Despite Germany's blisteringly hot weather in 2003, the country's soft drinks market was badly affected by the controversial mandatory deposit system, according to the latest research on the sector.

The year was the eighth warmest since 1901 and higher than average temperatures were recorded in no less than 10 of the 12 months. However, the introduction of the scheme on January 1st placed large deposits on non-refillable plastic and metal containers. As a result, huge variations were seen in the performances of the different categories when compared with 2002.

According to a report from the drinks analysts Canadean, the deposit system prompted many consumers to actually change their drinking habits in an attempt to avoid the new charges.

The leading category, packaged water, was unaffected with consumption reaching record levels and increasing by 12%. Perceived as a natural product, packaged water has been boosted by the fact that German consumers are extremely health conscious.

Conversely, carbonates declined by almost 8%, reversing the growth seen in each of the previous four years. Many retailers actually delisted carbonated drinks sold in non-refillable packs causing off-premises volumes to decline sharply. The traditionally strong segments of cola, orange and clear lemonade were particularly badly hit, although cola-mix and flavoured colas did fare a little better than their classic counterparts.

The third largest category, juice, is exempt from the deposit system and benefited greatly from the new legislation. Consumption rose by around 7% with much of the incremental volume coming from own brand products. Juice was widely used as a substitute for the delisted carbonates and took full advantage of its new-found shelf space.

Apple remains the most important flavour but is slowly losing market share to Mixed Juices. The fact that the deposit charge is expected to be introduced to juice and nectars in the next couple of years does though provide cause for concern. Still iced/RTD tea is also exempt from the new charges and grew by almost 40% during the year.

Sold mainly in 25cl cans, Energy drinks had a catastrophic year and declined by a staggering 85%. They were virtually banished from retail outlets with convenience stores providing the only significant outlet. On a packaging level, glass and cans dropped most notably whilst there was a strong shift towards refillable PET. Most of the major soft drinks brands now use PET as their main material although cartons are still the commonly adopted format among own brand products.