Businesses, the economy and life as we know it have seemed to change daily as the pandemic continues to unravel across many parts of the country and around the world.
When it comes to the beverages industry, what impact has the pandemic had on operations and consumer activity? And what impact will it have going forward?
According to Australian Beverages Council CEO Geoff Parker, while the non-alcoholic beverages industry is expected to contract this financial year, industry conditions are anticipated to recover over the next five years, underscoring the medium-term nature of the recovery, with revenue forecast to grow at an annualised 1.1% over the five years through 2024-25, to be worth $4.2 billion (IBISWorld, Soft Drink Manufacturing in Australia, May 2020).
“While it may be some time before we know the true extent of the damage caused [by the pandemic], it’s clear that many sectors are already being forced to make tough decisions,” he says.
“At the same time, however, Covid-19 has sharpened business strategy and crisis preparedness like never before and created an opportunity for government to embark on pragmatic reform to aid economic and social recovery.”
Health and energy still front of mind
As the recession “starts to bite”, Mr Parker says, it’s likely that the beverages industry will see continued expansion in private-label products, underpinned by consumers looking for increased value.
On the other hand, he believes, increased health consciousness is likely to support industry revenue across a range of branded low- and no-sugar products and those that make health claims based on immunity.
“Higher value energy drinks and sports drinks, and niche products, including those focused on immunity in particular, are expected to bolster industry revenue and provide avenues for growth over the next five years,” says Mr Parker.
Mr Parker adds that juices with no added sugar, after a marked decline in sales volume over the past 10 years, have “enjoyed a recent uptick” as a result of Covid-19. He believes the industry may well see a long-term return to juice as consumers buy it for its “positive contribution” to dietary quality and to support their recommended daily intake of fruit.
Sustainability importance sustained
Environmental sustainability has been brought into focus during the pandemic, says Mr Parker, with it “likely” to only grow in importance.
“As sustainability permeates almost every sphere across a vast number of industries, the drinks industry has also been adapting production processes, packaging sustainability and beverage recipes to meet sustainability goals,” he says.
“Driven by both consumer trends and business strategy, sustainable practices, such as higher recycled content in packaging, have become a core focus for the industry.
“Sustainable product design and packaging practices generate environmental benefits by redirecting packaging material away from landfill to be remanufactured into new products, keeping it in use and reducing the need for virgin packaging material.”
The “missing link” in Australia at present, believes Mr Parker, is sufficient reprocessing and remanufacturing infrastructure to meet demand created by the supply of uncontaminated material via container deposit schemes (CDSs).
“While it’s the ambition of the drinks industry to increase the volume of containers being recycled through CDSs, as these uncontaminated or ‘clean’ waste streams have significantly improved the supply of packaging available for recycling,” he says, “it’s also anticipated that we’ll see more PET chipping plants and reprocessing manufacturing facilities. This is commensurate with the COAG ‘Waste export bans – response strategy’ from March this year and is now even more pressing as Australia considers what policy settings are right to support the economic recovery of the nation.”
Energy prices are another concern of the industry, particularly for manufacturers.
“Beverage manufacturers constantly raise their frustration with high energy prices that cruel growth and stifle innovation by reducing working capital that can be reinvested in R&D,” says Mr Parker.
“Moreover, higher costs, experienced by many drinks manufacturers across Australia, erode the price competitiveness of domestic products relative to imported products at a time when domestic production should be a key consideration for economic growth.
“Secure and competitive energy supply is critical and something that should be supported by developing a well-informed energy policy that reduces cost, increases reliability and is consistent across the nation.”
Clear lessons and opportunities
There are some “clear lessons” from the Covid-19 emergency, says Mr Parker. Particular lessons will remain with the industry for some time, he adds, but there are also some “clear opportunities” for reform and positive change. This includes a refocusing of domestic manufacturing and supply, and a celebration of the diversity of the Australian drinks industry.
“This will also contribute to businesses becoming even more agile and responsive in the future,” says Mr Parker.
“As the country adjusts to the new reality, we know that, in turn, the industry will continue to chart a fascinating and innovative course forward to provide Australians with refreshing drinks for any occasion.”
Read more in the latest issue of Convenience World.
