The latest research from leading beverage analyst Datamonitor has uncovered a hot and soft drinks market increasingly driven by impulse buying. With consumer attitudes to brands, lifestyles and consumption habits shifting, product development, packaging and promotional teams are facing a period of change. However with out-of-home purchases increasing in importance, new product developers need to react to changing channel and consumption occasion dynamics as well.

The beverages markets are shifting towards out-of-home consumption, while market growth lies in impulse purchasing, according to the latest research from Datamonitor. In its report Future Innovations in Beverages, the company found 49% of soft drinks sold in the US in 1999 were for immediate consumption. Furthermore, impulse sales are set to continue to increase at an average annual growth rate of 3.5% over the course of the next five years.

The shift towards impulse has several key implications for beverages manufacturers:

  • Immediate consumption expands categories by encouraging consumption in a wider range of locations. If manufacturers can access these locations more efficiently and extensively than their competitors (from other categories) then considerable share of throat gains can be made.

  • Impulse purchases almost inevitably involve small packaging formats and low cash outlays. As a consequence, they invite trialling and experimentation, which can eventually lead to brand loyalty.

  • Impulse channels tend to be less price-sensitive than traditional supermarket sales, thus delivering higher and more predictable profit margins.

  • The growth of impulse is leading to a greater emphasis on vending. This in itself brings advantages in that new technological features in vending machines include electronic data retrieval, remote monitoring, quick-change machine settings, debit and credit card acceptance and coupon reading. All of these features lead to a closer monitoring of consumer behavior and product choices.

Key out-of-home dynamics and opportunities are:

  • On-the-go: An increasingly fast pace of life, coupled with higher disposable income, dictates that consumers are far more likely to purchase meals and beverages outside the home than 30 years ago.

  • Workplace: Longer hours spent in the workplace, particularly in the UK and the US, have increased the opportunities for beverages new product development at work.

  • Cinema: In the early 1980s the cinema industry was in steep decline. However, the boom in home videos, rather than discouraging visits to the cinema, served to increase consumers' interest in films generally. In addition, the growth in the number of US-style multiplex cinemas offering a choice of ten or more films, particularly in the UK, also acted as an incentive to cinema-going. This led to increased sales opportunities for beverage manufacturers, as cinema goers are likely to purchase a hot beverage or soft drink such as Coca-Cola at the in-house café prior to the start of a performance.

  • Gyms and health clubs: Most western countries have seen a boom in health and fitness in recent years stemming from increased interest in healthy lifestyles. This trend has been particularly marked in the UK and the US, where growth in membership of fitness gyms and sports clubs rose dramatically from the mid 1980s onwards as a result of increased health-awareness and with it consumers' desire to remain physically fit. Gyms and sports clubs will inevitably have several vending machines where soft drinks can be purchased, if not a cafeteria for light snacks and beverages. In addition, people taking fitness classes are advised to maintain their fluid levels when exercising, thus leading to sharp increases in consumption of bottled waters and energy drinks on these occasions.

  • Nightclubs: The years since the late 1980s have seen a boom in clubbing among young people, again particularly in the UK and Europe. Clubbing often includes all-night events, at which participants need to boost their energy levels for dancing. Energy drinks, the best known of which is Red Bull, were launched a couple of years before the start of dance culture in the late 1980s. While energy drinks did not create this culture, they helped to promote and encourage it. Energy drinks are frequently found on sale in clubs, and can also be mixed to form alcoholic drinks. In addition, bottled water is another category frequently used by clubbers.

  • Speciality cafés: The 1990s have seen a surge in the number of specialty cafés such as Starbucks, which sell premium ready-to-drink coffees and other hot drinks. Originally from the US, these specialty cafés have helped to promote a café culture particularly in the UK, which, unlike the rest of Europe, did not have the same tradition of cafés selling premium hot drinks.

There are therefore huge growth opportunities for beverage manufacturers in the impulse-led out-of-home market and players across the beverages markets need to respond to them in their new product development strategies. The fundamental dynamic in channel and occasion targeting can be defined as follows: In their daily active lives, consumers are demanding convenience of service above all else. In their leisure time, quality of service is paramount.

Further details available from Yasmeen Khan on 020 7675 7487 or ykhan@datamonitor.com
*'Future Innovations in Beverages', £2995. See www.datamonitor.com.