In 2011, global soft drinks sales reached 609bn litres, up by 4% over the previous year and continuing a steady upwards trend. At the same time, global consumption continues to evolve, both in terms of what consumers are buying as well as how, where and - perhaps most importantly - why.

For consumers in traditional markets (mainly in Asia and Africa), packaged drinks consumption remains a matter of serving a specific need – better taste, greater safety, convenient packaging – with low incomes limiting demand for branding or additional added value. Competition from unpackaged local beverages remains high, and traditional retailing, such as independent corner shops and kiosks, remains the primary distribution channel.

In modern markets (mainly in Eastern Europe and Latin America), as incomes rise, demand for branding increases with new middle-class consumers looking to the status and prestige of global brands. Shopping habits change, as supermarkets and hypermarkets allow for one-stop shopping amidst busier lifestyles. Basic, affordable products, such as bottled water and concentrates, are joined by highly branded carbonates and energy drinks, as consumers increasingly seek to define themselves as part of a global consumer class, with lifestyles to match.

In markets termed post-modern (mainly Western Europe and North America), as branding becomes omnipresent, consumer behaviour shifts again, with purchasing increasingly a matter of finding a portfolio of highly specific products to define one’s lifestyle. Unified global brands give way to segmented, niche products, with local, artisanal products becoming more prominent. One-size-fits-all supermarkets are joined by upmarket niche players, smaller footprint convenience stores and discounters. Differentiation becomes the driving factor for consumers, retailers and drinks players, as consumers increasingly 'mix and match' products and retail formats to serve ever more specific needs.

Traditional: Limited, specific needs for new consumers

In India, a growing awareness of hygiene offers the potential to reach a large untapped consumer target. Rural households account for 70% of the country's population, but only 19% of soft drinks off-trade volumes. Improvement of supply is also driving sales – from direct sellers offering low price bottled water (which reaches 18% of off-trade volume sales in India) to grocers seeking expansion to mid-size cities and rural areas.

The limited size of the soft drinks category, due to strong competition from unpackaged drinks, means the supply landscape is still immature and competition quite consolidated. The top five players have over 80% of sales in Tunisia, India and Bolivia, and over 70% in Cameroon, Nigeria, Morocco, Kenya and Pakistan. Consolidation comes mainly from local and regional players, although global players are also powerful.

Traditional countries are characterised by a limited presence of chained convenience stores, with most purchases taking place through independent small grocers. With the exception of Pakistan, the consolidated top five retailers’ value share in every traditional market is less than 15%. Successful strategies to expand soft drinks distribution networks include offering a cooler to each outlet, which offers both good product placement as well as operator loyalty.

High prices, limited availability and insufficient perceived real value all contribute to negligible sales of modern drinks such as RTD coffee, sports drinks and reduced sugar alternatives. Meeting an existing need remains key: India’s Rooh Afza concentrate, for example, is popular during Ramadan among lower income consumers as it combines fortification with easy preparation, all at an affordable price.

Modern: Global culture, global products

Countries tagged as 'modern' tend to have the most heterogeneous consumption habits because income levels vary greatly. China is a key example of a fast-moving society, with large pockets of very traditional consumption, all the way to highly advanced, modern, global habits in eastern cities like Shanghai. The types of soft drinks consumed also vary due to generational differences, with modern soft drinks consumption habits often associated with young consumers.

The appeal of brands from global players is strong in these markets; however, the global giants The Coca-Cola Co and PepsiCo are losing share in all modern countries except Mexico and Russia, as new players, both local and smaller global ones (like Latin American cola producer Aje Group) gain ground. Successful examples of local companies offering modern drinks are Thai Boon Rawd Brewery, with its seltzer Singha, and Chinese Uni-President, with the sports drink Jianlibao.

While organic is a non-issue, there is a growing interest in healthy drinks, especially reduced sugar alternatives in CSDs, and bottled water. Modern markets in Latin America are the most developed in this respect, while Eastern European countries are seeing growing interest. Coca-Cola and PepsiCo lead with their global Diet brands (Zero versions remain underdeveloped) and local versions like Be-light in Mexico.

Traditional habits when it comes to where to buy soft drinks remain strong. In Russia, Ukraine and Latin America, independent small grocers hold more than half of off-trade volume sales, and up to 77% in Colombia, as they provide the convenience needed for impulse and on-the-go consumption. Modern consumption is initially driven by traditional retail channels, with the emergence of a modern retail environment coming more gradually.

Post modern: “You are what you buy”

In these markets, demand is growing for simple and straightforward products tagged 'organic', 'natural' and 'fresh', and offering added value, with premium exotic and functional ingredients including superfruits, and vitamins and minerals. Modern brands like Tropicana have gradually joined the bandwagon, with varying degrees of success: Pepsi Raw, the “natural born cola” was withdrawn in the UK in 2010 after poor results due to the recession.

The economic crisis saw post-modern consumers become more demanding and critical. Overly sophisticated 'beauty-from-within' drinks are losing consumer interest in Japan, while in Italy the focus is on safe and simple beverages with strong promotion, rather than multiplying innovations. To convince in the long term, the premium factor must feel authentic and be a specific alternative to existing choices.

Excluding Japan, the average share for private label in post-modern countries is 18%. Western Europe is by far the largest playground for private label due to discounters’ long-term presence. Supermarkets/hypermarkets have successfully extended their ranges of private label from budget to premium. However, in the UK last year, the shares of Tesco and Sainsbury’s private label declined due to heavy price discounts on branded products.

Post-modern consumers are increasingly looking for typical local brands and products, both when travelling and at home. The success of packaged coconut water in countries like the US and the UK (with Vita Coco and Zico) is a prime example of a product with a strong geographic and exotic image, which fulfils post-modern demand for healthy and authentic beverages, thanks to its long-term presence in countries like Brazil and Thailand.

Euromonitor International’s 'From Traditional to PostModern: The Evolution of Soft Drink Drinking Habits' discusses these soft drink trends in more detail. The report also identifies how these different market types are likely to evolve in the future.