For the soft drinks industry as a whole, 2016 proved to be a year of changing consumer attitudes and aggressive innovation to meet new consumer needs.
Traditional category lines continue to blur or disappear. Instability in demand will necessitate a rethink in how big beverage brands reach their consumers, how they responsibly meet nutritional needs with their products and how they create profitable growth strategies as consumption declines in some areas and with some consumer segments.
Despite the turbulence, the industry achieves growth
In 2016, global soft drinks volumes were up year-on-year by 3%. A similar level of growth is forecast for 2017. While the mix of products changes considerably, the surging demand for packaged, convenient and enhanced water products has become one of the main growth engines for the category. Energy drinks, RTD brewed beverages and super-premium juices – most notably, coconut water – were all top global performers last year, and will continue in 2017.
Sugar stays top of the agenda
Limiting the consumption of sugar was one of the top health priorities for global consumers in 2016. As one of the principal sources of sugar in the diet, packaged soft drinks have had to deal with regulatory pressure, excise tax proposals and shifting consumer-led attitudes to consumption stemming from a desire to reduce sugar intake. This concern has reached fever pitch in Western Europe and North America, but is increasingly impacting developing market consumers as well. Major soft drinks companies will remain at the centre of this debate in 2017, and will have to adjust their product portfolios to responsibly meet new consumer demand for healthier options.
Healthy, high-value hydration drinks performed well in 2016: Glaceau Smartwater (Coca-Cola), Evian and Villa del Sure (Danone) were top performers. Traditional sports drinks also performed well, with Gatorade (PepsiCo) recording a rise in sales of 7% last year. Premium natural hydration – led by coconut and other plant waters – is another top performer.
Tepid CSD growth in developed markets has led to alternative sparkling success stories like La Croix (National Beverage) or Sparkling Ice (Talking Rain) in the US, or sparkling Volvic Touch-of-Fruit (Danone) in the UK. Where traditional CSDs continue to grow, lighter citrus flavours have outperformed, with lemonade-lime flavours performing well in Asia. Meanwhile, the crisis in cola is deep, with low-calorie products achieving mixed results while brand owners increasingly focus on reduced portion sizes and higher-value single-serve packages.
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Energy in new flavours & sizes
Despite maturation of the energy drinks category overall, Monster and Red Bull exhibited strong growth propelled by low-calorie extensions, new larger pack sizes and flavour varieties. Demand for functional energy extends well beyond the traditional brands in this space, with functional waters, teas and juices threatening to co-opt the USP of the energy drinks category.
Starbucks grew its global brand sales by 22% in value terms last year, while premium single-serve RTD tea grows strongly in the US. In Japan, Kirin enjoyed success in 2016 with its revitalised Namacha green tea brand, with double-digit sales growth. Cold brew drinks are on the verge of mainstream appeal in North America, while carbonated RTD tea is expected to be an NPD focus in 2017.
Odwalla, Del Valle (Coca-Cola) and Naked (PepsiCo) were strong performing brands in the super-premium tier of the juice segment, while refreshment mango juices in India like Slice (PepsiCo), Frooti (Parle Agro) and Maaza (Coca-Cola) also performed well.