September 2010 Management Briefing - Innovation in the Drinks Industry – Part IV
The global carbonated soft drinks market is not the most obvious sector to go seeking innovation in. But, as a new report published by just-drinks argues, flavour innovation is expected to be a major driver within the carbonated beverages market, as consumers demand greater variety in their drinks.
From a flavour perspective, the global CSD market remains dominated by cola, together with other popular variants such as orange and lemon drinks. In most instances across the world, these three varieties account for the bulk of sales of carbonated beverages, which is why the product ranges of many leading operators are heavily focused on these sectors.
However, consumer fatigue is setting in for these traditional drinks throughout many of the world's largest markets. Many people are increasingly seeking out something different, examples of which include flavours based on unusual tropical fruits, as well as carbonated drinks from yesteryear. The global carbonated beverages market is also witnessing greater fusion of flavours, which increases the novelty value of the drink in question and provides a new taste experience.
Health concerns also continue to play a role in flavour development for CSDs. Typically, this has taken the form of flavours based on antioxidant-rich superfruits such as pomegranate, as well as flavours derived from natural ingredients.
Cola continues to occupy the primary position within the world market for CSDs, mainly as a result of the global presence of the Coca-Cola and Pepsi brands. In recent years, consumer interest in the cola category has been maintained by the introduction of new varieties featuring novel or unusual ingredients.
As a result of pressure from more dynamic sectors of the soft drinks industry, leading suppliers such as Coca-Cola and PepsiCo have introduced a number of different cola variants as part of their product strategies. Some of the different variants which have come to market have included vanilla and cherry-flavoured colas, while PepsiCo's Japanese unit has recently launched Pepsi made with the African fruit baobab. This would appear to point towards a trend of using ever more varied ingredients to create different-tasting cola drinks.
Green tea has also started to feature as an ingredient for both cola and non-cola carbonates, since it is generally perceived as offering mental health benefits. In a similar vein, Coca-Cola's Japanese division has launched versions of its flagship brand fortified with additional fibre and vitamins, a move which would appear to extend colas further into the functional soft drinks category. Health concerns have also been addressed via the launch of colas made with natural ingredients, of which Pepsi RAW is one such example.
Although this sector trails cola in most instances, the two major multinationals include a number of fruit carbonates within their respective ranges. Although orange, lemon, lime and apple represent the current favourites for the world market as a whole, companies such as these continue to experiment with new flavours, as a result of which the range of fruit varieties used continues to expand.
In order to improve the perceived healthiness of their products, many suppliers of carbonates have been turning towards superfruits, which offer the benefit of a high antioxidant content. Pomegranate was one of the best performing flavours in the carbonates category during the second half of the last decade, having been aided by the launch of a pomegranate variety of 7UP in the US in 2007.
Some of the recent new product activity across the world market has also focused on developing carbonates based on exotic and tropical fruits. As people become more familiar with new and more exotic flavours, tastes are becoming more cosmopolitan. Mango and pineapple were two of the star performers during the second half of the last decade, while flavours based on kiwifruit, lychee and passionfruit have also appeared.
Fruit-based flavours are also making an increasing impact within the sports and energy drinks market. In recent years, the Lucozade Sport brand has been extended in the UK with varieties such as Tropical, Apple and Raspberry. Elsewhere, berry fruit flavours are becoming more commonplace within the energy drinks market, whereas tropical appears to be the preferred choice for many suppliers of sports drinks.
In response to consumer demands, the range of flavours available within the global CSD market can be expected to continue widening. Besides the introduction of fruit flavours not typically associated with the category (such as banana and peach flavours of Fanta, launched in India and Mexico respectively), new product activity over the coming years may also witness more varieties featuring flavour blends. Manufacturers are already combining traditional fruits with less common varieties, such as plums, elderberries, guava and even African fruits, to create new taste experiences. In a similar vein, plant extracts such as hibiscus and rosehip may also start to impact upon flavour development in the market in the future.
The other area of CSDs where new product activity has been especially high of late has been in the launch of traditional or classic flavours, most of which are remembered from childhood. Although the share of the market taken by these varieties compared with cola and fruit-based carbonates remains modest in most instances, it is a sector experiencing strong growth at present.
The trend towards products carrying a nostalgic appeal has been especially apparent in large western markets such as the US and the UK, and has also been evident in other areas of the food and drinks industry.
This trend has been most apparent in the resurgence in popularity of beverages with long histories. Some particular varieties currently in vogue include ginger beer, cloudy lemonade, pink lemonade and cream soda.
For manufacturers, bringing back old favourites has the advantage of usually requiring less resources than developing a completely new brand, while also benefiting from a target audience already familiar with the product in question.
Future strategic directions
Flavour innovation is expected to remain a major driver within the global carbonated beverages market, as consumers demand greater variety in their drinks. Some of the key points to consider as far as flavours are concerned are the following:
- Cola - it appears the fashion for developing different cola ‘flavours' (e.g. cherry, vanilla) has passed
- Superfruits - as is the case for juices and other fruit-based drinks, flavours based on ‘superfruits' (such as pomegranate and blueberry) have reported strong growth recently, and may continue to do so as a result of rising consumer awareness of their health properties. It may prove useful for manufacturers to look at some of the new fruit flavours emerging in the juice sector, such as acai berries
- Exotic fruits - consumer demand for flavours based on ever more exotic and unusual fruits appears to be staying relatively strong. Again, inspiration could be drawn from the fruit juice sector
- Traditional favourites - it seems likely that more suppliers of CSDs will tap into the nostalgia trend by extending their respective ranges with traditional favourites such as ginger beer
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