The Australian Beverages Council CEO Geoff Parker looks at lessons from 2020 and their impact on trends for 2021. This article first appeared in the January/February edition of Food & Drink Business.
It’s no exaggeration to say that 2020 has been a year to remember. The beverages industry is no exception with a year that started with supporting communities during fires and floods and which quickly pivoted to supply households through retail outlets as the country went into lockdown.
The industry’s performance during the pandemic has demonstrated its ability to adapt to radically shifting circumstances, anticipate change in the operating environment and invest to ensure consumer needs are met.
While the pandemic is still with us as we head into 2021, we can start to see the outline of a post-pandemic world. In his new book, the head of the World Economic Forum Klaus Schwab describes the pandemic as an opportunity for a “Great Reset” – to focus business investment not simply on recovering lost sales but to create industries that are set up for the long-term objectives of consumers and society as a whole.
The popular slogan for this thinking is “Build Back Better”.
The fact that throughout 2020, the Australian beverages industry showed an underpinning of resilience and sustained or even accelerated investment confirms we are leading the way in building back better.
These strengths could be seen in areas like sustainability with recycled packaging, energy and water initiatives, and reduction in sugar commitments.
The continued growth in no sugar products, waters and kombucha were led by increasing consumer demand.
So, as we move into a new and hopefully brighter year, industry’s lessons from 2020 dominate our approach to 2021. Let’s look at the main areas of focus.
Consumer purchasing behaviour has changed
The channel migration from on to off-premise purchasing, which started in 2020 will continue. Consumers are buying more from grocery channels, in larger quantities, and are often having these orders fulfilled via e-commerce. This will continue to impact packaging decisions.
Expect to see larger pack sizes and multipacks, and fewer single serve beverages. Shifts in marketing behaviour to capture both home-based and social-based purchases will also emerge with more focus on digital channels.
The business value of the workforce
The beverage industry’s workforce commitment during 2020, with many deciding the right and smart things to do was whatever it took to retain workers, means it has the strength and speed to bounce back as conditions improve. Simply put, industry could not have executed the shift in business models without a capable, committed and expert workforce.
New flexible ways of working will unlock productivity across industry. Add to this adaptation and innovation, especially a holistic approach to collaboration across the supply chain, and industry has the tools to deal with efficiency challenges as the market continues to recover.
One direct impact on industry in 2020 was a noticeable shift in the values which drove consumer spending, specifically the role of the brand in people’s psyches. Brands equated with comfort, prestige and familiarity. Consumers treated themselves to known brand products to the detriment of house and private label brands.
As we move into 2021, brands linked to optimism and positivity are likely to flourish during the post-pandemic times ahead. Brands will become a big part of the post-pandemic recovery and 2021 will see the rise of strong smart brands.
Government policy for innovation and growth
With the federal government’s Modern Manufacturing Strategy putting food and beverage manufacturing front and centre of a post-pandemic recovery, industry takes this cue to work with government on a number of reforms which drive manufacturing competitiveness.
The Australian Beverages Council has, on behalf of its members, presented to governments its post-coronavirus recovery blueprint, which maps out a suite of concrete ideas for policy reforms to bolster investment in the sector including business tax reform; a better industrial relations environment, recognising new flexible ways of working; investment in skills development for future manufacturing; and reliable and well-priced energy.
Sustainability the key to future success
People have had a chance in 2020 to step back and realise what’s important in life. This is a fundamental shift in consumers’ conscience. Most are more aware of being mindful consumers.
We believe there is going to be a greater social conscience in people’s spending coming out of the pandemic, especially in regard to sustainability, community causes and the environment.
We see industry accelerating its use of recycled product and consumers increasing their involvement in recycling schemes, such as the many container deposit schemes around the nation.
There is also deeper investment by government into creating better functioning rule sets that enable improved, smarter recycling of waste products. This will move Australia much more towards a circular economy.
Health and wellness continues to rise
Alongside the social conscience comes an increased commitment to consumer health. The exponential rise we have seen in consumption of products in the bottled water category will continue, as will the kombucha trend.
The growth in healthier products such as alcohol removed wines and alcohol free, probiotic beers and similar beverages will continue.
In many respects the COVID-19 pandemic created the impetus for the beverage industry to accelerate its investments in sustainability, to position us well for the “Great Reset”.
A more socially aware buying public will seek out an industry well across the challenges of being more environmentally mindful in its manufacturing and distribution.
A more savvy set of consumers want an industry that can meet them where they are – whether that’s on e-commerce or back in traditional channels.
And a government interested in modern manufacturing knows the Australian beverage sector can make the most of smart investments in workplace and skills reform, energy policy and a more rational taxation system.