The global refreshment market is due toexpand by 46 billion litres between 1998 and 2001, barely matching the incremental volumeduring the previous three years. In spite of trouble-spots affecting large parts of theglobal economy, the soft drinks business will continue to offer significant opportunities.
Carbonates are forecast to slow downmarginally while continuing to provide the overwhelming bulk of the industry volumegrowth. Packaged water and juice & fruit drinks are taking share from carbonates andbeer driven by changing consumer tastes. The extended life-expectancy, the growingeconomic affluence among all population groups as well a wider dissemination ofhealth-related issues have attracted the involvement of the multinationals in the packagedwater and juice & still drinks categories and are the main drivers behind the’natural’,’healthy’ water and juice categories.
The demand for products withadded-benefits, mood-altering and nutraceutical formulations as well as new flavourcombinations and innovative packaging is creating new products and categories in theindustry. In the more affluent markets around the world, juice & fruit drinks productsare emerging from the crowded, non-branded, ‘strictly breakfast’ category intothe complex arena of brand marketing and supermarket distribution.
Whether you’re planning for capitalresources or making market strategy decisions you need to look beyond the trend-lineforecasts and evaluate the potential of individual markets in the regional context. TheConsumption Model helps planners and analysts to assess the potential of a given market inrelation to purchasing power, in a more culturally sensitive regional context as well asin the global context.
If, as the chart below suggests,consumption of packaged water in Thailand is well over the predicted potential derivedfrom the regional consumption model while Hong Kong appears to lag behind its predictedpotential, the fact has implications on your approach to product development andpositioning in the two markets.
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The Model is based on the actual retailprice of the dominant package and leading product/brand expressed in US dollars andconverted to price at purchasing power parity (PPP). Price at PPP indicates thesignificance of a purchase relative to local purchasing power. This is important in caseswhere there are wide disparities between actual GNP levels: in cases where per capita GNPappears low, inhabitants can be well off in PPP terms as the local purchasing power isrelatively high.
While the correlation between consumptionand PPP price is obvious in the case of Portugal, Poland, Romania, Spain and Germany it isless obvious why the Czech R. and Hungary have achieved relatively high per capitavolumes. At the other end of the spectrum, France continues to rank below the GreaterEurope average in spite the fact that carbonates pricing is second lowest in Europe,behind Ireland.
The pricing model for carbonates is basedon the price of a single-serve leading cola in order to enable us to work on a commonbasis in poorer countries where the single-serve is the only affordable market entry. Thepackaging profile, and the market channel information provided for each country surveyedin the report are designed to help refine the analysis.
Economic crises, or a change in theoperating environment like the recent introduction of the Euro, demand a finely tunedapproach to pricing.
The impact of the EMU on sourcing, pricetransparency, euro price points and the different elements of the supply chain isdifficult to predict at present. However, arbitrage by retailers operating on apan-European scale is likely to force manufacturers and other suppliers’ prices downin return for sheer volume business. Such a trading environment will require freshthinking, flexibility and innovation in relation to branding, the DOB option and nicheing.
E-commerce is already having a similarimpact and is set to become a major driver in the pressure for price transparency on aglobal scale.
Although the for global comparison purposeswe have adopted the US dollar as the benchmark currency, the following chart would lookmuch the same if the Euro was used instead. Suppliers in countries where per capitaconsumption and prices are both relatively high like the UK, Netherlands and Germany arelikely to find themselves under just as much pressure as those in Italy, Portugal andSweden to lower prices in the pursuit of volume boost.