Market research
As the coronavirus pandemic continues, consumers have returned to big brands. Soft drinks commentator Lucy Britner takes a closer look at the trend and assesses the impact on the category's health & wellness space.
Has the coronavirus crisis put paid to the growth of the health & wellness trend in soft drinks?
Over the past few years, just-drinks has reported on many acquisitions in the soft drinks category, where big soda has snapped up a niche innovation in order to keep up with consumer demands - quite often those demands have been around health & wellness. For now, at least, the coronavirus crisis has thrown many trends off course, as consumers seek comfort in lockdown.
In soft drinks, that means big brands are top of the pops once again.
Looking back to the pre-COVID-19 days, Coca-Cola Co CEO James Quincey has from the start of his tenure in 2017 called the group a "total beverage company". NPD innovation and acquisitions have seen the soft drinks giant make moves into water, kombucha and coffee brands, launch an energy proposition under brand Coke and even take on RTDs with its Bar Nøne range of cocktail-style soft drinks.
Fast-forward to late-April and although the company is still waving its "total beverage" banner, the post-Q1 2020 results conference call took a different tone - COVID-19 has brought core brands to the fore.
"For our retail customers ... we're focused on maximising system efficiency by ruthlessly prioritising to deliver on core SKUs and key brands and help customers simplify their supply chains," Quincey told analysts. "We're also taking this opportunity to reshape our innovation pipeline to eliminate a longer tail of smaller projects and allocate resources to fewer, larger, more scalable and more relevant solutions for this environment."
As shelf space in shops is given over to essential items and consumers cut down on the number of store visits, Quincey's comments highlight the importance of minimising out-of-stocks and maximising share of visible inventory. "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," he adds.
Looking back to the last global crisis - the financial crash of 2008 - we can see from the BrandZ Top 100 Most Valuable Global Brands Report 2009 that in a year of worldwide economic turmoil, when every key financial indicator plummeted, the value of the top 100 brands increased by 2% to $2tn - and Coca-Cola moved from fourth to third position in the rankings.
Value and affordability
There is also the value argument. The virus is hitting businesses large and small, while many consumers are finding themselves furloughed on reduced pay or out of work completely. Buying multipacks of big brands suits lockdown life.
Across the world, Coca-Cola is preparing for consumers to prioritise value. "We're ... going to see a very profound theme of affordability," Quincey says. "What we're seeing ... is not just the effect of the lockdown of certain channels, but I think that anticipation by the consumer of where the economy is going."
Refillable PET is on the way back in South Africa, according to Quincey, who also flags an investment in refillables in Latin America. "We're certainly going to see a profound theme of affordability coming up in the next years," he says.
Turning to markets that are coming through the pandemic, according to McKinsey's 'Chinese consumer behaviour post-COVID-19' survey, between 20 and 30% of respondents suggest they will continue to be cautious, "either consuming slightly less or, in a few cases, a lot less across consumer goods categories". It's important to note that the survey also shows a rising demand for healthy products. According to McKinsey, more consumers say they want to ensure product safety after the crisis, with "66% agreeing or strongly agreeing that they will 'spend more time' doing so". The survey of Chinese consumers also found that 64% agree or agree strongly that they will consider products that are more environmentally friendly, while 70% say they will work to boost their own physical immunity by exercising more and eating healthily.
But, here's the rub: Words such as 'affordability' and 'value' do not go hand in hand with the health & wellness trend. Drinks touting superfood ingredients or functional properties are generally at the premium end of the soft drinks market.
Luckily, in countries where a sugar tax has been implemented, many soft drinks manufacturers have already reformulated mainstream products to be healthier. Analysts at Rabobank believe further government involvement in this area could be around the corner.
"Preliminary statistics say that people who are obese or overweight have a higher chance of getting the coronavirus," said Rabobank's global strategist consumer foods, Cyrille Filott, in a recent webinar. "Therefore, it is likely that health & wellness is put high on the agenda by governments and consumers."
Going forward, we will likely see some polarisation in the health & wellness arena, as consumers navigate the financial impact of this health crisis. Products touting functionality and immune health could be the expensive preserve of a few wealthy consumers, while mainstream brands that can market any aspect of their better-for-you credentials - such as less sugar or natural ingredients - will likely gain more traction with the masses.
The sweet spot for NPD will be affordable health & wellness brands. Perhaps, this could be bottled water's moment to shine again.
Sectors: Soft drinks, Water
Companies: The Coca-Cola Company
