EUROPE: Soft drinks: Summer '06, how was it for you?

Branded soft drinks remain strong throughout Europe where they account for more than 85% of volume across the major categories, according to two new industry reports.

Beverage industry analysts Canadean has warned, however, that 'Distributors' Own Brands' (DOBs) are rising. In West Europe, they have advanced by around 5% during the last year and are outpacing the market as a whole. Competitive positioning, product quality, choice and value for money have combined to offer consumers in the region an extremely attractive proposition, the analyst said today (2 October).

DOBs have gained greatest penetration in the juice, nectars and still drinks segments, the report noted. Stiff competition has been faced in the packaged water and carbonates segments, where the strength of the leading brands is matched by their huge marketing budgets. In juice, however, the reports found that consumers are less willing to pay the higher prices typically associated with branded offerings and are choosing DOBs in increasing numbers.

The rapidly expanding network of discount retailers such as Aldi and Lidl has further fuelled DOBs. German retailers have even used own-brand packaged water as a loss leader, selling at near to factory prices.

DOBs first appeared in East Europe in 1998 and are less developed than in the West. In the region's largest market, The Czech Republic, consumers are notoriously price conscious. As a result, a number of local players now produce DOBs in parallel with their premium brands in order to take advantage and optimise capacity. DOBs have also benefited from Poland's struggling economy where price has become increasingly prominent in the decision making process.

Away from DOB's, total soft drink consumption in West Europe advanced by around 2% during the first half of 2006, the analyst found. In Germany, the region's largest market, the World Cup surprisingly failed to make a significant impact, with beer proving the major beneficiary.

Coca-Cola's extensive marketing around the tournament does, however, appear to have benefited the German cola market as a whole, which grew by around 8% in the second quarter, compared with the corresponding period last year. Fuelled by the healthy living trend and new product launches, low-calorie carbonates are also making inroads across West Europe. Strong growth is expected for the segment in 2006, with Denmark, Germany, Italy and Portugal likely to be among the star performers.

In the East, second quarter total soft drinks consumption increased by around 13%. Packaged water, which is widely used across the region as a replacement for tap water, continued to advance rapidly with the still segment particularly buoyant.

The hot summer and aggressive promotional activities of the larger producers helped carbonates perform positively, a trend that is predicted to continue throughout this year. Juice has also grown, boosted by increasing consumer spending power and again, the move towards healthy living. Fierce competition between producers in Russia and the Ukraine has also boosted sales.

Meanwhile, the still drinks segment has grown markedly, encouraging many major players - including Minsk Soft Drinks, AquaTriple, Sandora and WimmBillDann - to diversify into the category in order to expand their carbonates-based portfolios.

Looking forward, consumer demands for healthier and more functional drinks should continue to shape new product strategies, Canadean concluded. Evidence of this has already been provided by the recent launch of Coca-Cola's 'Zero', no/low sugar variants by Nestea, Lipton and Pfanner, Unilever's Adez and Sunnyland's four new functional products in the Netherlands.