Canadians are moving away from carbonates in favour of other soft drinks, according to a new report from the leading beverage industry analysts Canadean. Although still accounting for almost half of the volume, carbonated soft drink (CSD) sales have weakened in recent years, at the same time as manufacturers have begun to invest heavily in alternative products to meet changes in demand.

Soft drinks sales expanded at more than twice the rate for all commercial beverages in the decade from 1992, but the pace has slackened in the last three years as producers have realigned their portfolios with changing consumer tastes.

The main CSD players, who also head up the soft drinks industry, Coca-Cola, Pepsi-Cola and Cadbury Beverages, control the bottling and distribution networks which form the main route-to-market for most soft drinks, including new products. These companies, which have been joined at the head of the industry by Nestle following its acquisitions in the packaged water business, are now said to regard water, juice and sports and energy drinks as major contributors to their future growth. Non carbonates last year accounted for almost a third of Coca-Cola’s sales and around a fifth of Pepsi’s compared to 23% and 16% respectively in 1997.

Canadean’s data shows that the most spectacular growth rates are being experienced by the packaged water sector. Although still only accounting for around 10% of volume sales, per capita consumption has almost tripled in the last decade and grew by almost 18% during 2001. The industry focus on single-serve packs and wide distribution via convenience stores, petrol stations and vending machines, has matched up with growing consumer concerns about tapwater quality and demands for a healthy, refreshing alternative to carbonates and sweetened drinks.

Less spectacular but nonetheless solid growth has been experienced by Canada’s second largest soft drinks sector, juice and nectars. Both chilled and ambient juice have seen sales rise substantially thanks to recent investment and product development. However, the future is far from clear as the juice segment is coming under attack from the third largest category, still drinks, which has a wider variety of tastes, lower prices and greater availability. The situation is further complicated by the fact that many producers are active in both juice, nectars and still drinks and see them as one sector.

Although sports and energy volumes have increased by leaps and bounds in the last five years, sports drinks are still only around 1% of total soft drinks sales and, says Canadean, most of the new product activity from major companies now centres around energy drinks.

Looking to the future, the report indicates that Canada’s strong economy, highly developed distribution channels and increased level of innovation in non-carbonates will continue to create a receptive market place for new, healthy soft drinks, many of them aimed at the country’s increasing number of older consumers.