Will they? Won't they? The plight of Greece and its people is a daily story across Europe and, as it appears more likely that the country will have to pull out of the Eurozone, the soft drinks and bottled water industry, like many others, is watching through its fingers as things unfold. Richard Corbett takes a look at the lay of the land and prays for sun.

These are pretty anxious days if you are Greek, and I doubt even Archimedes could find a solution to the financial mess that they now find themselves in. Painful austerity has inevitably had repercussions for Greek lifestyles and, according to beverage researchers Canadean, this has hit demand for commercial refreshments.

Soft drink sales in the first three months of this year slumped by as much as 16% year-on-year, a dramatic slide by anybody’s standards. To say that Greece is a challenging trading environment for soft drinks operators is an understatement. Just ask Coca-Cola Hellenic Bottling Co, who have already announced the closure of their production sites Thessalonika and Patras this year.

It was all so different in the care-free days before the crash, when the Greek government was spending money like Montgomery Brewster: Soft drink sales in the country were vibrant. In 2007, the sector expanded by nearly 11%, and even in 2009 demand was stable before slipping into an accelerating decline in 2010 and 2011.

In other European markets, volumes have held up relatively well during the uncertain times  of the last few years as consumers stopped eating out so much in restaurants and bars but compensated for this by drinking more at home. The seriousness of the Greek situation is that consumers have not only stopped eating out but have also cut back on their expenditure in the supermarkets and other off-premise outlets. This has triggered price competition in the supermarkets of such intensity that even discount stores have been unable to differentiate their prices enough to appeal to consumers. Aldi announced back in the summer of 2010 that it was quitting Greece, when you would have thought that few markets would be more suited to that company's business model. The remaining discounters have continued to see soft drink volumes fall ahead of the market this year.

The speed and size of the downturn this year can be partly attributed to the crippling VAT increase to 23%, a 10% rise having come into force in September. The VAT rise applies to carbonated water, water containing added sugar or other sweetening substances or flavours, non-alcoholic beverages and juices, and this is reflected in Q1’s dismal market performance. Cafes and bars in particular have suffered as a result of the extra tax, compounding already intolerable conditions. The Greek case study gives ammunition to those that suggest that if you put up taxes your tax take will go down.

Not surprisingly, leading the downward charge are still waters; trading down to tap water is a straightforward equation when you are trying to balance the household books. Still waters should pick up as the year goes on, however, helped by a hotter summer compared to the poor one last year and the continued improvement in visitor numbers. Tourism will play an important part in Greece’s recovery and, according to the Hellenic Statistical Authority, visitor numbers to the country jumped by nearly 10% last year. Tourists are prolific consumers of bottled waters and, if tourism continues to gain momentum, there should be a positive spin-off for waters.

It is not all bad news: There is one form of soft drink consumption that bucks the negative trend Energy drinks sales ended the quarter in the black. The fact that energy drinks grew just goes to highlight how resilient the global energy drink boom must be if these products can still grow in the acidic soil of today’s Greece. The Monster brand is the main driver in the Greek energy drink marketplace.

Launched in May 2011, Monster is one of the very few examples of innovation in the Greek market in the last 12 months (rival Rockstar’s arrival in Q3 last year was another). The absence of innovation and new product development is a key feature of this distressed market, illustrating how reluctant operators are to invest in Greece and showing just how little confidence there is at present. Consolidation is very much the order of the day for the industry as defensive strategies are implemented to preserve existing products and brands.

The question people would like answered is whether Greece is near to turning the corner or is Eris going to be up to her mischievous ways for some time to come. With another election on the cards so soon after the last one it seems that Greece is some way off settling down, especially when compared to the other high profile economies weighed down with excessive debts.

According to Canadean, of all the so called PIIGS markets, Greek soft drinks are by far struggling the most in Q1. Portuguese and Irish soft drinks volumes are down by 2%, Italy less than 1%, while Spain has seen a small increase.

What will worry the European soft drinks industry is whether these other markets could see a rapid deterioration in their sales as the Eurozone crisis bumbles along unsolved. Between them these countries account for more than three in every ten litres of soft drinks sold in West Europe.