Drinks companies worldwide could lose more than US$430 billion in brand value if plain packaging laws are extended to alcohol and sugary drinks, according to new research.
Valuation consultancy Brand Finance has analysed the potential impact of such a policy on food and beverage brands in four categories: alcohol, confectionery, savoury snacks, and sugary drinks, and found that companies like Pernod Ricard are particularly vulnerable.
A number of countries have started to enforce plain packaging laws on products such as tobacco, while others are debating extending these policies to alcohol.
Eight major brand-owning companies would lose a total of $234.0 billion, according to the study, which said that alcohol and sugary drinks producing companies were the “most vulnerable”.
The research builds on Brand Finance’s first plain packaging report, which was released in 2017.
Given the growth of brand values over the last two years, the estimation is now almost $50 billion larger than the $186.7 billion calculated in 2017.
The initial white paper also found that the global drinks sector could lose US$300 billion from plain packaging laws.
Producers like Heineken, AB InBev, and Pernod Ricard would see 100% of their revenues exposed to the legislation, the report said.
Proportionally, French drinks giant Pernod Ricard has the most to lose, according to the study, with 36.2% of its enterprise value at stake.
Enterprise value is a measure of a company’s total value, often used as a more comprehensive alternative to equity market capitalisation.
AB InBev has the most enterprise value at stake in absolute terms, with Brand Finance estimating its loss at $64.6 billion.
David Haigh, the CEO of Brand Finance, said that a number of other countries have either implemented – or legislated for – plain packaging for tobacco products.
“With health advisors labelling obesity ‘the new smoking’, it is not surprising that there have been repeated calls for this type of legislation to be expanded into the food and drinks sectors. It is obvious, however, that this would severely damage these companies’ business values.”
“However, the predicted loss of brand contribution to companies at risk is just the tip of the iceberg. Plain packaging would also lead to losses in the creative industries, including design and advertising services, which are heavily reliant on FMCG contracts.”