Comment – Soft Drinks & Water – So, What's Next?

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It's crystal ball time for Ray Rowlands from DrinksInfo. This month, Ray takes a guess at what future trends in soft drinks and water will shape the categories in the months and years to come.

By now, I'm guessing we're all aware of the social backlash against CSDs (which, by the way, still represent by far the largest selling soft drinks brands around the world and are in no danger of losing this position for many moons to come). However, it cannot be denied that consumer tastes are drifting towards pastures new. For example, despite the well-documented reports of its high cost to consumers, environmental concerns over ground water extraction and competition from alternative beverages, bottled water continues to close the gap on CSDs.

But, this too is old news.

Last month, I wrote about the new plantbottle from The Coca-Cola Co, which has broad potential in both the aforementioned categories. Environmentalists may harbour concerns about the efficacy of such a container, but that is not preventing the announcement of even more applications, including Heinz ketchup bottles. But, this is just a stepping stone in terms of packaging development. I think it safe to assume that, in order to appease environmental concerns (and reduce costs), suppliers will put increasing focus on more 'earth-friendly' and increasingly lightweight packaging (thinner bottles, lighter plastic caps etc). 

Obesity is becoming a widespread problem, especially in developed economies. According to the OECD, 30% of US Americans and 24% of Mexicans are obese. This is based on findings from back in 2005. I very much doubt that the situation has improved much since then. As a result of the link between sugary drinks and child obesity, numerous schools have stopped selling them. So called 'fat taxes' have also been imposed on products containing unacceptable levels of sugar (fat and salt content have also been targeted). France is the latest country to announce the implementation of such a levy on standard fizzy drinks - zero-calorie 'diet' drinks will be exempt.

The obvious industry answer, therefore, is to raise the profile of zero calorie offerings. This sounds straightforward enough, until you learn that, globally speaking, low-/no-calorie carbonates are struggling to take share from their sugar sweetened counterparts. There have always been some male reservations over low-calorie drinks, whilst many consumer profess to having a sweet tooth. However, the main hurdle to low-/no-calorie development is consumer unease over the negative health aspects of artificial sweeteners. As a result, the industry is investing heavily in researching and developing new diet products, including natural sweeteners such as stevia.

Both Coca-Cola and PepsiCo are among companies developing beverages containing stevia-derived sweeteners. But, their commercial usage requires approval: Consequently, the availability of stevia varies from country to country. In Japan, the sweetener has been available for decades, while in other countries, health concerns and controversy have limited or prohibited its availability. But, over the years, the number of countries in which stevia is available has been increasing. In October 2009, the Hansen Beverage Corporation released Blue Sky Free, said to be the first zero-calorie soda on the US market containing Truvia, a natural stevia extract sweetener. The region-wide usage of stevia is also expected to be authorised in the EU by the end of 2011, so watch this space. 

An interesting development across the entire soft drinks spectrum is that it is becoming more difficult to allocate a particular product to a specific category. It was bad enough trying to pigeonhole schorle: I mean, how do you classify a drink that is 50% natural mineral water and 50% pure fruit juice? Is it a juice, is it a flavoured water, is it a CSD? But, as producers attempt to improve profit margins, address ever increasing consumer demand for well-being and functionality and lay claim to the next Red Bull, the segment lines are getting blurred.

Today, we have crossover beverages that marry dairy produce and juice (drinking yogurt and juice plus dairy/juice smoothies), squashes that think they are iced teas (see Bickford’s Ice Tea Cordial in Australia), products that are not sure if they are coffees or energy drinks (Starbucks Doubleshot Energy + Coffee in the US) and energy drinks that might actually be sports drinks (V IsoKinetic Energy Sports Drink from New Zealand's Frucor), or is that a sports drink that thinks it is an energy drink? Potential combinations appear practically endless, so long as they do not breach regulatory controls, or curdle! But then, even sour drinks tickle some people’s taste buds. At the same time, flavour combinations are becoming increasingly adventurous.

Flavour is an important means of product differentiation and a useful way of pushing demand, especially in a saturated market. Recently, retro flavours (Pepsi Throwback) have received an airing whilst limited edition variants such as J2O Glitter Berry in the UK - with edible gold glitter! - enjoy a seasonal appeal. There is also the opportunity to take regionalised products, such as kvass or Asian jelly drinks and place them on the world stage. However, to my mind, the next new flavour sensation is going to be coconut water. Whilst the Coconut Development and Janatha Estate Development Ministry in Sri Lanka is making plans to produce soft drinks made out of coconut water, PepsiCo, Vita Coco and Fiesta Coco Equity all have investment plans for the coconut industry in the Philippines. All are aware of the growing demand for coconut water as an alternative to carbonated and other mature soft drinks.

The soft drinks market is constantly evolving. Forty years ago, who would have believed that bottled water would be the almost essential accessory that it has become for so many people today. Five years ago who would have thought that a 50cl energy drink can would challenge the 25cl industry standard. Ask me today what the next new flavour sensation will be and I will say coconut water; ask me tomorrow and it could be pumpkin juice.

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