Comment

Comment - Soft Drinks & Water - Sunshine Cheer for Soft Drinks Players

Most popular

Pernod is back in Kentucky, but why did it leave?

The opportunity for no-alcohol in the on-premise

Anheuser-Busch InBev Performance Trends 2014-2018

Which drinks companies will be hit by cool weather

Why brown spirits is behind low- & no-alc curve

MORE

The sun is about to turn in for the winter here in the northern hemisphere. As he waves goodbye to a good Summer, Richard Corbett considers what the weather does for consumption across the soft drinks and bottled water categories.

//i2.aroq.com/1/14194y4213.jpg

In Europe, a scorching summer in some key markets has highlighted why forecasting soft drinks demand is so difficult. The economic and financial environment may have some bearing on consumption requirements but it is a quite basic principle: When it is hot, people get thirstier and drink more commercial soft drinks. Saatchi & Saatchi and Steven Spielberg could be responsible for your advertising campaign, but demand will still hinge on the weather conditions during the influential summer months. 

The tropical conditions in Europe are the factor cited by Danone as a major contributor to its 9% third-quarter jump in water volumes. One can probably assume that Danone's water business will expand year-on-year in Asia and other parts of the developing world, but, in Europe, demand for water has lost its buoyancy and achieving growth is far more challenging.

Value sales will have been helped by the fact that it is the portion sizes, which are far more profitable to soft drinks players, that benefit most from the surge in on-the-go consumption that higher temperatures trigger. That will be a sizeable dynamic behind Danone’s 17% value sales rise in the Summer. In the convenience shops of Western Europe, the low-cost discount brands have a limited presence and the glamorous brands like Evian and Volvic prevail - these also have much to gain. Still water is most certainly the most weather-sensitive of the soft drinks categories, so Danone has been well-placed to capitalise on the sunshine.

Soft drinks demand begins to edge upwards above the norm when temperatures reach 16°C, but when they climb to around 28°C, then consumers begin to shift to still water.

To assess which soft drink categories will be the main winners of the sizzling North European summer of 2013, it is a good idea to look back to 2003. The 2003 heat wave was the hottest summer on record in Europe since at least 1540 – so long ago that Henry VIII was still on his fourth wife.    

A look at beverage researcher Canadean's numbers does indeed show that still water sales rocketed by 10%. The previous year had seen still water sales rise by less than 4%. Still drinks were - and still are - a hotbed of innovation in the region, but growth doubled during the year from 8% in 2002 to 16%. Squash syrups had been around for a long time and were showing all of the symptoms of maturity but they too prospered and recorded an upturn; volumes leapt by 8% in 2003 – in 2002 they had been flat. A good summer is certainly very favourable to the soft drinks industry and overall soft drinks consumption went up by nearly 8% that year.

Iced teas in particular have a strong association with the Summer, which can be traced as far back as the 1904 St Louis World's Fair. Temperatures were so high then that a despondent tea salesman, Richard Blechynden, opted to put ice in his tea. Fair-goers were quickly won over and the iced tea concept was created. During the hot Summer of ten years ago, the iced tea category showed just how much it enjoys warmer conditions, doubling its West European growth rate from the previous year to a dramatic 20%. What comes up must come down, however, and during the cooler Summer months of 2004, demand for iced teas shrank by as much as 5%. When I asked the marketer of a major iced tea brand about this, he suggested that the summer bias towards iced tea sales was related to the fact that much of the marketing support for iced tea brands is deliberately focussed on this time of the year. 

You might not have expected juice & nectar sales to have been helped by the good conditions but they both saw an upturn in sales in 2003, but what interested me most was the muted CSD market, which could only muster a modest 1%; the same as in 2002. This disappointing showing was linked in part to the introduction that year of a deposit on fizzy drink cans in Germany, which prompted a 7% drop in CSD sales in the country. As Germany makes up around a quarter of Western European volumes, this is very influential on the overall region. If you discount Germany, then the heat wave in Europe that year pushed carbonates demand up by almost 4%.

Comparisons this year are already being made with 2003 and, to a lesser extent, by 2006. But, there is a considerable variance between this year and those years. 2013 started off very slowly with an exceptionally cold and late spring in many important markets. If the Summer washout predicted by some forecasters had been realised, then 2013 could well have been an annus horribilis for the soft drinks industry, just when the European economic climate looked to be settling.

Luckily it wasn’t and the atmosphere in most of the soft drink boardrooms will be more relaxed this year than last year.


Sectors: Soft drinks, Water

Companies: Groupe Danone, Evian

Related Content

Can soft drinks producers catch the iced tea wave? - Comment

Can soft drinks producers catch the iced tea wave? - Comment...

What's coming up in soft drinks in 2019? - Predictions for the Year Ahead - Comment

What's coming up in soft drinks in 2019? - Predictions for the Year Ahead - Comment...

Why iced coffee will be one to watch for soft drinks in 2019 - Comment

Why iced coffee will be one to watch for soft drinks in 2019 - Comment ...

Why Deposit Return Schemes are the ultimate option for soft drinks - Comment

Why Deposit Return Schemes are the ultimate option for soft drinks - Comment ...

Oops! This article is copy protected.

Why can’t I copy the text on this page?

The ability to copy articles is specially reserved for people who are part of a group membership.

How do I become a group member?

To find out how you and your team can copy and share articles and save money as part of a group membership call Sean Clinton on
+44 (0)1527 573 736 or complete this form..



Forgot your password?