Packaging in Russia

Weakened consumer purchasing power affects packaging of major fmcg

2016 saw the Russian economy continue to experience difficulties as it continued to struggle to enter the positive growth phase. Although inflation stabilised after the shocks of the previous year, real disposable incomes in the country continued to shrink due to the slow recovery of business activity. As a result, consumer demand in most fmcg markets remained weak, which resulted in corresponding weak demand for packaging. Given strengthened demand for affordable products, players in several consumer goods markets remained keen to introduce new products in cheaper packaging formats, typically made from rigid and flexible plastic.

Food packaging continues declining

2016 saw food packaging in Russia continue to decrease in total unit volume terms and this was not least due to the stagnation seen in volume sales of packaged food. Cheaper plastic-based packaging formats have started to be used more in food packaging, largely at the expense of relatively expensive packaging formats such as glass and flexible paper. As consumers are striving to obtain better value for money, manufacturers have started to adapt the pack sizes of their products. For instance, in categories that saw strong unit price growth such as chocolate confectionery and nuts, manufacturers are reducing pack sizes in order to reduce the price per pack.

Rising demand for bottled water boosts demand for rigid plastic packaging

2016 saw demand for bottled water in Russia continue to rise, resulting in strengthened demand for PET bottles. Both smaller and larger PET bottles witnessed positive volume growth due to increasing consumer awareness about how healthy drinking a lot of water is, as well as the consumer belief that Russia’s tap water is poor quality. 5-litre and larger rigid plastic packaging saw noteworthy growth in 2016 as still water in bulk packaging registered dynamic growth. More families in Russia are now buying water in “family” formats, while growing numbers of families in Russia’s biggest cities are installing water coolers, supporting demand for water in 19-litre bottles.

Large PET beer bottles are banned in 2016

The legislative ban on beer in PET bottles of larger than 1.5 litres after lobbying since 2003 resulted in the law being approved in 2016 and this law came into force during 2017. This ban aims to reduce beer consumption in Russia by making beer less affordable. Starting from January 2017, the production of beer in PET bottles larger than 1.5 litres has been prohibited and the sale of beer in larger PET bottles has been banned since July 2017. This restriction on beer packaging is expected to have various effects on the packaging industry, the most notable of which is set to be an increase in demand for smaller PET bottles.

Beauty and personal care packaging aims for greater affordabilty

Russian consumers opted for beauty and personal care products in more affordable packaging formats in 2016. This involved both cheaper packaging materials such as PET bottles and the use of flexible plastic instead of HDPE bottles, as well as larger and smaller sizes, depending on the category. For example, bigger sizes are becoming more popular in categories featuring products for family use, while smaller sizes are gaining traction in secondary categories such as anti-agers and mouth fresheners. Generally, the adaptation of packaging size and the use of cheaper packaging types enabled players in the market to remain competitive at a time of decreasing real incomes.

Cheaper packaging in high demand in home care

Home care packaging also saw increased demand for more affordable packaging in 2016 due to weakened consumer purchasing power. Players in the Russian home care market have started to look for the ways to minimise their costs, turning back to simpler packaging types. As a result, cheaper packaging materials such as flexible plastic, PET bottles and metal aerosol cans saw increased demand in 2016, whilst plastic pouches and HDPE bottles started losing total packaging volume share across home care.

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