottles and other materials. As domestic brewers try to regain cachet, more specialty packages like 8-ounce slim cans and aluminum bottles are being introduced. Citigroup also expects glass to continue to gain share at the expense of cans as a result of new imports and brewers introducing innovations in glass bottles. More brewers are likely to launch new products in glass or draught in order to maintain a premium image.
In carbonated soft drinks, aluminum cans represented 41 percent of the total packaged market in 2005. Plastic PET containers accounted for 35 percent, with a small amount in glass bottles. Citigroup anticipates that PET will capture more carbonated soft drink volume since the soft drink industry is trying to enhance margins via packaging innovation and by converting consumers to single-serve packaging.
Pricing pressures
Packaging and beverages are intertwined for a couple reasons. For bottlers and manufacturers, packaging represents 40 to 45 percent of the cost of goods sold. But from a revenue perspective, new packaging can raise the image of a brand or lead to volume growth.
Essential raw materials for all three major beverage packaging types – metal cans (aluminum), glass bottles (natural gas) and plastic bottles (PET) substantially increased during the past two years, Citigroup reports, and it expects that to translate into higher costs for bottlers and beverage companies this year. Aluminum prices passed 17-year highs, and Citigroup Investment Research’s global metals and mining team recently raised its full-year 2006 and 2007 price forecasts. The long-enduring aluminum price cap also is being phased out, increasing pricing demands on can-makers and their customers. As well, major glass bottle producers have been aggressively escalating prices due to growing energy and raw material costs.
U.S. beverage packaging use
(Volume in millions of units)
Metal beverage cans
 20042005*
Carbonates57,750.8 58,011.9
Fruit/vegetable juice1,327.7 1,263.5
Bottled water116.8 123.7
Functional drinks904.4 1,105.7
Concentrates42.8 42.5
RTD tea1,960.5 1,899.1
RTD coffee37.5 40.8
Beer29,405.3 29,166.9
Cider/perry5.2 5.2
Spirits8 7.8
Total category92,224.8 92,299.8
 
Rigid plastic bottles
 20042005*
Carbonates23,244.9 23,305.2
Fruit/vegetable juice5,095.4 5,086.0
Bottled water16,774.0 18,487.0
Functional drinks5,627.2 6,102.1
Concentrates79.5 79.1
RTD tea118.4 134.3
RTD coffee0.9 0.8
Beer40.6 47.5
Flavored alcohol beverages22.1 21.6
Wine0.3 0.4
Spirits267.4 320.3
Total category51,298.4 53,620.1
 
Glass bottles
 20042005*
Carbonates965.6 876.1
Fruit/vegetable juice2,173.2 2,094.7
Bottled water472.2 494.3
Functional drinks575.6 648.8
Concentrates38.9 38.6
RTD tea1,640.8 1,685.1
RTD coffee331.2 365.9
Beer15,859.5 15,866.7
Cider/perry73 71.1
Flavored alcohol beverages1,146.2 1,113.1
Wine1,989.8 2,061.4
Spirits1,165.5 1,173.2
Total category26,501.8 26,555.2
 
Liquid cartons
 20042005*
Fruit/vegetable juice2,246.9 2,161.4
Functional drinks103.7 118.0
Concentrates0.9 0.9
RTD tea10.5 10.8
Flavored alcohol beverages2.2 2.3
Wine6.3 6.9
Total category2,370.5 2,300.2
 
Paper-based containers
 20042005*
Fruit/vegetable juice311.6 275.8
Concentrates139.3 132.4
Wine44.6 46.6
Spirits70.5 73.0
Total category1,277 1,253.3
 
Flexible packaging
 20042005*
Fruit/vegetable juice 4,265.4 4,561.0
Functional drinks 432.8 512.4
Concentrates 262.7 252.4
Total category 6,041.6 6,507.9
*Forcast volume
Source: Euromonitor International, Chicago, 2006
In contrast, the significant schedule of new PET resin expected to enter the global market in the next three years – more than 10 percent per year – will moderate cost pressures for PET bottle-makers and their customers. Given cost outlooks, Citigroup suggests that PET bottle-makers could see opportunities to benefit from substitution to PET in select beverage categories.
Innovations in packaging
PET is a leading material when it comes to innovations in bottle shape and design. But as with most materials, drawbacks to PET exist such as exposure to ultraviolet light that can degrade flavors, colors and vitamins. Eastman Chemical Co., Kingsport, Tenn., developed Vitiva PET for clear packaging of beverages to protect against such exposure.
“Beverage companies make significant investments in developing the ideal balance of ingredients for their signature formulations,” says Lavonna Buehrig, North American business market manager for polymers at Eastman. “Vitiva’s FDA-approved UV absorber protects some of the most popular ingredients used in beverage formulations.”
Vitiva PET contains a UV absorber bound directly to the polymer chain, and is not an additive, so manufacturers do not have to worry about leaching. The product blocks UV light up to 370 nanometers. Studies at Eastman on sports beverages and fruit juices show that colorants such as Red #40 begin to degrade after a few hours in the sun or under a UV lamp. Vitamins C and B6, among others, also show a decrease in their efficacy after short UV exposure. Products with 370 nanometers of UV protection remained undamaged even after prolonged exposure to direct sunlight.
“Any change in the product flavor or color can have a detrimental effect on sales and lessen customer loyalty,” Buehrig says.
PET also offers beverage manufacturers the ability to differentiate via the bottle instead of just the label. Non-carbonated PET packaging is growing rapidly because of this as well as its ability to withstand hot-fill and cold-fill aseptic processes, says Stewart Leslie, president of 4sight Inc. Working with the functionality of PET instead of against it, manufacturers can “let the bottle be the brand instead of the label,” he says.  
For example, the new grip on a global Gatorade bottle takes care of the give and take of hot fill and cooling. 4sight embossed and debossed the Gatorade name and lightening bolt logo into the recessed grip areas of the bottle along with an oval shape that resembles a football. Creating a tall, slender lightweight package, 4sight changed the feel and grip using contours and finger depressions. The company produced a similar branded bottle for Propel that depicts the brand’s focus of being an aerobic fitness water.
“In non-carbonated, hot-fill manufacturing is really pushing the envelope for finding and inventing new bottle types, instead of crunching under the technical challenges, embracing them and using them to be innovative,” Stewart says. “You get such a strong ownership. Typically with a bottle you’ll get a design patent and somebody can knock you off. But because these new innovations are tied to functionality they are held with strong utility patents, so its very difficult for someone to come along and do the same thing you did.”
For Pepsi-Cola North America’s MDX launch, the carbonated segment also stepped up its innovation with 4sight creating a bridge in packaging between the energy drink and carbonated soft drink markets. In 4sights’ research, consumers associated energy drinks with a tall, skinny can and soft drinks automatically came to mind with a 20-ounce capped bottle. 4sight, in turn, created a 14-ounce bottle that is narrower in diameter than a soft drink with the hand-feel and grip of an energy drink and waves on the bottle that communicate energy.
Graham Packaging Co., York, Pa., also created a new PET plastic container for S. Martinelli & Co.’s resdesigned and improved plastic version of its trademark 10-ounce, apple-shaped glass juice bottle. Martinelli wanted to maintain the container’s brand identity, but recognized the portability opportunities that a plastic container would bring. Graham Packaging created a panel-less, label-free container with barrier properties that could be processed on hot-fill equipment, says Paul Young, vice president and general manager of the PET business unit for Graham Packaging. The challenge was to maintain the shape of the bottle when the contents cooled after being hot-filled.
“We solved it by using liquid nitrogen ‘dosing’ in the head space,” explains Charles Simpson, senior product development engineer for Graham Packaging. “When the bottle is filled and heated, the liquid nitrogen expands as it becomes a harmless, inert gas that then counteracts the normal volume reduction during cooling.”
Adding liquid nitrogen flushed out the oxygen, improving the juice’s shelf life as well.  
Nestlé Waters North America also reshaped a beverage option for kids with the launch of Aquapod. Round-shaped and targeted at kids aged 6 to 12, the bottle contains 11 ounces of spring water. Even with the growth of the bottled water category and the number of children drinking bottled water, no product was specifically targeted at them, says Mike Pengue, director of innovation at Nestlé Waters North America.
“Aquapod bottle is something that kids will get excited about,” Pengue says. “It’s something that is for them and not their mom or dad’s half-liter of Poland Spring. Through our research, they want healthy refreshing beverages, and spring water is continuing to fill that need, but they want it in a bottle that is fun and specific for them.”
With Aquapod’s shape, look and feel, the bottle is something that Nestlé Waters thinks is iconic and clearly extendable, Pengue adds.
Packaging design is still a driver of new products in aluminum as well. Last year, CCL Container, Hermitage, Pa., introduced the first American-made aluminum crown beer bottle for Pittsburgh Brewing Co.’s Iron City beer. This year, CCL created an aluminum bottle for Froster’s Crown Lager in the Australian marketplace.
“Foster’s considered other on-premise package options … but ultimately decided that aluminum bottles offered the unique shape, upscale look and distinct style that would enhance the premium image of Crown Lager,” says Ed Martin, CCL Container’s vice president of sales and marketing.
For CCL’s next generation of aluminum bottles, the company is launching Aluminex – a technology that allows a manufacturer to shape the entire length of the bottle to within about 20 mm. of the bottom, Martin says. “That’s a significant improvement as far as designability of the bottle vs. what the first generation products were,” he explains. “The first generation products could only shape the upper third of the bottle, which would create a relatively short neck. The new bottle designs will be about using the full capabilities of this technology.”
Another trend playing out in aluminum is manufacturers’ use of black light sensitive inks on their bottles. “It’s a whole trend of making things new and different for on-premise,” Martin explains. “The on-premise environment is also a place where the consumer isn’t going to be price sensitive, so you’re able to do some different things.”
Aseptic packaging now has a high-barrier, clear aseptic stand-up pouch in Tetra Wedge Aseptic Clear from Tetra Wedge. The transparent, squeezable package launched last year in Mexico, where Jumex rolled out Mundo Nautix. The package was designed with smooth sides and no sharp edges like current commercial stand-up pouches, and its slim 200-ml. design allows small hands to easily handle the product. Tetra Pak is extending the introduction of the Tetra Wedge Aseptic Clear in select global markets this year, with full commercial availability scheduled for the end of 2007.
Tetra Pak also created a Tetra Prisma being used by Trinchero Family Estates, St. Helena, Calif., for its Three Thieves brand. Extending its offerings with Bandit Cabernet and Bandit California Pinot Grigio in a single-serve 250-ml. four-pack. Each 250-ml. mini-box – dubbed a “Bullet” – contains one-third more than the wine industry standard for single-serve portions and is sealed with a pull tab. Ideal for outings, the Bandit Bullets allow consumers to enjoy a glass of wine without opening an entire bottle.
Just by tweaking the delivery system of a conventional tea bag, Ineeka Inc., Chicago, rolled out an innovative new product. Organically certified Ineeka tea sparked creative packaging in the tea bag world with a single-serve, pre-packaged infuser with tabs that spread open and wrap around the edge of a cup to allow the loose leaves to unfurl completely, expressing the nuances of natural flavors and aromas. Available in seven varieties, the unique tea delivery systems are conveniently packaged for consumption by the cup. The disposable infusing bag eliminates the need for pots, strainers and cleanup associated with brewing whole-leaf teas. BI

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