Once defined by soda-pop and fruit drinks, the soft drinks market now represents a diverse panoply of products, ranging from mainstream carbonated brands to bottled waters, energy drinks and new age beverages. According to the recent Datamonitor report, Innovations in Soft Drinks, adult tastes are defining the evolution of the soft drinks market and growth in new categories targeted at adults is among the key factors driving the sector forward.

A new report by market analysts, Datamonitor, in association with Innova Market Insights, reveals that soft drinks sales are storming ahead worldwide on the back of growth in emerging markets and increased adult consumption, particularly of new kinds of soft drinks.

According to the report, Innovations in Soft Drinks, the value of the soft drinks market globally increased by almost 33% between 1997 and 2002, and is currently growing at an annual rate of over 4%. By 2007, the global soft drinks market is forecast to be worth some US$361 billion (£251 billion).

Most tellingly, consumption among adults is also on the up, leading to a "premiumisation" of the market. "Society is becoming more experimental and health aware, drinking less alcohol and demanding a social environment that reflects this," says Dominik Nosalik, consumer markets analyst at Datamonitor, the report's author. "In response, the number of occasions available to consume soft drinks has increased and the ability of soft drinks to satisfy physiological and psychological needs has expanded with innovation in product and packaging"

Germany is Europe's largest soft drinks market, followed by the UK. However, to a degree fuelled by increased adult consumption, it is bottled water, energy drinks and new age beverages, rather than carbonates, which are providing the growth.

UK consumers on average drink 156 litres of soft drinks a year, and consumption is forecast to rise to 186 litres by 2007. Between 2002 and 2007, the value of the UK soft drinks market is forecast to grow by almost 30%, to almost £13 billion. This represents impressive growth in a country that already has a very high penetration of soft drinks.

The changing lifestyles, needs and expectations of children, youth, adults and families are all responsible for the strong growth of soft drinks. "Consumers' lives have become increasingly busy and fast-paced, spawning an on-the-go culture. This has created a strong demand for refreshment in a variety of out-of-home locations thus driving soft drinks, which are more accessible and convenient than other drinks such as hot drinks and alcohol," says Nosalik.

The development of convenience-orientated packaging in soft drinks, such as single-serve, weight-reduced cartons and packs, has played a crucial role in facilitating this. For example, Crystal Drinks launched Crystal Premium in the UK earlier this year. Crystal Premium is a 100% pure orange juice in a single-serve bottle with a sports cap for convenient drinking on the hoof. Meanwhile in Germany, Nestlé has launched its indulgent iced coffee Nescafé range in slimline cans for easy and unobtrusive portability.

Bottled water has been a key growth area for the soft drinks market, reflecting the demand for lighter and healthier beverages. By 2007, UK consumers will be drinking 1,446m litres of bottled water annually (equivalent to 24 litres per person per year), representing impressive growth of 46% on 2002 consumption levels. Spending is also forecast to grow by 41%, to £910m in 2007. The success of bottled water reflects the demand for lighter and healthier beverages, the desire to overcome dehydration, and for trusted sources of clean water as concerns over tap water quality have increased.

Product innovation is moving in the direction of how best to offer value to customers through healthier propositions. According to the Innova database, added vitamins and minerals account for 40% of all different types of enhanced bottled waters currently available on the market.

Health is even being marketed by soft drinks producers beyond humans to their pets! The K9 Water Company in the US has launched a bottled water specifically for dogs. The water contains vitamins for improving their health and is available in beef, lamb and chicken flavours.

Sports and energy drinks show even stronger growth, reflecting consumers' demand for products that meet the needs of active lifestyles, particularly among the youth. Energy drinks are driving this category as they are seen as a cool alternative to mainstream brands, and appeal to a broadening consumer base because of their functional benefits. For example, Coca-Cola launched 'Burn' in Spain in the summer, and energy drink with, it claims, 'the right kind of sugars and complex carbs' to ensure sustained energy. The demand for energy drinks is even attracting the interests of alcoholic drink makers, such as Anheuser-Busch, which launched the energy drink '180' in the US in February this year, complete with vitamins C, B6 and B12 to enhance the healthiness of the product.

New age beverages have experienced a rebirth as manufacturers have capitalised on consumers' growing interest in herbal remedies. "Consumer attitudes to healthcare are changing and more people are taking responsibility for their health rather than passively accepting medical decisions. Within this desire to exercise individual decision, many consumers are looking outside the traditional realm of pharmaceuticals to herbal remedies and supplements" comments Nosalik.

The self-medication trend will continue to boost the new age beverage category. The opportunities will range from hangover remedies to pick-me-ups to those beverages that act as insurance policies against future health problems.

Even though bottled waters and energy drinks are booming, carbonates still hold the largest share of the market, representing some 64% of the soft drinks market by volume. However, their market share is forecast to contract from just over 64% in 2002 to 61.8% in 2007.

Soft drinks consumption is increasing among older segments of the population, where it was previously concentrated among children. In more developed soft drinks markets, consumers aged 35 and over represent the first generation to grow up with soft drinks. Having grown up with soft drinks, many of these consumers continue to drink soft drinks and introduce them to their families.

Although the overall trend, as consumers get older, still shows an increasing preference for hot tea and coffee over soft drinks, soft drinks such as pure juice and squash, water and other more natural products are becoming more relevant to this group who are becoming more health conscious.

Many soft drinks manufacturers now offer propositions targeted to the needs of adults, such as refreshment when on-the-move, and age-related health benefits. For example, Starbucks launched its 'Doubleshot' Iced coffee in a can so that consumers can easily drink their 'refreshing', cooled coffee whilst on-the-move. Meanwhile, Premier International Foods is hoping to target women with its 'London Fruit & Herb Echinacea' juice drink as a boost for their immune system.