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Push for plain packaging could cost drinks industry $400billion

Push for plain packaging could cost drinks industry $400billion

A new study has found that extending plain packaging to alcohol and soft drinks could cost drinks companies $396 billion in sales.

The report by Brand Finance analysed the potential financial impact of such a policy on beverage brands. It found the Coca-Cola Company and PepsiCo stood to risk the most - $47.3 and $43 billion respectively, equal to 24% and 27% of their total value. 

However, companies such as Heineken, AB InBev, and Pernod Ricard, would also be devastatingly affected. 

CEO of Brand Finance David Haigh said: “To apply plain packaging in the food and drink sector would render some of the world’s most iconic brands unrecognisable, 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, which are heavily reliant on FMCG contracts.”

He added: "Take a brand like Johnnie Walker. Johnnie Walker is an absolutely huge brand globally, it's the same sort of thing with Möet and Chandon champagne or Heineken beer, they have all developed very strong positions over decades and sometime centuries.

"Now if those brands all suddenly had to go plain packaging they would obviously lose market share, they would lose price premium, they would lose large amounts of money.

"And so it's a public policy debate about how far should the state go in restraining people's right to choose and right to use these products - my view is that they shouldn't." 

The state of play on plain packaging

Australia was the first country in the world to introduce plain packaging on tobacco products, leading to speculation it could try to do the same with alcohol. 

While tobacco companies fought the Australian legislation in the High Court and at the World Trade Organisation, they were unsuccessful. Since then countries including the United Kingdom, France and Ireland have followed Australia's lead.

Lawyers have warned that alcoholic drinks could be next. 

Australian National University is currently conducting a study on the benefits of plain packaging being introduced to alcohol in Australia, entitled "Would plain packaging for alcohol communicate health risk factors to youth?"

Meanwhile, a report by UK government advisory body Public Health England has suggested selling alcohol in plain packaging with more comprehensive health warnings would be effective in changing drinking habits.

Haigh said he first learned of the plain packaging threat in 2004 at a trademark conference where participants warned that activists would not stop just at tobacco.

"I don't think [the prospect is] that unlikely, there are certain countries that have already begun talking about having plain packaging on alcoholic drinks," he said.

Haigh noted that while regulations would cause huge damage to the brands, the situation with tobacco showed it would not destroy the drinks industry.

"The cigarette companies don't seem to have given up despite plain packaging because there is a demand for the products, so no doubt there will continue to be demand for the product but clearly it would not be particularly helpful for the shareholders if their market leading positions are undermined by plain packaging so it [will] obviously be damaging but I expect they would continue. 

"Just because you make whisky plain packaging doesn't mean there won't be a demand for whisky."  

ABA's view on plain packaging threat in Australia

Earlier this year, Alcohol Beverages Australia (ABA) dismissed calls for plain packaging for alcohol, which were made in response to a new study on the effectiveness of graphic anti-alcohol advertisements.

The report showed that advertisements warning of an increased risk in cancer when consuming alcohol were rated most effective in deterring alcohol consumption.

However, ABA Executive Director Fergus Taylor said the advertisements did not accurately reflect the health risks associated with responsible alcohol consumption, amounting them to scaremongering.

“While such advertisements can play a role in raising awareness amongst problem drinkers, they need to be much clearer about the very high levels of drinking that are relevant to significantly increased cancer risks,” Taylor noted. 

Taylor said the advertisements fail to make clear the number of risk factors involved in the development of cancers and instead simply demonises alcohol.

“Unless advertisements spell out that it is at high levels of drinking when these increased risks occur, what they amount to is simply demonising a product that has well-established health benefits when consumed at moderate and responsible levels."

ABA urged policy makers to carefully consider established evidence before taking action.