The outlook for most things is based on the gross domestic product (GDP) and personal incomes. This is especially true for packaged foods and drinks. Since packaging and making cans are global businesses, they are affected by the speed of their respective economies now and in the future.

According to the World Bank’s January 2023 report on Global Economic Prospects, growth in the advanced economies (the US, the EU, and Japan) was expected to drop from 5.3% in 2021 to 2.5% in 2022. Table 1 shows that this year’s growth was also expected to be weak, at only 0.5%.

It predicted that the US GDP would grow by 5.9% in 2021, 1.9% in 2022, and 0.5% in 2023. The National Association of Business Economists’ December forecast showed a similar picture, which “could point to a recession at some point this year.” In the EU, GDP was expected to go down in 2022 after a period of recovery in 2021,
but banks thought that growth would almost stop in 2023. Obviously, this has something to do with the war in Ukraine, which has driven up the price of energy and affected both industrial and consumer goods.

These predictions don’t come as a big surprise, since governments have mostly used monetary policy and interest rates to try to cut inflation. Several of the world’s most important economies will be hit hard by higher energy costs. A previous report from the International Monetary Fund (IMF) said that tourism helped Italy and Spain in 2022, but this trend may slow in 2023. France’s growth is expected to be 2.5% per year, but Germany’s growth may be “negative per year.” The IMF had previously predicted that the UK’s GDP would grow by 3.6% in 2022 and less than 0.5% in 2023. This is because high inflation and tighter monetary policy would “take a toll on consumer spending and business investment.”

The second-largest economy in the world, China, is expected to grow by 2.7% in 2022, which is the lowest growth rate in more than 40 years. It should get better in 2023, when growth of more than 4% is expected. India’s GDP is expected to grow by 6.9% in 2022 and 6.6% this year.

Lastly, it was expected that Latin America’s GDP would grow by 3.6% in 2022 and 1.3% in 2023. Last year, the area did better because the prices of commodities went up. The fact that global inflation may be at its highest point this year is a big plus. The IMF predicted that global consumer prices would rise by 6.5% in 2023, compared to an increase of 8.8% in 2022. In advanced economies, prices would rise by 4.4% in 2023, while prices in emerging markets like China, India, and Latin America would rise by 8.1%. But there are still a lot of unknowns, like the war in Ukraine, what the central bank does, and how long the effects of the pandemic will last.

Creative marketing for drinks drives up demand for metal cans.

Even though prices are going up because costs are going up, people keep spending because there aren’t many good alternatives. Hugh Johnston, PepsiCo’s chief financial officer, said in its third quarter report, “Clearly, we have seen elasticity continue to be strong, and stronger than expected, through three quarters of the year [2022], so we are closely watching what happens with the consumer.”

It sold 8% less beverages in Europe in the third quarter, but 1% more in North America. Also, PepsiCo’s sales in Latin America went up by 7%, and its sales in Africa, the Middle East, South Asia, and the Asia-Pacific region, which includes China, went up by a lot.

Coca-CEO, Cola’s James Quincey, said that consumer spending was “quite resilient” in North America and other “resource-driven” parts of the world where there was enough energy and materials. This is not a good rule, since India, one of its biggest markets, grew very quickly. He also said that in some places, like the developed world, volume is geared toward packaged drinks, while in the developing world, like China and India, only a quarter of all drinks are packaged.

Analysis

The fact that Covid-19 is being held back is another thing that is likely to affect sales and packaging mix in 2023. So, consumers have started to change their habits, which has led to less consumption at home and more consumption on-premises. This is the opposite of what has happened in the past two years. Also, sales have gone up because of new drinks.

As was said last year, the big drink companies are putting out more sophisticated drinks in cans, like cocktails. Together with Molson Coors, Coca-Cola has made a canned product called Topo Chico hard seltzer. In a deal with Boston Beer, PepsiCo made a version of Mountain Dew that has alcohol in it.

Anheuser-Busch InBev, the largest brewer in the world, said that its global volume rose by 3.7% in the third quarter of 2022. Its beer volume rose by 3.4% and its non-beer volume, which includes seltzer products, rose by 5.2%. Its line of canned cocktails, such as the Tequila Margarita, Mango Margarita, and Tequila Paloma, also helped boost sales, even though supplies were limited, distribution was slow, and prices went up.

Also, sales of non-alcoholic beer grew by more than 10%, led by Budweiser Zero and Stella Artois 0%. Michelob Ultra, one of its premium products, grew by more than 10% in the US and Mexico, and Spaten grew even more in Brazil.

In 2023, the biggest question is how much beverage companies will be able to raise prices to make up for higher costs like shipping, raw materials, and labor. Even though inflation will stay high until the end of 2022, price increases may slow down in 2023. The US consumer price index is expected to go up by about 6% in the first quarter of 2023 and 4.3% in the second quarter, according to S&P.

Prices went down in 2022, but can they still go up?

As shown in Table 2, the US Wholesale Price Index (WPI) continued to rise in 2022, but at a slower rate than the year before. Still, the WPI for consumer foods grew faster than that of other products like energy, plastic packaging, and paperboard, and it grew about as fast as energy.

The price index for metal containers went up by almost 19%. This was because the price of aluminum stayed high and labor and shipping costs went up. On the other hand, plastics packaging prices went down because oil prices went down. They went up by 7% in the year to the end of November, compared to a 26% rise the year before. Also, prices for paperboard and boxes went up at a slower rate. They went up 25% in the year ending in November 2021, but only 12% last year. Also, transportation and storage costs went up at almost the same rate as a year ago, and energy prices stayed high, again because of the war in Ukraine.

Since growth is expected to slow in 2023, prices may continue to go down. Even if the US unemployment rate goes up from its current low level, this could increase demand if consumer income stays the same.

Source : The canmaker