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Diageo (DEO) Plans to Launch Paper Packaging for Spirits

In a first-of-its-kind sustainability initiative, Diageo plc DEO is ready to serve its leading Scotch Whisky brand — Johnnie Walker — in a plastic-free 100% paper bottle, starting 2021. The paper-only bottle will be made from sustainably sourced wood. The company’s new venture is part of its partnership with Pilot Lite to launch a sustainable packaging company — Pulpex Limited.

Currently, most of Diageo’s spirits are packaged in glass bottles, the making of which also consume energy and emit carbon. The company plans to run trails of the new packaging in different markets from the next year. It said that the new environment-friendly bottles will find space in store shelves of supermarkets and other retail outlets, leaving out the bars and restaurants.

Pulpex is the first to develop a paper-only bottle for the packaging of FMCG goods, which is also recyclable. It is also in talks with leading companies in the field like PepsiCo Inc. PEP and Unilever UL to launch their branded paper bottle by 2021. Additionally, it is enthusiastic about the participation of other leading companies in the consortium. Pulpex’s paper bottle complies with the food safety standards and allows brands to move their packaging design to paper, while not compromising the product quality.

Consumer product companies have lately been under the radar for excessive plastic waste generated through the packaging of food and other household items. The move of shifting packaging of drinks to paper bottle may go a long way in contributing to their commitment to reduce plastic and produce recyclable packaging.

Coming back to Diageo, the company has been resilient in a tough industry, courtesy of strong fundamentals, continuous innovation and focus on expansion. It remains focused on expanding the fastest-growing premium spirit brands by resource optimization, which should drive growth and boost shareholder value. Diageo continuously explores opportunities to expand geographically through acquisitions to further strengthen its exposure in the fast-growing categories.

In sync with this strategy, the company acquired a number of companies and brands, including Don Julio, United Spirits and Casamigos, as well as increased shareholding in Shui Jing Fang. Additionally, Diageo has been divesting assets to enhance its portfolio — including the divestiture of 19 brands to Sazerac.

Moreover, the Zacks Rank #4 (Sell) company is set to grab a share of the momentum in the fast-growing hard seltzer category by promoting the Smirnoff Seltzer with endorsements. Notably, seltzers are stealing a large share from the beer, and wine & spirits categories, with a significant share sourced from the beer category.

Nevertheless, the company like others is facing challenges relating to the coronavirus outbreak. Diageo cut net sales view for fiscal 2020 on the ongoing trade conflicts in key markets and the spread of the coronavirus. The company expects the persistence of increased levels of volatility in India, Latin America and the Caribbean, and Travel Retail to hurt sales for fiscal 2020.

Shares of the company have declined 17.5% compared with the industry’s slump of 23.3%.

 



 

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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