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Smooth sales for soft drinks: despite disappointing summers and shoppers strapped for cash, the soft drink sector remains buoyant, says Jaq Bayles.

Year in, year out, soft drinks continues to prove one of the most resilient and adaptable of all grocery categories. Come rain or shine - both physically and metaphorically - the sector is capable of reinventing and repositioning itself in a multitude of ways that keep it sweet with consumers and retailers alike.



In the past year soft drinks has had to do battle with forces of nature that saw a virtually non-existent summer as well as, an economic climate that kept consumers thrifty and on the lookout for deals to make staying in a more positive option.

But, undaunted, the sector showed its usual inventiveness by bigging-up for the summer season with cold hot drinks, one of the heroes of the year rising y3% by value and 7% by volume, according to Britvic's 2011 Soft Drinks Report.

And Cola and Glucose drinks were no slackers either, contributing 54% of take- 1 home growth to a sector that, despite its maturity, managed value growth in the take-home channel of 7% to [pounds sterling]6.6bn, with volume up by 3%.

Leading the charge were Coca-Cola Enterprises (CCE), Britvic and Glaxosmithkline (GSK) with brands | Coca-Cola, \4onster, Pepsi and Robinsons at the forefront.


As ever, throughout the year there were new variants, new flavours and new twists on old themes to help the category continue its defiance of recessionary obstacles, with newcomers and stalwarts alike once again defying expectations on-shelf.

CCE boosted its energy portfolio earlier in the year with the release of Powerade Energy which, according to Stuart Agates, head of energy at CCE, "is the first Energy Drink in GB to launch a 'dual energy' I proposition". He continues "Nielsen estimates the category opportunity for 'Sustained Energy' Drinks is up to Esoom and we are confident that with this great tasting and functional innovation from Powerade we can help the Energy sector, to continue to build strong momentum 1 as the number one driver of growth for the soft drinks category".

In a further energy launch this year CCE introduced Relentless Libertus, developed to "meet the consumer need for mental renewal and recharging without sugar". With just 20 calories per 500ml can, the product also taps into consumer desires for better-for-you products.

Libertus is not the only new product to address this particular market this year, with AG Barr also seeing an opportunity and seizing it with the addition of Rock-star Pink to its Rockstar range, claiming it as the first energy drink to be targeted specifically at women. The drink contains 10 calories and is served in a 355ml can.

Barr's head of marketing, Adrian Troy, says the company firmly believes that functional soft drinks "hold the key to even greater levels of growth for the category". He continues: "The shopper is becoming increasingly aware and therefore discerning over their choice of energy or functional drinks, and is demanding ever more unique benefits from the products they buy. This year has seen the highly successful development of the Rockstar brand through the launch of Rockstar Recovery, Xdurance and Pink.

"However, while functional drinks are an important driver of growth, it is important to remember that the absolute sales growth in mainstream carbonates is actually greater - these brands, such as Irn-Bru and Barr, combine strong brand appeal and the key consumer needs of taste and refreshment and will remain the absolute core of the market."


Troy also points out that shoppers have continued to purchase more on promotion across all categories. "This was certainly the case in soft drinks, with the majority of brands increasing the level and degree of promotion to meet this demand.

"There has also been a huge growth in multi-pack cans, which have grown by 24% in two years (Nielsen Scantrack, Total Coverage, Total Carbonates, 52we 03/09/11). This has been driven by a significant increase in promotional activity, but also consumers looking for value by purchasing cans in bulk forfeiture consumption rather than purchasing single cans in impulse."

Britivic's commercial director, impulse, Kate Fletcher, believes innovation in size formats will continue to be a key driver for the sector and her company is to extend the 25Qml can format it launched for the Pepsi multipack range to both its /lip and Tango ranges early next year.

Fletcher says: "These 250ml formats are designed to give consumers a greater choice of can size for different soft drink occasions, as well as grow incremental sales for grocery traders. Sitting alongside the current 330ml four, six and eight packs, the new 250ml formats have been designed to fill a gap in the market, following consumer research which found that many consumers would like the option of a smaller can."

On the back of recent performance, cold hot drinks such as ice tea are also tipped for the top by Fletcher, who says: "Currently the second fastest growing sub category behind glucose/stimulant drinks, with volume up 17% [Nielsen MAT w/e 6.o8.11], the segment has definitely benefited from the influence of other markets such as the US and Europe. Lipton Ice Tea has a share of Ice Tea, up 28.9%, highlighting that the brand is the driving force behind the sub-category's growth. With continued investment into Lipton's Ice Tea the cold hot drinks trend is sure to go on."


While such segments bring the excitement of the new to the category, innovation continues apace to ensure that consumers' ever-evolving expectations are met when It comes to matters of health, diversity and flavours.

For example, with the broadening of consumer horizons through world gastronomy, soft drinks too are increasingly expected to deliver on the exotic flavour front. Gary Barnshaw, Masterchef of Great Britain and founder of Iconiq Drinks points out: "The sector continues to look at wodd wide soft drink options as customers become more adventurous. There is still room for growth as overseas influences find their way into the UK market, which has been proven recently with the emerging coconut water market."

Enco concurs with this view with its Grace Coconut Water. "There has been a surge in demand for exotic flavours as consumers actively seek refreshing, new taste experiences," says Nyree Chambers, head of marketing at Enco Products.

"Grace Coconut Water is not only refreshing, it contains potassium, manganese and vitamin C and is naturally low in fat and saturates," explains Chambers. 'Coconut water is also known for its fast rehydration properties and is low in calories, which ticks the box for health conscious consumers."


Milk-based drinks are proving increasingly popular as a healthier soft drink option for kids and Helen Cridge, trade marketing manager at Fries land Campina says: "Over the last 52 weeks, we have seen an increase in the number of consumers buying into flavoured milks, seeking an alternative option to other soft drinks. And Yazoo is no exception with our consumers buying more year on year."

But, she says, there is still work to be done. "To increase consumer confidence, it is key that new product development continues to be introduced into the market to keep shoppers coming back. Flavoured milks have evolved considerably in the last 12 months and can be sub-categorised into confectionary, hot cold drinks, traditional, thick shakes and vitamin enriched, with each meeting a consumer need. And there is still room for future opportunities in this sector, targeting consumption occasions and supporting a healthier lifestyle."

She is supported here by .Maria Leaves-ley, managing director of milk-based smoothies company Frumoo, who says: "We know that we're a nation living off poor diets. This, coupled with poor time keeping, means we're constantly on the lookout for that quick fix to keep us going. I think this is spreading to a much younger market, ie school age, as their lives are overrun with sports, after-school activities and access to computers and mobiles that keep them switched on 24/7. I think parents are aware that children need sustaining in a healthy way, so there's an area in this sector that is screaming out for an easy and tasty way to support busy family life."



In terms of how the flavoured milk category is shaping-up. Mars cites IRI Data for September 10 2011 which shows the category is worth some [pounds sterling]i77m and continues to grow y-o-y, with the latest market data showing an 11% MAT growth in value.


It is obvious from the above that the soft drinks category has never been more diverse, never covered so many styles, and such diversity can present a challenge for retailers. But Welch's country manager Malcolm Parkinson is at hand to offer some insight at least as to how his company's juice products can present opportunities forretailers: "Healthyfruit juice products continue to have appeal with more definition of the juice category offering potential for retailers to heighten instore positioning.

"For example, defining fixtures more clearly to reflect the products and potential meal occasions, eg breakfast juice drinks, healthy drinks and siting juice drinks alongside other drinks for all occasions."

And Pepsi adds: "Stocking single serve juices alongside sandwiches and break-fast items in key impulse areas of the store will encourage linked purchases through meal deal promotions and is a great way of delivering value and driving sales."

The company also points out: "There is still room for development and growth within the chilled juice category. New product innovation such as Tropicana Lemonades, Naked and Copella Winter Warmer, a spiced apple juice which is best enjoyed hot, has helped retailers drive incremental sales by exciting consumers and expanding the juice occasion. The 'on the go' occasion also remains an important growth opportunity for single serve which customers can maximise by introducing breakfast in addition to lunchtime meal deals."

Entering the UK juice arena is the well known Spanish brand Don Simon. The brand has been making inroads with its not from concentrate fruit juices, claiming "24 hours from tree to squeeze" for its orange juice. In addition to "health and wellness", the brand says it has also benefited from "a return to packed lunches, and the rise in a more value focused consumer".

It says: "In recent months there has been a push towards the children's drinks market and brand owner Garcia has signed a licensing agreement with Disney, leading to the launch of a new dual branded range of children's smoothies."


(Category ranging is an important issue for many producers and there is no shortage of commentary on the subject. Major energy brand Red Bull says visibility is key to driving sales, with head of category marketing Doug Bairner pointing out: "It's important that top selling brands in each category are signposted to consumers.

After all, shoppers shop based on shape and colour so to highlight a category you need the brands they recognise such as Red Bull, Lucozade or Coke. It's important you're pointing them towards branded products"

With the Olympics on the horizon, surely the forecast has never been better for energy drinks all round, and Red Bui I points out that Mintel has predicted the sports & energy sector will grow by 50% by 2015, and believes it will be "the only category in soft drinks to show consistent growth above soft drinks over the next four years".

So there's a massive opportunity still for all those stalwarts of the sector, as well as newcomers.

Launched earlier this year in the UK, Little Miracles Organic Energy drinks are one such newcomer and marketed on their natural credentials, with the company saying: "With an increasing interest in health benefits, consumers continue to drive brands to choose natural ingredients over artificial alternatives, a choice that Little Miracles already makes."

CEO Jorn Singer says: "The consumer demand for healthier soft drinks remains at an all time high," adding that "buying habits are becoming increasingly influenced by how 'natural' and healthy, products really are." The brand's 'super blend' of ingredients includes acai, ginseng and pomegranate.

And if there wasn't already enough to thin k about in the sports and energy category, Cott Beverages points out that it can be split into three sectors: Functional (caffeinated energy/stimulation drinks); Sports (isotonics designed to hydrate the body before, during and after physical exercise) and Glucose/Refreshment (carbonated glucose drinks to replace your body's glucose as an energy boost). The company says its Emerge brand covers all three and therefore offers exceptional quality at a value price.


For some consumers though, it's all about the taste when they're choosing a soft drink and the pallette of flavours for the palate has never been broader across the spectrum. Often the flavour choices are predicated on what's popular in cuisine, as mentioned previously by Iconiq's Barnshaw, and sometimes they arise out of the adventurousness of consumers' tastebuds and their willingness to explore the unknown or at least, the lesser-known.

Popular brand Old Jamaica Ginger Beer says: "As consumers are becoming more adventurous, there is a desire to add something new and exciting into their repertoire. Old Jamaica does just that, and its versatility means it is great as a long, refreshing drink over ice, blended with other flavours, or as a mixer - giving a unique twist to classic cocktails."



Shloer has also become well attuned to consumer adventurousness and, following the success of its Rose variety two years ago which, it says, "demonstrates that consumers have an unquenchable thirst for innovative new flavours", it launched limited edition Shloer Summer Fruit Punch launched in April, and Shloer Berry Punch, which has made its debut for the festive season.

Meanwhile, Vimto Soft Drinks launched the Levi Roots soft drinks range to the market in 2on, developed "in response to the huge growth in popularity of Caribbean inspired products in the UK".

The company says; "The range of carbonated drinks and fruit juices features a combination of authentic Caribbean fruits and flavours that have been given an extra 'twist' by Levi to create unique drinks. It hit the market at the perfect time to capitalise on consumers' growing thirst for exotic fruit flavours as in the five months since it launched three million packs have been sold."

With their adaptability and constantly evolving formulae to suit every taste imaginable, it's hard to see a time when soft drinks won't be a driving force in the landscape of UK grocery consumption. As 2012 looms, surely the energy sector will continue its rise unchallenged, while the great English weather could see a further boom in Hot Cold beverages. Watch this meteorological space.
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Title Annotation:ANALYSIS
Comment:Smooth sales for soft drinks: despite disappointing summers and shoppers strapped for cash, the soft drink sector remains buoyant, says Jaq Bayles.(ANALYSIS)
Author:Bayles, Jaq
Article Type:Industry overview
Geographic Code:4EUUK
Date:Nov 5, 2011
Previous Article:A seriously successful year.
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