The future of packaging in Europe

Related tags Tetra pak European union Europe

Tetra Pak has been a pioneering force in the central and eastern
European food and beverage packaging sector. However, with
accession just around the corner a series of new challenges are
about to present themselves. We spoke to a leading company
executive to find out just what's in store.

Tetra Pak​ already boasts an unparalleled footprint within the region, but with enlargement just around the corner certain aspects of the food industry are expected to undergo some major changes.

Many of those changes have been taking place over the course of the last seven years, as each of the 10 States has geared up for entry into the EU. However when accession finally does take place on 1 May, next year, further changes will be on the cards as compliance with EU food safety regulations becomes obligatory.

"Potentially accession offers our company huge scope for further expansion,"​ said Tetra Pak marketing director Anders Lindgren, who represents the company's interests within the region. "However it is not as straight forward as just moving in and producing more packaging. The market is complex and there are defining characteristics for the various countries that make up the region.

"Although labour costs are around 25 per cent of what they are in western Europe this benefit is often outweighed by the fact that productivity is substantially lower. This is one of the major challenges for Tetra Pak in the region, without an improvement in productivity the cost advantage cannot be leveraged.

"However, as quality rapidly improves in every aspect of the region's food industry, western European food manufacturers are going to find it an increasingly difficult battle to try and compete with eastern European food manufacturers in terms of price.

"In the immediate period after accession there probably won't be a significant impact on our business operations. As it stands the hard work has already been done for many food-related businesses there. As far as Tetra Pak is concerned, we were already working to standards that had previously been achieved in western Europe.

"However, as an ongoing process we will be there to offer our support to food and beverage producers throughout the region, helping them to meet new EU regulations on issues such as labelling, packaging safety and even helping companies to focus on expanding into the western European market."

Obviously the development of the eastern European market for packaged foods is still lagging many western European countries, but in turn this means that coupled with high levels of GDP growth, the potential is enormous.

"If you, for example, consider the out-of-home market - hotels, restaurants, etc - there are large differences in consumption. In the UK the out-of-home sector for food and beverage purchases accounts for 40 per cent of the total, whereas in the CEE region this figure stands at around 10 per cent. This presents a large big opportunities for packages and products adapted for this market.

"During the early 90's we saw the rise of larger supermarket and hypermarket chains, which has further picked up speed over the last few years. This development will cause a big leap in the demand for packaged foods and beverage, and also have a major impact on the purchasing and consumption behaviour of Eastern European consumers."

However, Lindgren also pointed out that, alongside all the progress, there is also a great deal of polarisation. The contrast in food and beverage consumption between urban and rural areas is vast, and although hypermarkets are becoming a way of life for many city dwellers, many people in the countryside still rely on markets and small corner shops as their primary source of purchases. But in turn, modern trade in the form of discount chains and smaller supermarket chains [superettes] are now starting to penetrate the smaller towns, a factor that will dramatically change the retail structure in these countries.

"Obviously milk cartoning remains the mainstay of our business within the region, but it should be pointed out that throughout there is still a great deal of unprocessed milk which is simply sold out of urns in country markets. In Poland, for example, it is estimated that some 40 - 45 per cent of milk consumed in the market is unprocessed."

The share of Tetra Pak's packaging between the main categories [dairy and juice] is presently contrasted in its western and eastern Europe markets. In the west the share of dairy packaging is higher, and in turn we can expect this share to increase in the CEE region over time.

The type of packaged food and beverages that appear on shop shelves also looks set to change, as Lindgren explained.

"We will expect to see a higher level of diversification, both of packaging and of products. We can also expect an increase in retail brands, which have had explosive growth in many western European countries. In the UK, for example, around 80 per cent of all juices sold in cartons are retail brands, meaning that the brand owner is the retailer.

"I would imagine that the competition between strong eastern European brands and western European brands will intensify. Western brands will be challenged into extending their reach within the region in a battle against strong existing eastern European brand. On the other hand this will probably spell the end for many third and fourth level brands throughout the region."

Related news

Related product

Enhance Food Safety with the Interceptor DF

Enhance Food Safety with the Interceptor DF

Content provided by Fortress Technology, Inc. | 19-Feb-2024 | Product Presentation

Tackling the unique challenges faced by confectionery manufacturers, the Interceptor DF metal detector surpasses all other systems on the market in identifying...