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RESEARCH: Italian soft drinks growth under the weather

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Italy's unusually cold and wet summer of 2002 badly affected the country's soft drinks market. A report from beverage industry analysts Canadean estimates that per capita consumption increased by a little over 1% - less than half the growth rate seen in the previous five years.
 
Short term forecast looks brighter, with water widespread
Despite this temporary setback, the overall picture remains positive with total consumption likely to reach 14.7 billion litres - a 32% increase over the last decade. Furthermore, the report predicts that consumption in 2003 will increase by an additional 2.4% to 15 billion litres.

On a sector level, packaged water and carbonates dominate with a combined 89% share of throat. Italy is firmly established as Western Europe's leading market for packaged water and boasts the world's highest per capita consumption. Distinctive brand positioning and strong new product activity, combined with deteriorating tap water and water supply problems during dry weather should help support strong future performance.

Conversely, carbonates have been stifled by a pre-occupation with the stagnant cola segment, a lack of product innovation and a continuing trend among Italians towards healthier lifestyles. Indeed, consumption of carbonates is now only around two-thirds of the average for Western Europe. This said, the sector remains a very important component of the soft drinks market.

Cola is the most popular carbonates flavour, accounting for over 40% of the total. The only other significant flavour is orange whilst the rest of the market comprises a myriad of smaller volume alternatives.

Although it is still a young segment, and volume is relatively insignificant, bulk/HOD water (bulk water sold for use in coolers and water bottled on site for use in Horeca outlets) is by far the fastest growing sector. The dominance of packaged water is underlined when examining the leading soft drinks brands. Nine of the top ten are primarily waters, with Coca-Cola the only exception. Extremely aggressive promotional activity employed by Nestlè helped maintain the market-leading position of its Levissima brand.

PET has packaging wrapped-up
Non-refillable packaging has consolidated its position and now commands an estimated 86% share of the market. In addition, PET continues to grow at the expense of glass. PET now accounts for 73% of all soft drinks packaging with further inroads expected to be made during 2003. The use of cans remains static at around 3% of the market, whilst cartons continue to lose popularity in every sector.

Market bubbling over with mergers and acquisitions
The Italian soft drinks market remains fiercely competitive and a hot bed for merger and acquisition activity. Pepsico's takeover of Quaker Oats Beverages, Unilever's acquisition of Bestfoods and the incorporation of Del Monte by Cirio were among the notable examples. The market continues to attract new activity with Nestlè and Danone, and Coca-Cola entering the bulk/HOD water and sports drinks arenas respectively.


Companies: Groupe Danone

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