Despite their lack of healthy credentials, carbonated soft drinks continue to dominate the market and have actually increased their share against the healthier alternatives such as juice and water. But poor summers and the economic downturn have taken their toll. Where now for the soft drinks category…

In its most recent report into the state of the soft drink market in the UK, research specialist, Key Note Ltd., revealed the just two giant corporations – Coca-Cola Enterprises (a direct subsidiary of Coca-Cola) and Britvic PLC were the dominant players, both in terms of marketing presence and new product innovation.

And while Key Note concludes in its report that the future will hold challenges for every manufacturer in this exceptionally successful sector – not least, the demands of the modern consumer for more natural products which are environmental sustainable – the biggest suppliers will have more than enough resources to allow them to invest appropriately in critical areas such as the adult drinks market, packaging and premium products.

That market, according to the British Soft Drinks Association, was worth almost £13bn in the UK last year and just over half of that is accounted for carbonated soft drinks. The next most popular drink with consumers is pure fruit juice (£1.9bn), then juice drinks (£1.6bn), bottled water (1.4bn and losing share since 2006) and dilutables (£825m).

That said, however, volume sales in the sector have slipped by 0.5 per cent in the last year and while the category value has risen 6.8 per cent, this increase has been driven by the increasing cost of raw materials such as sugar.

For their part, the big manufacturers will insist that the category is performing well in the face of recession and poor weather and many will point to the forthcoming World Cup as a fresh opportunity to drive sales.

Who is buying what..?
According to the authoritative Target Group Index Survey, the adult penetration levels for most soft drinks have remained fairly steady since the early 2000s, but have slipped downwards in several categories since 2005 – in 2008, there was a decline in consumption across the board.

Concentrates – that’s squashes and cordials – retain the highest appeal to consumers overall, while colas and other fizzy flavours vie closely with them for penetration. Juices and bottled mineral water have similar penetration rates, slightly below the concentrates and carbonates.
A slight decline in the consumption of colas and other carbonated soft drinks over the last few years is almost certainly due to an increased focus by consumers on health, although that doesn’t explain a similar decline in the popularity of bottled mineral water.

As far as shoppers are concerned, says TGI, sugar content is their main issue and the research suggests that there are groups of adults who, no matter which brand they are buying, will always choose from the regular, diet or sugar-free categories. Consumers are split almost exactly down the middle in terms of buying regular and reduced sugar soft drinks.

In bottled mineral water, the split in format in 2008 was 45.5 per cent for still and only 15.6 per cent for sparkling and TGI says that the long-term trend is away from sparkling water.

Flavour-wise in fizzy drinks, the top-seller is actually lemonade with 31.3 per cent of the market, followed by orange flavour drinks on 13.7 per cent; others (including blends) on 12.6 per cent; dandelion and burdock (8.5 per cent); ginger beer (7.7 per cent) and lemon and lime (6.6 per cent).

Retailers should note, however, that fizzy drinks are often chosen by brand as much as flavour – for example, 7Up is lemon and lime, but Irn Bru, Dr. Pepper and Vimto are classed as ‘secret recipe’ drinks. Also, the flavoured versions of bottled water are technically regarded as fizzy soft drinks rather than bottled water.

And the forecast is…

Any forecasts for the soft drinks market has make assumptions on pricing and, of course, the weather. As the wet, cool summers of 2007 and 2008 showed, the weather can have a dramatic effect on sales. Over those summers, sales in some soft drinks categories dropped by as much as 20 per cent, whereas the warm summer of 2006 will have contributed to the seven per cent rise in market value recorded across that year.

In the long term, the BSDA has forecast a steady increase in the consumption of soft drinks although healthy living will provide the foundation for future growth. Key Note Ltd., however, is less optimistic. It believes that the consumption levels of many drinks currently on retailers’ shelves are nearing saturation point and that the loss of any strong growth since 2005 could precipitate downward pressure on retail prices.

By category, the most surprising recent trend has been the drop in demand for bottled water – the industry had previously predicted that water and juice would climb towards international averages. Instead, says Key Note, carbonates are currently showing the most promise, fuelled by innovation and marketing, particularly in the area of energy drinks, carbonated hybrids and functional drinks such as ‘enhanced water’ and ‘super berry’ drinks.

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