Positive Luxury’s The Future of Premium Drinks report highlights the need for “true sustainability” in the sector. In addition to transport and packaging, financial sustainability is an issue of key importance.
When it comes to sustainability in the premium drinks industry, climate change and environmental issues have become top of mind. But financial sustainability is a crucial, yet often overlooked component, according to a new report from UK-based consultancy Positive Luxury.
There are a number of reasons for the increasing pressure on fiscal sustainability in the current market, including inflation, Russia’s invasion of Ukraine, transport and climate impact. With regards the latter, Jesse Twartz, Senior Risk Analyst at Zurich Australia, highlights the case of a company whose premium wine had to be sold under a less expensive brand as due to local environmental factors, the fruit was smoke-tainted, which negatively affected the wine's flavor profile.
Rising grain prices are also a critical issue for spirits producers; with Russia and Ukraine together accounting for 30% of exports, a big question mark hangs over supply in the coming year. More generally, higher prices are being felt globally, with global food prices hitting an “all-time high” this past March, says the report, and further increases are expected due to demand outstripping supply.
As for wine and spirits transportation, shipping prices to the EU have increased by around 400%. “The main issues are the lack of empty containers in Europe, lack of capacity due to port congestions and closures creating blank sailings which equals less available space on the vessels that do stop at the ports. Other factors are underdeveloped hinterland infrastructures and lack of investments in EU ports in general – which before the pandemic were already under strain and creating delays,” explains Antoine Petrogallo of Petrogallo Consulting. That said, “costs are lower to ship back to China as the shipping lines need the empty containers (especially 40ft) to reload at very lucrative rates,” he notes.
With exacerbated transportation issues forecast this year on the back of rising energy costs linked to war in Ukraine, “packaging weight matters a great deal more and represents an opportunity to bring down costs,” states the report. “We know that glass is relatively sustainable, but to ship it is a challenge. Can we come up with something that consumers are interested in purchasing – a product in a different type of packaging that allows us to be better stewards?” says Porto Protocol climate think tank ambassador Dr Gregory V Jones.
Brands are indeed beginning to embrace lightweighted bottles in a bid to cut down on shipping costs. Luxe Packaging Insight recently covered Champagne Telmont’s initiative to create the industry’s lightest Champagne bottle with glassmaker Verallia, and Moët Hennessy’s Chateau Galoupet’s PET wine bottle packaging. Producers should, Positive Luxury suggests, communicate their luxury values on the bottle's labels by commissioning an artist or illustrator, for example, rather than via the weight of glass.
The report spotlighted Air Company’s patented technology that transforms excess carbon from the air into ethyl alcohol for use in spirits and fragrances. Its Air Vodka is said to absorb as much CO2 from the atmosphere for each bottle as eight mature trees. “We created our vodka to show the world that pushing boundaries on technology and products is possible and that without innovation, the world becomes stagnant,” remarked Air Company Founder and CEO Greg Constantine.