Boxing clever

Bag-in-box remains a buoyant sector in the UK. However, Sally Easton MW discovers that the bag-in-box market also faces potential threats from increasingly aggressive promotions on bottles

ACNielsen data to the end of January 2006 shows that the global off-trade light-wine market is growing at 4% by volume. This increase is made up of a 5% growth for the 75cl glass bottle and a 4% growth for the 3-litre bag-in-box. The numbers suggest that bag-in-box accounts for 9% of the light-wine market, a figure similar to a year ago. The 3-litre sector is now worth £276 million, and it is branded boxes that are driving the growth in this sector, increasing at 8%, while own-label bag-in-box has grown just 1%.

Only Italy and the US have increased their market shares, with the US gaining a dramatic 3% share of the market. So while the overall 3-litre market is experiencing a growth of 4%, it is the US that is driving a big chunk of this.

This predicament partially reflects the total off-trade light-wine market, where both the US and Australia account for the lion’s share of market growth for all formats of packaging. It also suggests that Australia may be missing a trick in the 3-litre category.

Paul Sullivan, marketing manager at Western Wines, explains, “The statistics appear to reflect a slowdown. Growth has decreased to 4%. There are so many good deals in bottle format on brands and exclusive lines, and this has had an impact on the bag-in-box market. The difficulty is charging £15–£16 for bag-in-box, versus four bottles on BOGOF.”

But this is all just a drop in the bag-in-box ocean of the Scandinavian markets. In Sweden and Norway, bag-in-box boasts more than 50% market share. Ulf Sjodin, PR manager for Vin & Sprit, explains, “Price and convenience are equally important. You save a little money by buying bag-in-box. You can’t otherwise get a discount in a Systembolaget (stores owned by the Swedish alcohol retail monopoly). Consumers talk about the convenience. They can carry four bag-in-boxes from the Systembolaget, but they can’t carry 16 bottles. In addition, going to the Systembolaget requires a special effort, so you go as infrequently as possible.”

Sjodin adds, “Many big international brands have entered the bag-in-box market. Penfolds bag-in-box, which started in October 2005, was designed specifically for the Swedish market. It is going very well, accounting for about 1% of the total sales in January, and it’s one of the most expensive, at about 25% more than the price of other top sellers.”

Effective production
Tim North, UK director for Les Grands Chais de France, producers of French phenomenon JP Chenet, says that new technology has been instrumental in securing new business: “JP Chenet bag-in-box is growing very quickly at the moment. Brands have an important reassurance role to play in the bag-in-box market – £14.49 is a lot to shell out. Another big part of our business is doing exclusive products and retailer-brand own-label products. We’ve increased our share substantially recently.” 

The company has invested in new production lines that manufacture the bags in-line from a roll of metalised plastic film. The bag is welded on the line, a hole is made for the tap, a tap is placed and the bag is filled. As well as cutting out an element of cost, North says there is also a quality benefit: “Bag-in-box wines have a shorter shelf life because the oxygen barrier is not 100% effective. Flex cracks can occur in the metal layer, and it is quite difficult to monitor the level of creases in the bag, since it depends on the individual bag. One of the great advantages of making the bags in-line is that handling is reduced, which reduces flex cracks and gives the wine a longer and more consistent shelf life.”

More than 20% of German-based ZGM’s business is bag-in-box, both for its own brands and packaging on behalf of customers. Steve Howard, the company’s UK sales and marketing director, says the company has moved from the squat 3-litre bag to the “frigo-box” which is taller and more slender, fitting neatly into the door of the fridge. ZGM too has moved to the system where the bags are made in-line and filled immediately, and in the last four years it has grown to become Germany’s third-largest wine company from number 15. Howard says, “We are replacing technology that’s only three years old because we recognise the importance and growth potential of the bag-in-box and the need to stay at the leading edge of technology.”

The bag-in-box offers different marketing opportunities to glass bottles. Clare Griffiths, vice-president of brands marketing at Constellation, says, “On our Hardys Stamp and Stowells ranges we have included a picture of the bottle on the bag-in-box packaging to help educate the consumer that the liquid in a bag-in-box is exactly the same as its 75cl equivalent. This helps reassure the consumer.”

Western Wines’ Sullivan says, “We’re trying to consider bag-in-box along the linesof a cereal format, with large marketing
and advertising campaigns. Not many manufacturers use every available communication opportunity to talk about the full wine range. We trialled an in-pack CD on Kumala Chardonnay and Cabernet Sauvignon in Sainsbury’s, which worked pretty well. Bag-in-box should have more opportunities than bottles in terms of talking to the consumer, because there are four decent-sized sides. In-pack marketing is better on bag-in-box than on bottles. You could even drop in a leaflet; most consumers know that, if you take the bag out of the box and squeeze it, there’s two more glasses. So putting in a leaflet theoretically makes sense.”

Nick Juby of the Tesco wine team is more reticent, saying that, “Bag-in-box is a fundamental part of our offering, it’s another way of packaging wine that is convenient to some consumers. It is not huge on our radar other than to meet customers’ requirements. We sell a lot, in line with the market, but we don’t see huge growth.”

The single-unit price remains high, though, and the past year has seen the introduction of more 2-litre packs. Constellation products range in price from £9.59 to £14.99 for 2-litre, and £13.99 to £19.99 for 3-litre. While the company’s top 10 UK brands are all in 2-litre packs, Griffiths says, “The 2-litre pack format is still a relatively new concept for Constellation Europe, so it’s too early to say whether it will eclipse the 3-litre format. The 2-litre allows a more accessible price for our premium wines, while its more portable-size format gives greater flexibility and is key for the convenience sector.”

Sainsbury’s has more than 35 wines in bag-in-box, across all the price points. Its bag-in-box buyer, Michelle Smith, says, “Our most expensive bag-in-box is £19.99 [and] the majority of sales are below £15.” This is in line with ACNielsen data, which shows that the average price of £11.47 is down a fraction on 2004, and that price continues to be a potential limiting factor.

With the stats showing slowed growth for the category, consumers may not immediately recognise the benefit of the technical innovations being made, but brand owners who box clever with the marketing format may be the ones who edge ahead of the game.

Tetra piece
The Tetra Pak French Rabbit caused a bit of a stir in the season of the March hare. It was launched on the UK market at the beginning of the year to much fanfare, and the support of a traditional company such as Burgundy’s Boisset may well be needed to create credibility for this packaging format in a country as conservative as the UK.

One of the format’s main benefits is the reduction in packaging waste it offers. Eighteen months ago, the Liquor Control Board of Ontario was charged to decrease packaging waste by 50%, and it approached suppliers for solutions. Jean-Charles Boisset, president of Boisset Vins & Spiritueux, says his company had been trialling Tetra Pak already, which could reduce waste by a remarkable 90%, so it was able to respond quickly. French Rabbit was launched on to the Ontario market in July 2005 and was an immediate success. Where the sales per period for an average varietal French wine were 150–250 cases, with the Tetra Pak figures approached the equivalent of 1,000 cases.

In the UK, a greater challenge for this format is the current realistic ability to recycle this type of packaging, where paper, plastic and metal are combined in one pack and cannot be separated out by the consumer. Phillip Ward, director for waste implementation programmes at WRAP (Waste & Resources Action Programme) says, “While the materials used in multi-material packaging are often individually recyclable, combining them can reduce the opportunities for cost-effective recycling. The number of recycling facilities for this type of packaging is also currently limited in the UK.”

Boisset’s Canadian mantra of “environment, quality, convenience” has been reversed to focus on the convenience factor for the UK. Boisset says, “It is a UV-protective package, it’s shatter-resistant, it’s one litre but takes less space than a 75cl bottle, it’s about 45% lighter than a glass bottle, it’s resealable. You squeeze the air out before resealing in order to keep wine a little longer; and the package still stands up. It cools down three times faster than a regular bottle of wine.”

These are certainly things that may well appeal to the UK consumer. It’s said to be great for picnics. Also, the grip required to pick up one of these Tetra Prismas is the same as for a glass bottle, so there is no additional mindset to overcome on that count.

Sara Davolio, package integrity expert at Tetra Pak, says the technology uses a seven-layer packaging material – including aluminium, polyethylene and paperboard – all of which serves as a barrier to both light and oxygen, with a 30-micron layer of polyethylene in contact with the wine. 

While the company says it is normal for wine to undergo flash pasteurisation (heating to 60°C–70°C for one to two minutes) before the cartons are filled, Boisset still insists that French Rabbit undergoes no flash pasteurisation, adding that various tests need to be done to get the filling process right, but the wine is absolutely not heated at any point during the process.
A decade or more ago, the UK market was not ready for Tetra Pak wine. Will it succeed this time around? Boisset is optimistic, but at the time of writing it seems to be a waiting game. db  May 2006