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The soft drinks category in 2020 - just-drinks' Review of the Year, Part II - FREE TO ACCESS

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As 2020 draws to a close, just-drinks looks back at the stories that made the headlines across the global drinks industry over the last 12 months. Here, Lucy Britner picks out the highs and lows for the soft drinks category.

The soft drinks industry upped its focus on health & wellness in 2020

The soft drinks industry upped its focus on health & wellness in 2020

  • A tough year

There's no doubt 2020 has been hard-going, and several companies have spent the year making moves to restructure - or accelerate plans to reshape their operations because of the coronavirus pandemic. In August, The Coca-Cola Co announced thousands of job cuts along with its "portfolio rationalisation process". By October, Zico coconut water, Odwalla juice and Northern Neck Ginger Ale were for the chop, along with the Tab diet soda brand.  In the same month, Coca-Cola Bottlers Japan had offered voluntary redundancy to 900 of its employees and, in late-November, Danone outlined plans to remove up to 2,000 positions as part of a post-COVID cost-cutting plan.

  • The two faces of COVID

The pandemic has had a seismic impact not only on brand owners but also on consumers this year, and two main trends left their mark on the soft drinks category. At the start of national lockdowns, consumers turned to familiar brands. Less frequent shopping missions also saw drinkers opt for larger formats or multipack options. "As consumers adjust to stay-at-home lifestyle, they're making fewer shopping trips and filling bigger baskets often based on availability and orientate to known, trusted brands," said Coca-Cola Co CEO James Quincey in late-April.

As the year progressed, many soft drinks companies outlined plans to simplify portfolios and axe lagging performers. And, while lockdowns caused many to seek out known brands and value bulk purchases, the health nature of the pandemic prompted soft drinks brand owners to move quickly to answer consumers' calls for healthier propositions. The health & wellness watchwords this year include 'immunity-boosting' and Kirin Beverage Co's Kirin iMUSE water was an early contender in April. The drink, which features immunity-boosting lactic bacteria, reached its three-month sales target within a week of release.

By the end of Q3, the word 'adaptogens' was appearing more often in soft drinks and the umbrella term, which focuses on stress-relieving functionality, was popping up in everything from seltzers to kombucha.

And, as de-stressing became important to increasingly-worried consumers, PepsiCo tapped into a new occasion - bedtime. The company in September announced the launch of Driftwell - a functional beverage that claims to offer an "end-of-day relaxation" with no groggy side-effects, that intends to improve sleep quality. At the end of September, a Nestle Waters executive declared mental health concerns a future driver for functional drinks - a trend that will definitely spill into 2021.

  • e-commerce & omnichannel

COVID-19 also accelerated trends towards more omnichannel retail and praise for online sales channels poured in across food and beverage companies in Q1 results. Danone boasted that e-commerce sales were "significantly higher than usual" in the first three months of 2020, while sales in physical stores were impacted by lower traffic and a shift to larger pack sizes. At Nestle, first-quarter figures showed a near-30% jump in e-commerce sales. Looking forward, the group's CEO, Mark Schneider said that e-commerce will become a "key area" for food and drinks sales.

Direct-to-consumer plays, as well as cross-merchandising, have also proved popular for soft drinks makers. During the first lockdown, PepsiCo kicked off an e-commerce play in the US market. PantryShop.com and Snacks.com, two direct-to-consumer websites, were launched back in May. The company described the sites as places where "shoppers can order an assortment of PepsiCo's trusted and loved food and beverage brands". In October, PepsiCo CEO Ramon Laguarta said the company planned "to obviously scale them up a bit and get better at reading consumers early, test and learning with our innovation and also improving the way we segment consumers".

  • M&A

Despite a tough year, there were still a few deals around, and in March, PepsiCo agreed to buy Rockstar Energy Beverages for US$3.85bn. The snacks and drinks group, which already distributes Rockstar in the US, said the "highly-strategic acquisition" would allow it to grow both Rockstar along with existing brands such as Mountain Dew in the energy drinks category.

And by October, Coca-Cola European Partners had made a move for Coca-Cola Amatil in a bid that values CCA at AUD9.28bn (US$6.6bn). According to CCEP, the acquisition will double its consumer reach. As well as Australia, New Zealand and Indonesia, CCA operates in Papua New Guinea, Fiji and Samoa. The company operates an alcohol distribution service and handles brands for companies such as Molson Coors Beverage Co and Beam Suntory.

  • Coffee gets big(ger)

Following The Coca-Cola Co's 2019 acquisition of Costa, this year was always going to include more meaningful moves into coffee for the soft drinks giant. In January, a social media account that highlights new snacks and beverages posted a picture of a Coca-Cola-flavoured RTD coffee range. Three flavours were shown - caramel, vanilla and dark blend – with the account saying they are due to hit US shelves in April.  And April just happened to be the same month that PepsiCo was due to release the first cans from its own flagship coffee project in the US, Pepsi Café.

Coca-Cola's product finally made it to the US in July. In the meantime, the company had also rolled out Costa Coffee RTDs in the UK as well as Costa Coffee machines in the US.

  • Dispense

Speaking of machines, this year certainly saw some advances in dispense, with COVID-driven contactless technology, cryptocurrency and hygienic coatings all following last year's moves into self-serve. In November, Coca-Cola Co purchased automated coffee business Briggo, bringing the company's touchscreen vending machines into the Costa Coffee portfolio. The company has rebranded Briggo's machines as Costa Coffee Barista Bots and the machines can be operated through a smartphone app.

There is no doubt the year 2020 has been unprecedented for soft drinks. The question is, how long will the industry shockwaves created by COVID take to dissipate?

If they ever do.


Expert Analysis

Carbonated Soft Drinks in the United States

Carbonated Soft Drinks in the United States

Carbonated Soft Drinks in the United States industry profile provides top-line qualitative and quantitative summary information including: market share, market size (value and volume 2014-18, and fore...

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