Thorsten Hartmann, director of consulting EMEA at Canadean, looks at which countries are behind current growth and the developments that will drive the sector forward in the future.
For the fifth year in a row following the bad year of 2009, world sales of all types of packaged soft drinks have risen, returning a growth of around 4% year on year. Stronger growth in the boom years 2005-2007 was offset by a slump to less than 3%, to arrive at a ten-year average growth rate of exactly 4%. Still, that’s a slightly prettier picture than the world of beer, where ten-year growth is hovering around the 3% mark, with a distinctly lacklustre performance since the 2009 crash.
The global picture
Asia remains the growth driver in non-alcoholic beverages and beer – in terms of volume and percentage – but there are early signs that the regional powerhouse China is starting to fray slightly at the edges. Africa, the new buzzword, is also growing volumes rather happily, but from a rather small basis, and has much per capita consumption to catch up on.
China is now firmly the number two soft drinks market in the world after the US, and may well overtake it in the not-too-distant future, but there is still a vast difference in terms of per capita consumption. Numbers three and four are Brazil and Mexico, with Germany Italy, France, Japan, India and Indonesia bringing up the rest of the world’s top ten.
The industry has to look at – and increasingly is – improving value rather than trying to patch volume growth. Diversification, premiumisation and innovation are the buzzwords.
Within beer, craft beer packaging cannot be ignored. In various countries, with North America and the UK in the lead, small-batch brewers have staged a fantastic revival in recent years, not only starting to transform the beer retail environment, but also creating new and exciting formats of on-premise consumption. In US supermarkets and specialist ‘liquor stores’, entire chilled beer rooms are now commonplace, where ubiquitous megabrands compete with a multitude of smaller names of increasingly dazzling variety.
Interesting pubs and bars are sprouting that may no longer be aligned to some of the larger brewers, and are often changing beers on the menu weekly and increasingly supporting local brewers. Small brewers have started not only to develop new brands and ever changing ranges, but also to create their own food service environments in a brewery setting. Larger brewers have to take notice, and their own investments in the industry make the definition of ‘craft beer’ increasingly difficult: what is the tipping point when a craft beer grows so much that it stops being ‘craft’ and enters the mainstream?
Paving the way here is the question of quality packaging: beer must look attractive and high-quality in the bar setting but, increasingly, the focus is on unique branding rather than segment conformity and familiarity.
Blurring the lines
In the soft drinks space, innovation and premiumisation have taken a similar turn – more and more products are being launched that blur the distinction of formerly very clearly defined categories, and these beverages are becoming increasingly difficult to define. Juice drinks with caffeine or guarana, sparkling water with juice content, RTD tea with carbonation, fruit and vegetable juice products, line extensions for rhubarb and apple juice to contain carbonation, flavoured energy waters, and sports drinks with juice content – all these are examples of how the industry is becoming rather complex.
This is reflected by a wealth of new packaging formats and standout designs that cater to on-the-go and convenience trends while attempting to differentiate new products as the ‘next big thing’. Brands are also providing consumers with increasing variety and creating room for smaller producers, which previously may not have had sufficient breathing space between the global soft drinks giants and large co-packers or private-label suppliers.
This diversity is helped by developments in distribution channels. Lunchtime on the streets of London today is very different from only 15 years ago, with beverage accompaniments to the food sold in new ‘grazing’ outlets ever-changing and often leading the way in innovation, and with successful concepts appearing on retail shelves much later.
The value created in these on/off-premise hybrids is tremendous, and is being realised – on both sides and in the space between – through the overwhelming highlighting of ‘innovative’ packaging formats that offer novelty and convenience to on-the-go consumers.
Not all that sweet…
Sugar was the 2015 bugbear of the soft drinks industry. While the carbonated soft drinks sector is no stranger to strident debate on the issue, last year saw increased pressure on an area that previously appeared rather immune, and indeed the antithesis, to health concerns.
Press coverage on the sugar content of juice products (be they juices, nectars, still drinks or RTD teas) is contributing to uncertainty among consumers, and has sent the industry, certainly in the Western hemisphere, into a mild state of anxiety. It is heartening to see that the industry is starting to pull together to create industry-wide PR programmes to formulate robust responses to sometimes strong attacks. It could be argued that a key factor in this development is brands’ attendance at conferences and participation in associations.
This is coupled with another bout of product innovation among companies that see the tide perhaps turning against their mainstream products, with programmes such as the development of natural sweetener compounds or lowering of juice content for certain brand variants at least giving the consumer the option to choose, even if the consumer is rapidly becoming confused about what advice to take and what to discard – with moderation, of course, the most powerful tool in their arsenal.
Small brand successes
The chief driver behind growth in beverages in 2015 is said to have been enjoyment, with brands creating more occasions and providing value and a personal touch to consumers. While there continues to be an appetite for organic or natural flavours, the signs from the food industry are that this trend is on the wane, as consumers are becoming confused by claims regarding healthy products. Increasingly, customers are voting with their wallets and guts by sticking to authentic brands with a strong heritage. This movement is likely to impact the future beverage industry, and it’s most likely to be felt in 2016.
In terms of packaging, we might see the impact in individualistic packaging and formats that aim to attract buyers with personality – be this the highlighting of the ‘local brewery’ in craft beers or in unique formats for juices and soft drinks. The ‘personal touch’ will be key, with small brands subsequently thriving.