Beverages

Alcoholic Beverages

The Alcoholic Beverages industry includes companies that brew, distill, and manufacture various alcoholic beverages, including beer, wine, and liquor. Companies in this industry transform agricultural products, including sugar, barley, and corn, into finished alcoholic beverages. The largest companies have global operations, with portfolios of numerous branded products. Levels of vertical integration within the industry vary due to regulation in different markets. Breweries generally have multiple manufacturing facilities to provide access to different markets, while vintners and distillers are typically located where they have a history of production.

Non-Alcoholic Beverages

The Non-Alcoholic Beverages industry produces a broad range of beverage products, including various carbonated soft drinks, syrup concentrates, juices, energy and sport drinks, teas, coffee, and water products. The industry is dominated by large, international companies. Companies partake in syrup manufacturing, marketing, bottling operations, and distribution, with larger companies typically being more vertically integrated into operations that bottle, sell, and distribute the finished products.

‍

Source: SASB

The beverages sector is facing challenges due to rising input costs and a shift in consumer preferences towards sustainability and natural ingredients. To address these challenges, companies are developing sustainability strategies that focus on reducing their environmental footprint and achieving decarbonization commitments. Key investments in the sector include reducing scope 3 emissions, improving packaging, and transitioning to green power options.

‍

Industry Characteristics

• Despite softening in consumer demand and the move off record prices for input costs, stakeholders in the food and beverage ecosystem are placing longer-term bets to mitigate the forces that are driving up costs. Food and beverage companies themselves are making investments in technology and automation to improve demand planning and efficiency as well as reduce dependency on labor and increase productivity. Source: RSM
• As we’ll see, consumers are becoming savvier about how and why their beverage  is made. Gone are the days of avoiding labels and taking deep dives into the manufacturing and production processes. People are focused on sustainability, eco-friendliness, and all-natural ingredients. Source: Nielsen IQ
• (1) 4x - greater water use in beverage operations; (2) 56% - of F&B have no Scope 3 reduction target; (3) 73% - of consumers switch to brands with a social purpose; (4) 90% - of lifecycle emissions are Scope 3. Source: Engie Impact
• Many producers have implemented environmental, social, or economic aspects of sustainability at several stages of their production process. Designing appropriate interventions to fostering sustainable consumption requires deeper knowledge about its underlying determinants. Source: ResearchGate

Sustainability Impact

• Committing to a more sustainable future is essential for food and beverage companies, but a sustainability strategy and an actionable roadmap to achieve those commitments is what will drive value creation from sustainability across the business. Source: Engie Impact
• Develop a zero-carbon roadmap: Because only about 15% of food & beverage companies are on track to meet their sustainability goals, F&B businesses need to leverage strong data analysis and expert insights in order to develop an actionable zero carbon roadmap that will get and keep them on track to meet their targets. Source: Engie Impact
• Renewable power: Companies that have committed to RE100 are outperforming their peers. After addressing demand-side reductions, companies should transition to green power options to reduce carbon emissions and secure reliable power sources, including thermal solutions, on-site generation, storage, PPAs, VPPAs, offsets and more. Source: Engie Impact‍

Sustainability Investments to watch

• Within the drinks segment, the largest category, bottled water, continues to be the key driver of drinks packaging, supporting demand for PET9 bottles. However, drinks packaging overall is shrinking, which is mainly due to the downturn in carbonated soft drinks in response to health concerns. With a growth rate of –0.2 percent, consumption is expected to stay flat in the 2017 to 2022. Source: McKinsey
• There are two principal areas of focus, depending on the market stance of the company: most of product manufacturers’ overall emissions come from Scope 3, while consumer goods companies have a higher proportion of upstream emissions. Nearly 90 percent of emissions from beverage companies fall under Scope 3, with more than 60 percent from upstream activities. Importantly, such sustainability commitments are equally applicable to packaging, which accounts for $1 trillion of annual global spending. Source: McKinsey
• Resilient value chains - By engaging with partners up and down the supply chain, this industry can significantly scale its sustainability efforts, build more resilient value chains and protect against supply chain shocks. Identify hotspots and work with suppliers to reduce scope 3 emissions. Decarbonize end-to-end operations by shifting fleet to low-carbon transportation, changing to low-carbon cold chain technology, and optimizing transit routes. Source: Engie Impact‍
• Reduce resource consumption and strive for circularity - Leverage data and analytics to identify and implement retrofitting opportunities to improve demand-side energy and water intensity. Integrate energy efficiency into plants, warehouses, and processing centers. While increasing focus on water and waste, drive innovation toward more circular operations and sustainable packaging. Source: Engie Impact‍