Plain packaging policies could lead eight major food and beverage companies to lose $187 billion in sales, according to a new study by business valuation consultancy 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 analysed the potential financial impact of such a policy on food and beverage brands in four categories: alcohol, confectionery, savoury snacks, and sugary drinks.
AB InBev, The Coca-Cola Company, Danone, Heineken, Mondelēz International, Nestlé, PepsiCo, and Pernod Ricard are predicted to see their sales shrink should plain packaging be mandated for food and drink products.
Between them, these firms control 1,242 brands, 907 of which are used to market alcohol, confectionery, savoury snacks, and sugary drinks.
Brand Finance believes The Coca-Cola Company and PepsiCo are among those corporations with most value at risk: $47.3 billion and $43 billion respectively, equal to 24% and 27% of their total enterprise values.
Brand-finance-quoteThe consultancy claimed that entire brand portfolios of companies specialising in alcoholic drinks, such as Heineken, AB InBev, and Pernod Ricard, could fall within the scope of the legislation, jeopardising future revenue streams.
A calculation of the results for all major alcohol and sugary drinks brands, ‘points towards a potential loss of $293 billion for the beverage industry globally’.
In a statement, Brand Finance said: “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, 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.”
An increasing number of countries are introducing strict regulations on the marketing and advertising of food and drink products in an attempt to prevent obesity and lifestyle diseases.
With calls for more intrusive measures growing, the prospect of further applications of plain packaging looks increasingly likely.