Category commentator Richard Corbett looks at what 2018 has in store for the soft drinks industry

Category commentator Richard Corbett looks at what 2018 has in store for the soft drinks industry

Throughout January, just-drinks' regular category commentators will give us their take on how 2018 is shaping up for their specialist subject. First up, soft drinks expert Richard Corbett considers the year ahead.

Global soft drinks volume climb to continue

My performance prediction for soft drinks globally last year was for a volumes lift of 3%. I was almost spot on: the rise was actually 2.5%. For 2018, I would suggest that the market will expand by another 3% - or so.

Energy drinks and packaged waters will be top of the class again, while CSDs will record a slither of growth as negative press surrounding the segment continues to stunt demand.

Juices will be the only segment of the soft drinks category to decline. The trend to premium juices will continue and this will more than compensate for falling consumption, pushing up the value of the market. It's the low-priced end of the juice sector that consumers are shying away from, and top-end juice is in fashion.

Message in a Bottle

Ahead of last year's Drinktec exhibition, its organiser forecast that "innovative solutions for increasing energy and resource efficiency would be the leading topic presented throughout the halls". In 2018, planet well-being will be an even more important theme for the industry. Pictures of ocean waste always seem to capture soft drinks packaging, prompting consumers to point the finger at our industry.

Soft drink operators, more than ever, will have to demonstrate their green credentials to consumers. Good green practice will be expected as standard, not merely as a selling point for brands. Failing the green test will be toxic for any brand.

Consumers do not read company's sustainability reports, but they increasingly expect their refreshment to arrive without damaging the world around them. Regulation and legislation will come into play in many more markets if environmental responsibilities are not seen to be being met by the soft drinks industry.

The UK sugar tax: A bark worse than its bite

This year will see the sugar tax, or, as it is officially known, the Soft Drinks Industry Levy, introduced in the UK. Greeted with furrowed brows and plenty of debate when first announced, the tax will have little more than a psychological effect on consumers. The UK Chancellor has admitted as much. These are the reasons why:

  • The ending of the European Sugar Quota in September has pushed down sugar prices, diluting the impact of the tax
  • Operators have been busy reformulating their portfolios. Of Coca-Cola European Partner's UK products, regular Coke and Monster Green will be the only brands over the taxable sugar threshold. None of Lucozade Ribena Suntory's range will be liable, 90% of AG Barr's drinks will not be affected and not even three-quarters of Britvic's products will be
  • Cycling a miserable summer in 2017 means it's likely that even average weather conditions this summer could push up consumption in the UK

Evenso, the industry will have to be seen to be doing, otherwise we risk attracting demands for a higher tax rate. Prices will certainly rise, and CSD consumption will fall, but not by much. Meanwhile, margins for operators should look healthier in 2018. UK players, though, should spare a thought for Norwegian soft drinks operators; a budget agreement will see an 83% jump in their sugar tax this year.

Tonics and Mixers sparkle again

Success is a magnet for investment, and 2018 will see even bigger value gains for tonics and mixers this year. Fever-Tree will continue to spread the gospel. A new office in the USwill help in a very influential market.

New premium entries like Red Bull Organics and a revamping of existing brand portfolios from Schweppes, Britvic and others will raise the profile of the segment further.

It wasn't that long ago that innovation in the tonics and mixers segment was limited to adding a low-calorie alternative. Now, it's a hotbed of new ideas and concepts (I even put grapefruit in my G&T the other day, reflecting the pioneering spirit of the times). The targeting of brown spirits will provide considerable potential for volume growth - but only if it's well-executed.

Maybe this year, we'll see more of a coming-together of premium juices and spirits. After all, The Screwdriver is a very underrated drink.

SodaStream fizzes

SodaStream has had its ups and downs but, since its low of 2015, the company has been on a good run. Results for quarter three last year were encouraging, with growth in all corners of the globe. Once we know how many machines the group sold at Christmas, we'll gain more of an understanding, but 2018 will be a good year for SodaStream for a number of reasons.

The company provides 'green' refreshment, making the self-carbonating machines very relevant to a consumer increasingly conscious of its contribution to landfill and ocean waste.

Also, the decision to position itself more as a supplier of sparkling water has made it a more sophisticated and distinctive proposition. SodaStream's audience is now more grown up and will be more likely to replace their gas canisters.

The company reports good growth in Germany, Japan, Canada, Austria and Australia. Double-digit sales growth in the influential German market is particularly exciting. A decade or so ago, SodaStream sales exploded in the Swedish market – in a market of 10m people, 1m SodaStream machines were sold. German and Swedish consumers share similar traits and this bodes well for the company in 2018.

If SodaStream, can make more noise in the US, then its future could look ever rosier. On the R&D front, though, I'm not sure that the company's Sparkling Gold alcoholic concentrate, launched in Germany in November, will be the success the group is hoping for. It does, however, generate more media interest. And, that can only be a good thing.

Expert analysis

Global Soft Drink Market 2017-2021

Global Soft Drink Market 2017-2021

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