Insight: Shift to convenience retailers in Europe pushes innovation for packagers

A net of demographic and economic factors are transforming the European retail environment for food and beverages packaging.

The Smithers Pira report The Future of European Food and Drink Packaging to 2020. The report provides analysis on the market which is forecast to grow at an average rate of 3.2% per annum over the period 2015-2020, reaching over 954 billion packages. 

The highest per-unit national consumer is Germany, closely followed by the UK and Russia. 

Smithers Pira’s analysis highlights four interlinking trends contributing to the current transformation of the market.

Lightweighting is an increasingly important factor in the packaging market, with most significant influence in beverage cans and bottles. There are two drivers for this. The first is environmental pressures from government and environmental groups stimulating demand for greener solutions in the general public. Secondly, lower material usage for packages means reduced material and transport costs, which are always welcomed by both brands and retailers.

Despite otherwise strong environmental credentials, glass bottles and jars have a high CO2 footprint due to their weight in transit and are seeing declines, in favour of plastic bottles or jars; and flexible formats, like bags and pouches.

For example, UK-based APPE is enjoying penetration for its range of thermalite polyethylene terephthalate (PET) jars, as a substitute for traditional glass containers, which weigh by up to 85% less. They are suitable for a number of food applications such as cooking sauces, pasta sauces, relishes, chutneys, jams and spreads – with the additional benefit that they are shatterproof.

Consumer calls for convenience is key overarching factor. This is seen in the new types of foods people are eating. Convenience foods such as breakfast cereals and bars, savoury snacks and ready prepared chilled foods are proving increasingly popular.

For a time-poor consumer five minutes spent cooking a ready meal is often a more attractive option than taking 30 minutes to prepare a meal from scratch. In turn, this is changing the dynamics of packaging, with new pack features and more demand for specific pack types – especially those that enable in-pack microwave cooking.

This has, in part, been to the detriment of the food service industry as convenience stores provide substitutes for their goods in the form of sandwiches, pasta pots and other meal options.

Retailers are opening more convenience-size stores in urban locations. This allows consumers to move from prolonged single weekly visits to a two- or three-visit per week strategy. Such shops attract consumers to buy single-portion on-the-go format breakfast or lunch goods for their daytime meals. Significantly within this new retail model, smaller outlets need to manage their merchandise differently, and require greater amounts of packaging – including retail-ready solutions – to do so.

Another market approach to managing consumer demand for convenience is to move shopping online. A key example of this is France, where consumers prefer to order online, but pick up their deliveries on a click-and-collect basis. Breaking the link totally with a physical retail presence, Amazon is planning to set up its own online grocery stores across Europe, most notably in Germany and the UK.

The main driver for the packaging industry of this trend to online purchasing is a call for greater packaged fresh foods – this is especially felt for products like fresh fruit and vegetables that brick-and-mortar retailers typically display loose.

In the foodservice segment there has been weak consumption growth, with a weak economic climate forcing customers to downgrade to either fast-food options or eating at home instead. This has also opened up a market for more premium products in grocery retail, which provide restaurant quality food at a cheaper price.

In the key market segment of alcoholic beverages – in-home consumption has become more prevalent, especially for beers and ciders. This decline is supported by a general trend away from alcohol consumption. It is however stimulating the market in non-alcoholic beverages, with dispensing pouch and rigid plastic bottle suppliers benefiting.

More information

This insight is based on Smithers Pira's report The Future of European Food and Drink Packaging to 2020. This report is available for purchase now and is essential reading for anyone involved in the food and beverage packaging market in Europe.