Review of barrier PET Technologies for beverages

1. J.F.Schrurs – © Cape Decision - Drink Technology + PET India 07 – 29/30 Nov 2007, Mumbai
“Strategic Review of Barrier PET :
a Multiple Beverage Perspective”
Mr. Jean F. SCHRURS
Director
Cape Decision
Changing Markets – Future Trends

2. J.F.Schrurs – © Cape Decision - Drink Technology + PET India 07 – 29/30 Nov 2007, Mumbai
6. Conclusions :
Business
Development
Opportunities
5. Benefits and Threats
Of Barrier PET
2. Markets and Consumers :
- Current/Future Demand
- by Beverage Type
1. Beverages :
- Risks
- Quality Requirements
4. Brand Owner’s
View
3. Barrier PET :
- Applications
- Technologies
- 3 Key Questions
Introduction
p 1

3. J.F.Schrurs – © Cape Decision - Drink Technology + PET India 07 – 29/30 Nov 2007, Mumbai
Category Still Water Sparkling
Beverages
Juice/Nectar Milk Beer
I. Product Degradation Risk Levels (off-flavor, color change, vitamin loss, product/taste integrity)
O2 ingress Low Low High High High
UV light Low Low High High High
CO2 loss - High - - High
microbiological spoilage low-medium Low High High Medium
II. Quality Requirements
(Possible) Barrier - CO2 - O2
- UV light
- micro
- O2
- UV light
- micro
- O2
- UV light
- micro
- CO2
Process Requirements - ambient
- aseptic or
- ultra-clean
- ambient - aseptic
- hot-filling
- pasteurization
- aseptic
- hot-filling
-
pasteurization
- flash
pasteurization +
ambient filling
- container
pasteurization
Consumption Requirements - thermo-mechanical stability
- product quality (visual, taste, odor, claims, freshness)
- package quality (opening, convenience, date code, appearance)
1. Beverages : Risks and Quality Requirements
Summary of Product Degradation Risks and Requirements
p 2

4. J.F.Schrurs – © Cape Decision - Drink Technology + PET India 07 – 29/30 Nov 2007, Mumbai
2. Markets and Consumers : Water
Market - Size 183 Bio L (F 2007)
- Growth +9% (00/05 CAGR)
Trends* - Quantities Quality
Still to 1 L +15% Natural -3%
Still over 10 L +9% Processed +4%
Still 1.1 / 2 L +8%
Still 2,1 / 10 L +7%
Sparkling +2% (* : CAGR 00/05)
- Environment
Geography - US, China, Indonesia, Brazil, India represent
- 16% of 05/10 incremental volume (33 Bio L)
Drivers - Value : increase purchasing weight and multi-packs
- Convenience : bottles as dispensers
- Differentiation : packaging innovation (embossing, shapes)
Packaging - PET safety, lightweight, convenient
2005 Water per Capita - Top 10
99
116
123
123
131
134
135
145
171
220
50 100 150 200 250
2006 Water Packaging Mix
1
6
12
81
0 25 50 75 100
Others
Other
Plastic
Glass
PET
p 3

5. J.F.Schrurs – © Cape Decision - Drink Technology + PET India 07 – 29/30 Nov 2007, Mumbai
2. Markets and Consumers : Sparkling Beverages
Market - Size : 195 Bio L
- Growth : +1,3%
Trends - Growing needs states :
- health and wellness
- increased functionality
- Premiumization
- Unique, single-serve packaging
- Hybrid distribution
- Micromarketing
Drivers - Development of pack sizes
- Widespread of 50 cl PET adoption
- Various novelty packs on special occasions
- Resealability essential for ‘on the go’ generation
- Colored bottles give impulse
Packaging - 50cl has been the key driver of PET growth
- Taking share from 33 cl cans
- Emergence of new metal packaging (bottle cans)
Sparkling Beverage per Capita - Top 10
50 100 150 200 250
Sparkling Beverages Packaging Mix
11
11
22
56
0 25 50 75
Others
Glass
Cans
PET
p 4

6. J.F.Schrurs – © Cape Decision - Drink Technology + PET India 07 – 29/30 Nov 2007, Mumbai
Market - Size : 140 Bio L – 270 Bio packs (80% milk) (2006)
- Growth : +3.1% (02 - 06), +3.6% (2006 – 2010)
Trends - Long life milk : +5%
- Long life yoghurt drinks/flavored milk : +10%
- Affluence : milk sold loose replaced by portion packaged products
Geography - 02-06 : +11% in SE Asia/India/China
slight decline in NAmerica/Europe
- 06-10 : same growth expected
Drivers - Health and wellness
- Environmental and recycling
- Costs
- System flexibility
Packaging - HDPE - 6.8 Bio units, 0.16 Mio tons (2006)
- more for pasteurized, UHT, sterilized
- less for long life products
- Carton - 1.7 Mio tons board
- perceived environmental benefit <> 20% PE and 5% Alu foil
- Pouches/PE- 1 Mio tons PE + other material foil
- competitive equipment/packaging costs > rapid growth ?
- PET - little impact despite consumer advantages
Fluid Milk Per Capita - Selected
Countries
3
33
65
98
137
169
0 50 100 150 200
China
Argentina
Poland
2006 Liquid Dairy Packaging Mix
0 25 50 75 100
Cartons
HDPE Bottles
Pouches
Glass
Bottles
PET Bottles
Other Mio Packs
Mio Litres
2. Markets and Consumers : Milk
p 5

7. J.F.Schrurs – © Cape Decision - Drink Technology + PET India 07 – 29/30 Nov 2007, Mumbai
2006 Juice Packaging Mix
0 20 40 60 80
Cans
Other
Plastics
HDPE
PET
Glass
Cartons
NA
Europe
2. Markets and Consumers : Juices - Nectars
Market - Size : 40 Bio L
- Growth : +9%
Trends - Slight shift towards chilled / short life products in W EU
- Ambient/long life remains strong
- Tailored products for specific health needs
- Orange juice outsells other juices by three
- Conversion from glass to plastic
Geography - Incremental growth from rapidly developing countries (EE, ME, AS)
- US : 35% global market-share but declining - 2/3 juice in PET
- EU : second largest regional market
volumes similar to North America
6/10 highest country per caps
Drivers - Differentiating innovation tactics in new flavors and packaging formats
- Consumer targeted marketing for new occasions and locations
- Conveniencesingle serve multi-packs (lunchboxes)
Packaging - Cardboard : most popular technology (> 50%), especially in EU
- PET : juice : CAGR +8% (18% in 06)
nectar : CAGR +18% (21% in 06)
in NA, ambient juices shifting from glass to PET
- Glass : short life and chilled juices
Juice Per Capita - Selected Countries
0
10
20
29
40
0 10 20 30 40
India
Portugal
Lettland
Spain
Germany
p 6

8. J.F.Schrurs – © Cape Decision - Drink Technology + PET India 07 – 29/30 Nov 2007, Mumbai
2006 Beer Packaging Mix
0 20 40 60 80
PET
Cans
Glass
2. Markets and Consumers : Beer
Market - Size : 155 Bio l
- Growth : CAGR 3%
Trends - Global giants : beer market consolidating three times faster as market growth rate
- Mega-mergers : InBev, SABMiller/Coors, SN/Heineken+Carlsberg ?
- Top 10 share : 37% (98) > 59% (04)
Geography growth rates E EU : +4.2% NAm : -0.4%
APAC : +3% W EU : -0.6%
SAm : +1.3% AFR : -1.0%
Drivers - Penetration : volume and value
- Light beers : “low carbs” for health consious drinkers
- Premiumization : trade-up to premium/imported beers in developed markets
- Regional : flavoured beers, beer with food, organic beer, microbreweries
Packaging - Sensitivity beer requires significant barrier material
- Glass still the key material
- PET : greater Europe is selling more than 93% of global beer in PET
60 Mio hl per year or 4-5% of global beer market
2005 Beer Per Capita
8
12
44
58
77
82
0 25 50 75 100
AFR
APAC
SAM
E EU
W EU
NA
p 7

9. J.F.Schrurs – © Cape Decision - Drink Technology + PET India 07 – 29/30 Nov 2007, Mumbai
3. Barrier PET : Applications
Applications per Technology (2006 Mio bottles)
0
500
1000
1500
2000
2500
Juice Beer Ketchup Green
Tea
Water Edible
Oil
Fab CSD
Multilayer Blend Coating PEN
2006 Global PET Penetration by
Package Type (Bio units)
0 50 100 150 200 250 300
Milk
Beer
Sports Drinks
Energy Drinks
RTD Tea/Coffee
Juice & Juice Drinks
Carbonates
Packaged Water
PET
Other
World Market Barrier PET 2006 -
Standard vs Barrier PET
Barrier Standard
p 8

10. J.F.Schrurs – © Cape Decision - Drink Technology + PET India 07 – 29/30 Nov 2007, Mumbai
3. Barrier PET : 4 Technologies
Multilayer
Monolayer
Coating
PEN
p 9

11. J.F.Schrurs – © Cape Decision - Drink Technology + PET India 07 – 29/30 Nov 2007, Mumbai
3. Barrier PET : 3 key Questions
When ?
Category Sparkling
Beverages
Juice/Nectar Milk Beer
Risk of Degradation by - CO2 loss
(<0.5L)
- O2 degradation
- UV penetration
- micro
- O2 degradation
- UV penetration
- micro
- O2 ingress
- UV penetration
- micro
- CO2 loss
How ?
Which one ?
When standard PET properties alone are not good enough for product protection :
Brand Owner’s most common requirements :
- transparency - compatibility with post-consumer waste stream
- no shining effect - stability (no delamination)
- variable cost : lightest-weight strength - production efficiency
- recycling - limited capital cost
- CO2 shelf life function of supply chain - O2 ingress compared to glass
Decision making criteria for technology selection :
- Barrier Performance : - Volume
- O2 protection requirements (scavenging) - Supply Chain needs
- CO2 loss prevention requirements - Recycling
- Location - Impact on operational efficiencies
- Cost : variable and investment
p 10

12. J.F.Schrurs – © Cape Decision - Drink Technology + PET India 07 – 29/30 Nov 2007, Mumbai
4. Brand Owners
Objectives : - drive profitable volume
- product availability, affordability, quality
- create and fulfill demand
Strategy : - preference > brand equity + consumer marketing
- price/value > value-based product differentiation
operational efficiency
- market penetration > distribution
- people : ultimate enablers
Scientific
Regulatory
Affairs
Finance
Quality
Assurance
Purchasing
Operations
Engineering
Sales
Marketing
Communicat°
R&D +
Innovation
Logistics
Consumer
Customer/
Retailer
Recycling Regulation
Converter
Brand
Owner
Consumer
p 11

13. J.F.Schrurs – © Cape Decision - Drink Technology + PET India 07 – 29/30 Nov 2007, Mumbai
5. Benefits and Threats
Beverage SPARKLING JUICE/NECTAR MILK BEER
COMPLEXITY + ++ ++ +++
Protection against : CO2 loss O2 ingress
UV penetration
O2 ingress
UV penetration
O2 ingress
UV penetration
CO2 loss
ADVANTAGE ESL for smaller size
EXPECTED
BENEFITS
STANDARD PET best cost (no barrier)
BLEND better cost, easier for converters
MULTILAYER better performance and appearance
COATING best recyclability, best performance
ANTICIPATED
THREATS
STANDARD worst performance (no barrier)
BLEND recyclability (if nylon)
MULTILAYER delamination ? Higher price
COATING Investment cost, speed, flexibility, appearance, downtime, investment
p 12

14. J.F.Schrurs – © Cape Decision - Drink Technology + PET India 07 – 29/30 Nov 2007, Mumbai
6. Conclusions : Business Development Opportunities
Sources of Growth in Europe
PET barrier applications 2007
0
200
400
600
800
1.000
1.200
1.400
existing organic new
000tonnes
CSD bottled water other drinks juice and juice drinks beer
PET Raw Material Cost
0,7
1,0
1,3
1,6
Jul05 janv-
06
Jul06 janv-
07
Jul07
• In Europe, beer is the largest new source of growth for barrier PET
• Cost Reductions : Barrier bottles can assist by :
- light-weighting and reducing wall thickness
- extending shelf life and reducing supply chain costs
- accelerating glass replacement programs and
saving money in distribution
- applying simpler barrier constructions
• Barrier PET : a key ingredient developing new PET markets :
- premium beers, soft-drinks, juices, milk and waters
- promoting small sizes
- adapting to wine and spirits
• Potential : the barrier PET market will double if :
1% of beer is converted to barrier pet (2.8 Bio bottles)
1,5% of CSD is converted (3 Bio bottles)
• Should be developed together with other key process developments
• Environment : a critical factor to take into account for future success
p 13

15. J.F.Schrurs – © Cape Decision - Drink Technology + PET India 07 – 29/30 Nov 2007, Mumbai
Thank you !
For further questions, contact us at :
John F. Schrurs
Cape Decision
john@capedecision.com
+32 498 53 04 58
www.capedecision.com
p 14