Britvic Aims to Add Fizz to SoftDrinks Market

The tireless launching of new products andunveiling of novel marketing initiatives are driving the soft drink industry. Supportingthis revolution is a cavalry of heavyweight advertising campaigns and large-scaleinvestment.

The soft drinks market has undergonesignificant change in the past few years. At one stage last year, an average of two newsoft drinks were being launched in the UK every week and one soft drinks company waschanging ownership every month, according to a recent report on the UK soft drinksindustry by specialist consultants, Zenith International.

By the middle of 1998 there had alreadybeen over 50 new products launched since the start of the year. These ranged from highprofile Sunny Delight and Ribena Tooth Kind to more niche offerings like Zero Gravity withsuspended jelly balls and Jokk lingonberry juice drink from Lapland.

Market Performance

Soft drinks are one of the most ubiquitousproducts in the UK and because of this their consumption rate is steadily climbing,although the poor summer weather left 1998 sales short of the 10.3 billion litres consumedin 1997. Forecasts for the future of soft drinks in the UK remain buoyant, with Zenithprojecting continued growth of around 3% a year, taking consumption past 11.9 billionlitres in the year 2005. Quite an impressive amount considering that in 1982 only 5.2billion litres were consumed.

Carbonates is the biggest market sectorgenerating about 51% of total soft drinks sales. Cola has now stabilised to account forabout half of the carbonates sector, while low calorie drinks holds 30%. Dilutablesquashes and other concentrates make up 28% of soft drinks volume in ready to drinkequivalent, but are expected by Zenith to continue losing market share.

Bottled water remains the fastest growingsector and now has a 9% volume share. Market value has lagged behind volume, because oftrading up in pack sizes.

Fruit juice and nectars have stayed aroundthe 10% mark, but the best recent performers have been direct not-from-concentrate juicesand cranberry drinks. Still drinks with 0-25% juice content make up the remaining 3% andhave benefited from the arrival of new fruit cocktails.

On average, the yearly consumption of softdrinks is 175 litres per capita, with 15-24s accounting for 25% of all soft drinks andnearly 40% of colas. The retail value is an estimated £6.9bn, making it the largestgrocery product field in the UK.

Enjoying just over 40% of sales by volume,Coca-Cola & Schweppes Beverages and Britvic Soft Drinks are the clear market leaders.Coca-Cola & Schweppes Beverages produces over a quarter of the soft drinks consumed inthe UK, while Britvic is responsible for about 15%. Princes accounted for about 10% ofsales volumes while Cott and Gerber have 9% and 5% respectively (see Table).

Coca-Cola Schweppes leads the carbonatesector with about 38% while Britivic heads the dilutables sector with a 33% share. Gerberis similarly dominant in fruit juice/nectars, and Calypso Soft Drinks tops the stilldrinks category.

Flavour Flurry from Britvic

Britvic is the latest company to launch aspate of new flavours and marketing projects into the soft drinks market. In February itannounced a £14 million investment and unveiled the biggest marketing plans ever for itsleading fruit carbonate brand, Tango. Supported by a heavyweight advertising andpromotions programme, the investment includes the launch of new flavours and packaging.The introduction of the new Tango Tropical is the first time the Tango brand willchallenge the tropical flavour category. It is hoped that by launching Tango Tropical,healthy competition will be provided to drive the category, and new and younger consumerswill be brought into the tropical flavour sector. The brand's core range of Orange,Apple and the new improved Lemon flavour has been extended to make room for the newPineapple and Grapefruit combination. The Blackcurrant flavour will continue to beavailable in 330ml cans across the impulse sector.

Providing another key opportunity forgrowth is Diet Tango. The product will have the backing of significant investment tosupport it in a traditionally under-performing diet fruit carbonates sector. Diet colascommand 48.6% of total cola sales, whereas diet fruit carbonates only hold a 21.2% shareof the total fruit carbonates category.

Increasing visual impact using 3Dillustrations in vibrant colours and maintaining the boldness of the black, the new Tangopackaging concepts are sure to catch the consumer's attention. Diet Tango also has anew, strong look as it incorporates a blue background to enhance graphics.

The overall budget allotted to the 1999national advertising campaign is £9 million and will include TV, press, poster and cinemaadvertising. "1999 represents the biggest marketing package we have ever put behindthe Tango brand," says Britvic's marketing director, Andrew Marsden. "Withnew products and new packaging, all supported by heavyweight advertising, we are in a verystrong position to take the Tango brand forward and achieve our objective to grow thefruit carbonates category."

Drink of the Younger Generation

Although the 10-24 year-old age bracketaccounts for only 20% of the UK's demographic make up, it is responsible for over 40%of carbonates consumption. Drawing on this market research, Britvic's most recentmarketing initiative is in association with a children's animated film. The companyinvested £2 million in an effort to drive sales of its leading still drinks brand,Robinsons. Building on the success of the special Disney Mulan promotion last autumn,Robinsons has joined up with the latest animated film, A Bug's Life. The endorsementspans both the dilutables and cartons ranges with characters from the animation featuringon pack.

The soft drink industry shares withanimated movies a special appeal to the younger generation and it is to this market thatthe campaign is chiefly geared. Adrian Troy, marketing manager for Robinsons, comments:"A Bug's Life is the second Disney film that Robinsons has been associated with.It is expected to be huge in the UK and our promotion will add to the movie magic for ourconsumers."

An extensive media campaign which includesTV advertising, was used to support the campaign. The consumer promotion will also supporta new bottle and case format for the impulse sector, designed to meet both consumer andretailer requirements.

Further Industry Activity

The rapid rate of business development inthe soft drinks industry is matching that of product innovation. "The pace and scaleof acquisitions has been astonishing," says Richard Hall, chairman of Zenith."Behind Coca-Cola Schweppes, Princes and Cott are fast catching up with Britvic aftera series of UK purchases. These two superbottlers are now among the largest own labelsuppliers in Europe and could soon enter the overall European top ten."

Japanese-owned Princes Soft Drinkspurchased Barber Springdale in June 1997 and then Waterford Juices in March of last year.In addition, Capespan International has recently entered a partnership agreement withPrinces. Capespan has formed a new Fruit Juice Division which assumes control ofproduction and distribution for all fruit juice under the Cape and Outspan brands inEurope. Princes will have the charge of production, marketing and distributionresponsibilities of both ambient and chilled Cape and Outspan branded juice. Bothcompanies expect to achieve a volume exceeding ten million litres per annum by the newmillennium.

Amongst the other notable transactions,Sodastream featured in a management buyout from Cadbury Schweppes in September 1997 andthen merged with the international Soda-Club Group in April 1998. More recently, Cott andVirgin Cola have parted company. Cott is still in the midst of restructuring its businessinternationally and Virgin has signalled its intent to step up activity in the UK colamarket this summer with a cash injection of £9.7 million (see Soft Drinks section in NewsBrief).

International Developments

The international soft drink market isequally active. Cadbury Schweppes has disposed of its soft drinks brands outside the US toCoca-Cola, although the US drinks giant has been frustrated in its attempt to acquireOrangina from Pernod Ricard (however, the French Government is expected to lift its vetoof the deal).

Tropicana acquired Copella Fruit Juices inJanuary 1998 and has now itself been sold by Seagram to PepsiCo in a £2 billion cashdeal. The sale means PepsiCo is now in control of 40% of the US chilled orange juicemarket, around twice as much as Coca-Cola's Minute Maid division. The deal placesPepsiCo in an exceptionally strong position in the growing juice market as Tropicana isthe world's largest branded juice business.

Top UK Soft Drinks Companies, 1998

Company Market Share
1 Coca-Cola Schweppes 26.5%
2 Britvic 14.1%
3 Princes 9.8%
Cott 9.3%
Gerber 5.0%
Ranks 6-10 16.1%
Others 19.2%

Source: Zenith International. 1997 volumesbased on 1998 ownership.