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Carbonates keep on fizzing: makers of fizzy drinks say predictions of a downturn in the sector are premature despite market research showing consumers are ever-keener on healthier options.

Fizzy drinks manufacturers have taken out many things from their products to make them more acceptable to today's health-conscious generation but they are trying to retain one thing they think will see them into the long term: the treat factor.

"There will always be room for indulgence," says Andrew Marsden, marketing director of Britvic, owner of Pepsi, 7-Up and R Whites Lemonade. "People portfolio-buy; they buy a range of soft drinks products and they use them at different times and at different occasions during the day. Within that, there will always be room for a treat."

Marsden argues that carbonated drinks should be seen in a wide context. "People are consuming more soft drinks, full stop." He also notes that, even though carbonated drinks were outsold in value terms by still ones for the first time last year, the sector is still in growth. Colas rose 5-9% in the year to the end of January, according to data from TNS, for example.

Anita Huntley, head of marketing for Coca-Cola Enterprises (CCE), is similarly upbeat, noting that soft drinks remains one of the biggest categories in grocery. Citing Nielsen data, she adds: "The carbonated soft drinks segment still remains hugely significant, accounting for 40.4% of total soft drink sales. In impulse, carbonated soft drinks account for 57.5% of total soft drink sales.

"Well-known brands will always sell well, particularly within the immediate consumption opportunity, and are vital to the category overall as this segment accounts for almost one third of total category value. Success is due to a number of factors including increased brand awareness driven by advertising and promotional activity and excellent in-store display both on fixture and at the point of purchase."

Companies know success is also due to their giving consumers products with apparently better health credentials. "The key issue with carbonates growth is no added sugar," says Marsden. Britvic, CCE and other companies have been very active in this area, with CCE pointing to the impact of the launch of Coke Zero.

Nonetheless, market research organisation Mintel notes: "Carbonated soft drinks, epitomised by the leading brands of cola, but also comprising fruit-flavoured fizzy drinks, lemonade and mixers, have felt the negative impact of heightened consumer interest in healthy eating.

"Once the first choice with many on a range of occasions, carbonates have lost out as the breadth of alternative drinks available has increased and a preference for healthier options has developed."

Retailers are already taking note of these changes in consumer habits by reformulating soft drinks in own-label portfolios. Last month Sainsbury's announced it would remove all artificial colours and flavours from its own-label soft drinks from June. It plans to update its 120-strong range of squash, cordials, mixers and fizzy drinks to contain natural ingredients, with fruit and vegetable extracts replacing artificial.

"Consumers have been turning away from carbonates on the grounds of content, switching instead to more natural alternatives such as water, juice or juice drinks. They are perceiving still drinks as inherently healthier," says Mintel.

Marsden argues, though, that alcohol consumption is reducing, meaning people are turning to soft drinks to replace intoxicating ones and that carbonated drinks will benefit from this general trend.

Claire Nuttall, client director at brand agency Dragon, feels the example from the restaurant sector shows there is a future for carbonated indulgent drinks. She notes the balance that many consumers strike--they eat and drink healthily all week then feel they deserve a treat at weekends. She says: "The growth of premium burger chains show people want pleasure and are prepared to balance that out at other times."

Indeed, companies within the carbonates sector remain consistently positive about the future. Adrian Troy, head of marketing at AG Barr, owner of Tizer and Irn-Bru, says: "We have seen people talk about the demise of carbonates. That is a massive over-simplification. The sector grew 56m [pounds sterling] last year at retail values." Bolstering that, he feels, is "tradition and taste," adding: "Carbonates is about taste, refreshment and a treat." AG Barr is, though, conscious of the pervading health message and, much as it markets Tizer on those traditional values, it also increased the drink's fruit content for its relaunch in March.

Claire Nield, brand manager for Vimto, notes: "The thing to bear in mind with carbonates is the sheer size of the market. It's a big market and very healthy part of the soft drinks market." Nield argues that companies investing less in carbonates or abandoning them are doing so prematurely and are not in step with consumers who want fizzy drinks in increasing volumes.

"You move with the times, though," she adds, "so we have developed a new sugarfree range. But we need to make sure we are still delivering excitement. Whereas some brands have turned their back on carbonates, we have made sure we are encouraging brand loyalty."

Nield feels her company is flying a flag for the sector and contends that "unless other manufacturers start to reinvest and reinvigorate the market" carbonates will continue to be outstripped by still products.

The British Soft Drinks Association continues to believe in carbonates, pointing out that the increasing range and sophistication of sweeteners means manufacturers can make sugar-free products with improving tastes. A spokesman states that across the range of soft drinks there are 200 new product launches annually and that carbonates continue to feature prominently. He adds: "Carbonates is still the single-biggest sector."

Data from TNS shows that in the year to the end of January, colas were 19% of the market and carbonated flavoured drinks a further 16%.

However, despite the upbeat message from companies in the carbonates sector, those working alongside them do not always share the optimism. A senior executive at a still drinks company under the same roof as a fizzy drinks maker says: "Carbonates have to face what their future looks like and their challenges are an opportunity for us."

And the head of one juice company, who prefers not to be named, says: "I'd rather be developing films in the age of digital cameras than working in carbonates. The market is moving to us and away from them."
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Title Annotation:focus on ... soft drinks: carbonates
Publication:Grocer
Article Type:Industry overview
Date:May 5, 2007
Words:1025
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