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just-drinks Confidence Survey 2016, Part III - Questions 8 to 14

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In this, the third part of just-drinks' coverage of its annual confidence survey, we analyse the results from questions eight to 14 of the survey's 20 questions.

just-drinks released its 2016 Confidence Survey this week

just-drinks released its 2016 Confidence Survey this week

8: Will your company be more willing to use M&A to grow in 2016?

As one might expect, the perception that there could be more M&A movement in the offing also prompts a greater willingness on the part of our respondents to use it in order to grow their businesses.

That said, the situation on this front has not changed markedly from last year. Almost 40% of those surveyed say they'll be more willing to use M&A to boost their companies in 2016, compared to just under 38% last year.

The most marked difference is in the numbers ruling themselves unlikely to take part in acquisition activity: less than 13% this year, versus more than 28% last year. There's been a corresponding increase in the proportion seeing no change in their attitude on this front – 47.4% this year, up from 33.8% in 2015.

9: What will your company's R&D and innovation expenditure be in 2016?

Innovation remains a hugely important area, both for existing brands looking to diversify their offerings and provide markets with 'new news' about their products, and for entirely new product launches.

Looking in isolation at spirits, for example, the number of new gins launched both internationally and domestically in markets like the US and UK has exploded in the past few years. Meanwhile, in Scotch whisky, existing single malt brands are releasing an apparently never-ending stream of new expressions, often limited editions with price tags designed to trade consumers up.

As such, it comes as little surprise to observe that drinks companies are poised to spend more on R&D and innovation in 2016. Specifically, some 41.6% expect to increase their investment (compared to 37.8% in 2015), while only 4.7% say they will reduce their spend (6.4% in 2015), with 53.7% maintaining current budget levels (56.2% last year).

10: How many new products does your company plan to launch in 2016?

This question elicited a similar response to question nine, but with a slight twist. Some 44.5% of respondents expect to release more new products in 2016 than in last year, compared to 39.7% in our 2015 survey.

However, the number of respondents expecting to reduce their NPD activity has increased to 12.3% from 10.3% last year, with 43.2% expecting to maintain their current rate of innovation (50% last year).

The tentative conclusion from questions nine and ten is that at least some drinks companies will focus on fewer new product launches, but with increased financial support to develop and market each of them.

11: What key trends do you expect to drive your company's innovation initiatives in 2016?

The number of possible responses to this question illustrates the complex array of trends which influence all sectors of the modern drinks industry – everything from health concerns to drinking occasions and sustainability.

A first glance at the comparison with last year suggests little change. Many of the trends identified here – health, quality, flavour, price/cost-cutting and reformulation – are, according to our respondents, similarly influential in 2016. But, a couple of trends stand out: a strong 54% of those surveyed identified drinking occasions as a key trend (33.8% last year), illustrating that brand owners are becoming increasingly sophisticated when it comes to identifying and exploiting target consumers and important 'moments' in their consumption patterns.

Sustainability is another increasingly important trend – the proportion of respondents highlighting this has more than doubled over the past 12 months – and luxury, an option not offered in last year's survey, was the third most popular trend identified, illustrating the continued and increasingly important role of premiumisation in many drinks markets.

12: Interest in health products has continued to remain high. What do you expect to be the key health claims in 2016?

Health issues – from responsible drinking of alcohol to the sugar and calorie content of soft drinks – continue to be vitally important to all branches of the drinks industry. And, our survey suggests that that importance is growing even stronger.

Specifically, the major aspects of reduced-sugar and reduced-calorie products were namechecked by more respondents in 2016 than in 2015: 59% mentioned reduced sugar (up from 43.1%), and 49.3% highlighted reduced calories (up from 40.8%). Alternative sweeteners were picked out by 16.7% of those surveyed – a similar number to last year – but this year's survey brought out a number of other health-related issues, including low-carb and protein products.

Respondents also highlighted several other issues not specifically mentioned in the suggested responses: especially low-alcohol products, organic products and gluten-free formulations. Also mentioned were fitness and specialist sport drinks, and so-called 'natural' wines – typically made using organic/biodynamic grape-growing methods, natural yeasts for fermentation, and with no added sulphites.

13: Do you expect your company's domestic sales to increase in 2016?

We have no possible comparison here, as this question was not asked in 2015. There's a notable degree of domestic optimism, however, with practically 97% of respondents expecting their sales at home to increase (72.7%) or stay the same (24.2%) in 2016.

Only just over 3% of those surveyed are predicting a domestic sales decline this year, although time will tell whether this overriding optimism is entirely justified. Few companies begin a new year in the expectation that their sales will decline in their home markets.

14: Do you expect your company's export sales to increase in 2016?

Again, no direct comparison is possible here. Last year's survey asked if drinks companies were planning to increase investment in order to grow their exports, and the responses were split: 37.9% said yes, 33.3% no and 28.8% said they expected no change.

This rather different question prompted a more positive prognosis from our respondents. Nearly 56% expect export sales to rise during 2016, and only 5.5% think they will fall, with 38.6% predicting exports to maintain the same level as during 2015. Although this is an overwhelmingly optimistic response, a significant number of companies are not expecting to see much growth in the 12 months ahead.

For the full results of just-drinks 2016 confidence survey, click here

For a US$1/EUR1/GBP1 trial subscription to just-drinks, click here

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