While non-carbs are driving soft drinks growth in Italy, Spain, Portugal, Greece and Turkey, the carbonated sector in this region has lagged behind. In the second of two features, Hope Lee, of industry analysts, Euromonitor International, looks at the prospects for the CSD sector in these key Mediterranean soft drinks markets.

The 2003 heat wave and growth in bottled water and juice sales have resulted in strong growth in the largest Mediterranean soft drinks markets - Italy, Spain, Portugal, Greece and Turkey - but the carbonated soft drinks (CSD) sector has not been among the fast-growing areas in this 36.7 billion litre market.

As in other European markets, CSDs are a very mature category in the Mediterranean region. Euromonitor found that Spain had the highest per capita consumption of carbonates, at 104 litres in 2003, but generally carbonates recorded sluggish volume sales in all major Mediterranean markets between 1997 and 2003.

Greece, the only country where CSDs are the most popular category in soft drinks, recorded a sharp decline in total volume sales of 2% in 2003. Even though carbonates enjoyed a small increase in 2003 in several markets purely due to the heat wave - Italy, for example, recorded 7% total volume growth in 2003 - Euromonitor believes the unexpected growth in carbonates in 2003 is unsustainable. The poor weather conditions in 2004 and an 'unhealthy' image, are both factors that are likely to lead to a decrease in sales of carbonates in 2004.

While "cola fatigue" continues among Mediterranean consumers, light/low calorie cola seems to be a healthier choice. Italy, Portugal, and Spain recorded strong volume sales in low calorie cola between 1997 and 2003, with Portugal seeing the highest growth at 103.6%, albeit from a low base. In Italy, PepsiCo launched Pepsi Light, which replaced Pepsi Max in 2004.

Apart from the positive news from light colas, non-cola CSDs also saw an increasing variety of flavours, mirroring the desire for diversity in food and beverage consumption. Italy's local drink Chinotto (a traditional Italian soft drink flavoured with Chinotto extract) is doing well and enjoyed strong growth in 2003 due to substantial investment. The drink is positioned as the "Italian" answer to cola carbonates.

Greece has seen the popularity of juice-based CSDs grow. Such products are offered not only by multinationals but also by domestic players. Local company EPSA registered strong growth through its lemon and lime carbonated drinks named Eps. The brand has a 5% share in retail volume sales of non-cola carbonates in Greece and is one of the country's fastest growing non-cola carbonates brands. Other peripheral players, such as Kliafa, Gerani and Marlaflekas, are also gaining national distribution and stealing shares from multinationals. Both PepsiCo's Ivi and Coca-Cola's Fanta were forced to give their product lines a face-lift by updating their packaging, in order to defend market share.

To some extent, innovation in flavouring has served to retain some CSD consumers, especially the younger generation. Non-cola carbonates with exotic flavours or juice-based carbonates are perceived as being healthier than cola; packaging formats of such drinks and accompanying marketing campaigns tend to excite and entice the youth market. However, these flavour innovations or product renovations cannot stop consumers from seeking out healthier non-carbonated drinks, such as fruit juice and functional drinks.

Nevertheless, with Euromonitor forecasting healthy growth for the soft drinks market in the region between 2003 and 2008, there remains room for soft drinks players to develop in the Mediterranean, and in terms of products, diet cola could provide a great deal of potential for growth. In the UK, the consumption of low calorie cola stands at 21 litres per head, while the consumption in Italy is under 2 litres.

Of the five markets, Turkey offers the strongest growth potential for soft drinks in general, according to Euromonitor International, with growth of around 60% forecast between 2003 and 2008. However, soft drinks market growth in the region is also subject to external factors notably the state of the tourism market.

Mediterranean countries are likely to come under increasing competitive pressure from Eastern European countries for tourists from the UK, Germany, France and the Nordic nations. The potential threat could be strengthened further when low cost airlines improve their routes and pricing in these emerging tourist resorts. This underlying change is likely to have an effect on foodservice sales of soft drinks in the medium and long term.

For further information on Soft Drinks International, go to www.softdrinksjournal.com