Wine Australia’s Emissions Reduction Roadmap, released last week, is a guide for the sector to significantly reduce its carbon emissions by 2030. A large share of current emissions come from packaging. This Market Bulletin will review the most recent trends in packaging, considering environmental and economic forces, as well as consumer preferences.
Emissions Reduction Roadmap
The Emissions Reduction Roadmap (Roadmap) established a baseline of the total greenhouse gas emissions generated by the Australian grape and wine sector, demonstrates a pathway to reduce those emissions, and outlines effective and practical initiatives along the supply chain to reduce emissions by 42 per cent by 2030.
It is estimated that the Australian grape and wine sector contributed 1,770,997 tonnes of carbon dioxide equivalent to the atmosphere in the 2020–21 financial year, which is roughly the same emissions as a full jet plane doing 609 laps of the world. Packaging is estimated to contributed 44 per cent of these emissions, with heavy glass bottles being the main contributor (34.4 per cent of total emissions). Emissions from packaging include its production, sales, and end-of-life treatment such as recycling or landfill.
Figure 1: Breakdown of emissions of Australian wine
There are two packaging-related initiatives identified in the Roadmap to reduce emissions: transitioning to lightweight bottles (a reduction of 759,545 tonnes of CO2-e) and lower energy glass production (a reduction of 301,823 tonnes of CO2-e). Lighter glass bottles use less glass in the production process, therefore lowering emissions. They are also lighter to ship, reducing emissions in transport as well. Lower energy glass production has been modelled at a 35 per cent energy saving, starting in year 2025. The Roadmap recognises that switching to other forms of packaging – such as bag in box and canned wine, are also important avenues to consider.
Innovation in wine packaging
While bag in box, single serve PET bottles, and canned wines have now been on the market for a number of years, there are also new innovations in packaging entering the market. Variations on the traditional bottle include the Frugal bottle, which is made from recycled cardboard and uses a plastic pouch to separate the liquid and paper, and the Packamama bottles, which are made using recycled PET and come in a flatpack design, allowing for twice the number of bottles per pallet. Even the bag-in-box format is being re-invented with new sizes and shapes, such as the Californian wine brand Juliet.
For on-premise outlets, more options for refillable containers are becoming available. Storing wine in kegs is offering the ability to have wine on tap while maintaining wine quality. Systems such as the wine ecoTOTE, which has a 4.5 litre capacity, can be used, sanitised, and refilled up to 150 times without damage.
Drivers of packaging change
According to the 2023 Wine Business Monthly Packaging Survey, conducted in the United States (US), the average cost of glass has risen by 8 per cent in the past year and 43 per cent of all wineries surveyed indicated that controlling costs was the main driver of the packaging strategy. Thirty-one per cent of US wineries surveyed have switched to lighter glass bottles in the past couple of years, while the majority of the remaining respondents had already switched or were already using the lightest glass available. While the most common reason for switching to lighter glass bottles was to reduce emissions, the second and third most common reasons were reduced bottle costs and reduced transport costs. The most common reason for not switching is the perception that the brand would seem less premium to consumers.
Consumer health and wellness movements are also impacting packaging trends. As consumers move towards moderating their alcohol intake, packaging types that enable this behaviour are increasingly recognised. According to Wine Intelligence, regular wine drinkers in Australia, the United Kingdom (UK), the US, and Canada are showing increased awareness of certain packaging types outside of the standard 750ml bottle, especially in the US where nearly all other packaging types increased in awareness during 2022 (see Figure 2). In Australia and the UK the “pouch” container increased the most, while in Canada it was the small single serve bottle.
Figure 2: Awareness of packaging types amongst regular wine drinkers in the US
Source: Wine Intelligence
In all these markets, it is the younger generations of consumers who are more likely to purchase alternative packaging types, while those aged 55 and over are much more likely to stick to the standard bottle size.
Consumer purchasing behaviour across markets
An analysis of off-trade wine sales by packaging size in key markets reveals that, while the standard 750ml bottle is the most commonly bought pack size in all four markets analysed (Australia, UK, US, and Canada), its market share does differ (see Figure 3). The 750ml bottle has a much larger hold on the UK wine market than the others, with a 91 per cent volume share. On the other hand, it only holds a 58 per cent volume share of sales in the US. Compared to other markets, nearly all other formats in the US have a higher market share, except for larger casks which are more popular in Australia and Canada. The one litre format has a respectable share of the Canadian market, while barely registering sales in the others. Of the smaller formats, the single serve 187ml bottles are most popular across the UK, US, and Australia.
While the total volume of wine sales declined in the year ended March 2023 for all four markets, there were some forms of alternative packaging that grew in each market. For both Australia and the UK, there was growth in both larger and smaller formats. For example, in Australia large 5 litre casks grew in volume and value year-on-year, while in the UK magnums (1.5 litre bottles) and 3 litre casks drove growth. However, 187ml bottles also experienced growth in both markets, off small bases. Meanwhile, in North America, the 500ml format, which is mostly mini casks/tetra packs, showed growth in the US, while the 375ml size format grew in Canada.
Figure 3: Share of wine sales volume by packaging size across key markets
Source: Wine Australia analysis of various sales data sources (Circana, Association of Canadian Distillers)
Exports show slow change towards non-glass packaging
Over the past ten years, the volume of Australian wine exported has declined by 1 per cent on average per annum. Over this time, the exports of wine in bulk (to be packaged in market) has increased in volume by 1 per cent on average per annum, moving from a 53 per cent volume share in the year ended June 2013 to a 69 per cent share in 2023. As discussed earlier, the move by exporters from shipping in bottles to alternative forms of packaging such as bulk containers, is driven by both economic and environmental factors. Shipping in bulk containers means that a company can ship more wine, with less weight and lower costs.
Figure 4: Volume share of Australian wine exports by packaging type
Exports in alternative packaging formats (cans, PET containers, flagons, kegs, and tetra packs) has grown by 2 per cent in volume per annum since 2013, but still only accounts for 0.2 per cent of total export volume. Adding soft pack (casks/pouches) to this group brings the volume share up to 1 per cent of total volume. However, it should be noted that some unpackaged (bulk) volume would also be packaged in alternative packaging or soft packs once it reaches market, as well as glass bottles.
Figure 5: Export volume by packaging type MAT June 2023
The biggest movers in this group (all pack types besides glass and bulk) have been 5 litre casks, growing by 13 per cent on average per annum, and 2.25 litre casks/pouches and 375ml cans, both of which did not get exported ten years ago. The smaller 250ml cans have also increased, by 1 per cent per annum on average.
Figure 6: Volume share of pack sizes (ML) of alternative and soft pack products
When it comes to exports in glass bottles – 79 per cent of volume is shipped in 750ml “standard” bottles, while 19 per cent is shipped in 1.5 litre “magnum” bottles, with the remaining 2 per cent being made up of smaller and larger formats.