Developing arena for malt and chocolate drinks
While western markets remain challenging for malt- and chocolate-based drinks, there has been growth in this area in developing markets, notably in China and India where malt drinks have long been drunk as a substitute for milk. Now, strong economic growth in these markets is seeing middle class consumers trading up to added-value hot drinks. Hope Lee of market analysts, Euromonitor, reports on the latest trends.
Global retail volume sales of malt and chocolate-based drinks reached 956,702.3 tonnes in 2003, with the bulk of sales being generated from less developed markets. Latin America is the largest market, accounting for over one third of total retail volume sales. Strong sales in Latin America are derived primarily from the large youth population who are the major consumers for chocolate-based drinks.
Among developing markets, the availability of products varies. Malt-based drinks have a negligible presence in Argentina, Morocco and most East European countries. Malt-based drinks are not traditionally drunk in Russia, while malt-based hot drinks are virtually unknown. There is no investment in this sector either. In contrast, some markets such as Mexico, Indonesia and India have shown strong growth in sales of malt-based drinks.
Malt-based drinks still hot in India
India, the world's largest malt-based drinks market, accounts for 22% of world's retail volume sales. In India, malt-based drinks are traditionally consumed as milk substitutes and are marketed as a nutritious drink. Such drinks are principally targeted at older consumers, the young and the sick. Sales growth has been assisted in recent years by improved retail and distribution networks and demographic factors, namely a large consumer base in the children's and youth market. India also recorded the highest growth (53% in US$ terms) of any market between 1998 and 2003, primarily as a result of consumers trading up to value-added products.
Major global players such as GlaxoSmithKline, Cadbury Schweppes and Nestlé are present in India. India contributes nearly 60% of GlaxoSmithKline's global sales of malt-based drinks. The company has a share of 70% in malt-based drinks in the country. In 2003, the company relaunched its Horlicks brand in three new flavours. The company also relaunched Horlicks for Kids specifically targeted at young children in the same year.
Added-value products welcome in Latin America
Geographically, chocolate-based drinks are more widely available than malt-based drinks. With the exception of a few South East Asian countries, chocolate-based drinks are sold in all major markets. The top three countries by retail volume sales are Brazil, Spain and Mexico.
Introducing value-added products seems a general trend in product development. In recent years, the Mexican market saw the launch of a number of chocolate-based powders in new packaging, formats and formulas often with new flavours. These products tended to target consumer demand for value-added products though some were aimed at low-income segments of the population.
Brazilian manufacturers also met consumer demand by offering premium chocolate-based products. Compared with their Latin American counterparts, Brazilian consumers are showing greater awareness of health issues. Brazilian consumers tended to upgrade by purchasing healthier chocolate-based products such as low-calorie and diabetic-friendly alternatives. In 2003, PepsiCo launched Toddy Light especially targeted at consumers concerned about their health.
US manufacturers fail to attract young consumers
The performance of malt- and chocolate-based drinks in mature Western markets was one of stagnation and decline between 1998 and 2003. The US saw a sharp decline in value sales of both malt- and chocolate-based drinks over the past few years.
These products largely remained outside the overarching US consumer trend for premium and healthy products. In fact, malt-based drinks have an almost negligible presence in the US. US manufacturers have by and large failed to attract the important child and youth consumer groups, with younger consumers overwhelmingly showing a preference for soft drinks.
Demographic changes offset growth in Western Europe
The performance of malt- and chocolate-based drinks in Western Europe was more positive than that of the US. Nonetheless, a general stasis in growth characterised these products between 1998 and 2003. In general, a relative lack of innovation and marketing activities, allied to demographic factors such as falling birth rates and an ageing population, saw important Western European markets such as Germany record modest growth. The UK experienced a sharp decline of 13% in retail volume terms in malt-based drinks and moderate growth in chocolate drinks between 1998 and 2003. The warmer winters experienced in Western Europe in recent years also contributed to the lower demand for chocolate- and malt based drinks.
More good news to come from developing markets
Malt- and chocolate-based drinks are set to show steady growth in both volume and value sales globally. Euromonitor predicts developing markets will continue to be the driving force for these products between 2003 and 2008. China, Indonesia and Mexico are expected to see strong growth in both chocolate- and malt-based drinks during the forecast period. The proportionally large younger population and a rising number of middle class consumers are the main factors likely to spur growth.
Among major markets, China is forecast to be the fastest growing market in both chocolate-based (35% by value) and malt-based (29% by value) during the period of 2003-2008. China's booming economy along with rising levels of disposable income and increased availability of quality products will encourage further consumption. Following China's accession to the WTO, multinationals are expected to penetrate the country further. Lured by the growth in demand, more local manufacturers are also expected to get themselves involved in local production.
The poor performance of malt-based drinks in mature Western markets is not forecast to be reversed between 2003 and 2008 due to similar factors experienced in the previous five years. North America is expected to see unstoppable decline in sales of both malt- and chocolate-based drinks due to competition from other healthy alternatives.
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