In 2015, the global soft drinks industry demonstrated only a marginal improvement on the growth seen in 2014, according to research from Euromonitor. Growth reached 5.5% in value terms, with energy drinks the fastest-growing category – and strong performances by bottled water (the overall volume leader) and sports drinks as well. Total volumes in soft drinks last year grew by 3%.

Volume growth slowed in the US and China over the 12-month period, although a modest improvement was observed in Western Europe and Latin America. Looking over the next five years, China is still expected to lead the way in terms of forecast growth in absolute terms. However, there was a sharp slowdown in Chinese growth in 2015. Despite considerable volatility in individual categories – a crisis in carbonates and an acceleration in bottled water growth – top-line volume consumption of packaged soft drinks is expected to remain broadly stable over the forecast period, with a 3% CAGR expected over 2015-2020.

Emerging markets in turmoil

2015 was characterised by weakness in key emerging markets for consumer goods, particularly the BRICs. This year is expected to remain challenging. While India remained strong, Russia slipped into negative value growth in retail beverages as a consequence of a severe recession. China was also a weak spot, as an economic slowdown combined with changing consumer attitudes towards healthier food and beverages, driven in part by food safety concerns.

Chinese soft drinks grew volumes by 3% and value sales by 6% in 2015, a substantial weakening in contrast to the early review period. Juice drinks volumes declined by 4% in 2015, as consumers gravitated to healthier beverage options in the wake of damaging food/beverage scandals affecting leading domestic players. Carbonates and RTD tea also performed poorly, while bottled water (particularly functional waters) and premium juices were bright spots.

The soft drinks category in Russia was severely impacted by an economic downturn, resulting in a 7% fall in retail volume. High-priced categories like 100% juice and nectars were among the most impacted categories, although volumes were also down in carbonates and bottled water. Energy drinks remained a rare area of growth, increasing retail volume by 5% in 2015 thanks to brand popularity among younger consumers.

Brazil still demonstrated top-line volume growth in soft drinks, with a 3% increase experienced in 2015 – in line with the previous year. However, this belies significant changes in category prospects. Carbonates volumes were down by 2% in Brazil, with consumers exiting the category for more natural and healthier options. Bottled water volumes grew by double digits, while juice also grew by 8%.

Almost everywhere you look, carbonates are going flat

2015 was the slowest year for global carbonates growth of the 15 years of available market size data. CSD volumes declined in Western Europe, North America, Latin America and Eastern Europe.

Consumer sensitivity to health and wellness factors – particularly sugar content – was one major contributor to the poor performance of the category in 2015, and pressure will only increase in 2016. Retailers are increasing the number of healthier beverage options on the shelf, and governments – under pressure from public health campaigners – continue to explore excise taxation options.

Despite this, consumers avoiding CSDs are not exiting packaged beverages altogether. Different products and categories appear to be benefiting from the global carbonates crisis. Bottled water, for example, increased its volumes last year by 6%. While low-margin still bottled water was a strong volume performer, higher-value carbonated bottled waters and functional/flavoured waters also demonstrated strong value growth. Many successful enhanced water brands are directly benefitting from the declines in CSDs.

Despite increasing maturity, energy drinks remained the fastest-growing category in soft drinks, appealing to younger consumers as a functional alternative to CSDs. Sports drinks also demonstrated improved growth in 2015. In North America and Western Europe, healthier RTD tea and super-premium RTD coffee were robust growth areas in 2015, winning consumers from other categories.

Consumers demand healthier choices in their packaged drinks

WHen it comes to ingredients, the soft drinks category faces unprecedented scrutiny from consumers. Health and wellness is top of mind in consumer decision-making in both developed and emerging markets. Traditional low-calorie options may not be enough to save CSDs, with consumers scrutinising added ingredients, particularly artificial sweeteners. In fact, reduced-sugar carbonates underperformed regular, full-calorie carbonates in North America and Asia Pacific. 100% juice is another category under pressure for both reasons of price and, increasingly, because of sugar and calorie content. 100% juice declined by 2% in Western Europe in 2015 and 4% in North America.

Expert analysis

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