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Growth, R&D and Trends - just-drinks' Confidence Survey 2018, Part III

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The third in our four-part review of the just-drinks Confidence Survey for 2018 looks at the answers to questions 8 to 14, which consider future growth opportunities, research & development and the trends that are just around the corner.

just-drinks received 172 responses to the Confidence Survey 2018

just-drinks received 172 responses to the Confidence Survey 2018

8. Do you expect your business to grow in 2018?

Source: just-drinks Confidence Survey, Dec 2017

We note a bullish picture here, but the responses do not differ all that much from the past couple of years in terms of positivity about business growth. Almost 85% of those surveyed expect their businesses to grow during 2018 which, perhaps surprisingly, is down (albeit only very slightly) on the 2017 figure, but marginally up on 2016.

The most positive news comes in the share of people expecting their businesses to enjoy double-digit growth, which topped 23% this year, compared to just over 21% in each of the last two years.

What is more, the share of respondents expecting their businesses to shrink in the year ahead hit a new low of only 4.4%, versus 6.2% in 2017 and 5.1% in 2016.

9. Do you expect there to be more M&A opportunities in your category in 2018?

Fewer Opportunities10.14
Roughly the Same as 201742.03
More Opportunities47.83

Source: just-drinks Confidence Survey, Dec 2017

There was a slight uptick in the numbers expecting further wheeling and dealing in their respective sectors this year, with 47.8% of respondents forecasting more opportunities in the year ahead. That's up on the 2017 figure of just under 46%, but still short of 2016's high, when more than half of those surveyed expected more M&A opportunities in the year ahead.

Meanwhile, the share of people expecting fewer opportunities fell away to just above 10%, compared to 13.5% a year ago.

10. Will your company focus more on M&A or innovation to grow in 2018?

Source: just-drinks Confidence Survey, Dec 2017

No comparison is possible here, because the question previously focused purely on how willing companies would be to use mergers and acquisitions to grow during the year ahead. What is apparent from this first year of responses is that innovation is viewed as being far more important to growth than M&A. Given the challenges and costs associated with the latter, perhaps that isn't surprising.

Only 9.4% of respondents expect to focus on M&A alone to grow their businesses during 2018, with 51.5% looking to innovation for growth. Meanwhile, a healthy 39.1% of those surveyed reckon a mix of M&A and innovation could be on the agenda in the months ahead.

11. What will your company's R&D and innovation expenditure be in 2018?

Source: just-drinks Confidence Survey, Dec 2017

There's a subtle shift here, but there are signs that drinks companies are willing to expand their R&D budgets during 2018. Almost 44% of respondents expect to increase spending on R&D and innovation in the year ahead, well above last year's sub-40% figure and also ahead of the 42% recorded in 2016.

Meanwhile, only 6.5% of respondents are planning to trim their R&D budgets in the months ahead – well below last year's number (almost 11%), but slightly above the 5% low from 2016. Those expecting little change account, as last year, for just below 50% of the responses.

12. How many new products does your company plan to launch in 2018?

Source: just-drinks Confidence Survey, Dec 2017

Another slight development here too, in line with the increased focus on innovation outlined in the responses to the previous question.

Some 48.3% of those surveyed expect to launch more new products this year, compared to figures of 41.1% and 44.5% in 2017 and 2016 respectively, suggesting that product innovation is becoming increasingly important to the modern drinks business.

As consumers become ever more promiscuous and fickle in terms of brand loyalty, it's arguably never been more important to have a succession of 'new news' to tell them about your brands.

Nonetheless, the share of respondents expecting to release fewer new products this year remains pretty much unchanged on last year at 15%, and ahead of the numbers recorded in 2016 and 2015.

13. What key trends do you expect to drive your company's innovation initiatives in 2018?

Source: just-drinks Confidence Survey, Dec 2017

It's hard to come up with a product that will resonate with today's consumers if you don't know what trends are driving their buying preferences in the first place. But, in today's marketplace, it's vital to be clear which of those trends are important for your brand, from price sensitivity to drinking occasions and the quality and flavour of your product.

'Quality' remains the key component here, referenced by 65.1% of respondents (down slightly on last year's figure of 67.6%, but still well clear of 2016's 56%), but a tweak to the question's phrasing - 'premiumisation' is a development of last year's 'luxury' as a possible response - attracted 64.3% of respondents, versus 53% in 2017.

The next most popular trend identified was 'drinking occasions' at 51.6%, followed by 'flavour' and 'health' - both with a bigger share of responses than last year. Notably, 'health' has now overtaken 'sustainability' as a trend to watch.

Next came 'price and cost-cutting' and then a new potential response that was highlighted by 21.4% of those surveyed – 'provenance', one of the buzzwords of today's craft-influenced drinks industry.

14. Interest in health products has continued to remain high. What do you expect to be the key health claims in 2018?

Source: just-drinks Confidence Survey, Dec 2017

The significance of this question lies partly in genuine consumer demand, and partly in the threat of regulation from governments, whether in the form of a 'sugar tax' or the imminent introduction of minimum unit pricing (MUP) in Scotland following the decision of the UK Supreme Court in late-2017.

Sugar remains the clear focus here, with well over 60% of respondents mentioning it – down on last year's high of nearly 70%, but clear of the 2016 figure of 59%, not to mention 2015's 43%.

But, other concerns are increasingly significant, including reduced abv products, which gained a response rate of 47.8%, and reduced calorie products at 45.2%, up from less than 40% last year.

And, there is a range of other issues to explore here, including gluten-free products (a concern for nearly 29% of those surveyed), alternative sweeteners (21.7%) and low-carb products (20%).

For the full results of this year's confidence survey, click here


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