Soft Drinks passes £10bn mark but future growth linked to value

The latest Soft Drinks Report from Britvic has revealed that the value of the soft drinks market has passed the £10bn mark for the first time. The report also reveals key trends in the sector, pointing the way for retailers to increase profits.

by Kevin Scott

The pursuit of value for money is the primary driver of the soft drinks category, according to the latest Soft Drinks Report from Britvic. Published annually, the report always gives a fascinating insight into what is driving spend in the category – though as ever, when it comes to discussing its contents, retailers in Scotland must always beware the huge Irn-Bru shaped caveat. Given that the AG Barr product over indexes in Scotland to a Girders-bending ratio compared with the rest of the UK, the figures aren’t representative of Scotland as a whole. However, the report’s findings do provide some genuinely interesting insight into the category.

It comes as little surprise to read that this year’s report mentions the ‘rise of the savvy shopper’. Dubbed the ‘new normal’, shoppers are working harder than ever to get the most from their limited budget. Over half the people surveyed for the report (58%) said they had switched to cheaper brands over the last year. What this means for the soft drinks category is that manufacturers have spent the last 12 months striving to reassure shoppers that they are getting value for money, and quality.

Despite this drive to reduce spend the soft drinks category as a whole – impulse, take home and on-trade, hit £10.3bn last year, which is +2% year on year – meaning the category surpassed the eleven-figure mark for the first time. This in part is down to a particularly long sunny spell last summer. Another trend which helped reach this mighty figure included price marked packs – which is basically a highly visible extension of value for money.

Focus on Health was also marked out with more soft drinks manufacturers signing up to the Government’s Responsibility Deal. Looking at the channel split of that £10.3bn and convenience took £1.9bn in total. Soft drinks was also one of the best performing categories in convenience and grocery, jumping +3.9%. Home entertaining, top up shops and on-the-go consumption were the key drivers of growth in the convenience and grocery channel.

It seems odd that both channels are clumped together given the vast differences between a 200,000 sq ft Tesco and a local CTN, however the report does show enough comparisons of the two channels to paint a realistic portrait of convenience. For example, sales were up 5% in convenience stores compared with +3% in mults, which the report says suggests that on-the-go and top up missions were key. Further detail can be gained when the reports begins to break down the entire category into sector. Within this, we find that cola remains the ‘star performer’ with sales of over £1.6bn, although energy drinks show no signs of slowing down, with value growth of 7%. The highest growth came from the wonderfully named ‘cold hot drinks’, which were +43%, while private labels sales dipped in favour of bigger brands.

This last statistic is seemingly at odds with the overarching value for money trend, however as big brands have responded with increased promotions and price marked packs, the consumer can see value, which lest we forget, doesn’t just mean low price. Water was one of the star performers last year, growing +13%, to £573m. Within this, Water Plus, which includes water with nutritional benefits was +8%. It should be noted though, that most of this growth came from grocery. Squash had a decent year, with sales +4%. Double concentrate launches from brands such as Robertsons helped. Pure juice didn’t fair so well, -8% though it remains the second most popular sub-category. The rising cost of raw materials combined with the continuing pursuit of value has hampered the sector, where 51% of all sales are own-label.

One note is that coconut water grow by +125%, so one to keep an eye on there. Juice Drinks was +12 as a sub-category, with convenience ahead of this at +15%. The growth, again, coming as a result of the value for money trend. Last of the fruit-based sectors and smoothies declined by 4% – with the likes of Innocent seeing falls in both volume and value. It should be noted though that Naked smoothies were on the up, while Booker’s Happy Shopper smoothies range was +45% in value.

On the carbonates front, fruit carbonates were +3%, non-fruit carbonates +2% and Lemonade +1%, however when Irn-Bru and the popularity of the Barr range in Scotland come into play, these numbers are largely irrelevant north of the border.

The message then is that value is the key driver as consumers look to make their money stretch further than ever before. Retailers who respond by offering a strong range of brands in price marked packs along with promotional and budget options, stand to take their share of the category. Paul Graham, General Manager at Britvic Soft Drinks, commented: “Shaped by multiple consumer trends, such as value, premiumisation, heath and convenience, we have seen a wealth of innovation hit the market, all of which has helped to keep the sector relevant and exciting amongst a diverse audience. This combined with an unpredicted summer of sunshine; it’s unsurprising for the first time the category topped the £10bn mark. We are confident that this successful performance and the continued evolution of the category is paving the way for a positive and exciting future.”

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