Britvic Soft Drinks Review 2018
In 2017 there were many areas of growth in the eating and drinking out market and solid results were achieved by the food, service and licensed channel, according to the annual Britvic Soft Drinks Review.
In 2017, soft drinks accounted for value sales of £6.9bn. The year ended with fairly flat performance, with volume growing marginally at +0.5% ahead of value which dipped to -0.4%.
Water has long been heralded as a success story in soft drinks and is now the largest volume segment in the category growing at +6.1%. In 2017 significant innovation was witnessed, with leading brands seeking to build on the benefits of hydration, with products bringing excitement or functionality to plain water. The flavoured water segment was invigorated by many exciting new entrants. In addition, a new segment emerged for consumers to experience 100% naturally infused sparkling water products. While this segment is new in the UK, its potential is huge with global sales doubling in the last four years.
No alcohol – no problem.
With the growing number of people abstaining from or reducing their alcohol intake, 2017 was a transformational year with low and no alcohol sales growing +20.1% to £35m. The soft drinks industry aimed to seize this opportunity by increasing range and visibility of great tasting, sophisticated adult drinks. Super premium beverages, termed ‘zeroproof' were developed to mimic the positive cues of the alcohol without any compromise. These products will play an increasingly important role for premium outlets who want to create a high-end range to drive distinctiveness. Ensuring these products are visible, endorsed by staff and activated as appealing alternatives to alcohol will deliver premium growth.
Paying a premium.
Consumers expectations for healthier, more convenient and more experiential solutions have presented an opportunity for operators to differentiate and add value. At a total market level, value and volume sales of soft drinks grew at similar rates, but this trend masked the fact that the soft drinks category took steps to deliver the premium opportunity, developing ranges through premium NPD accounting for 43% of all launches, up from 30% in 2016. In the licensed sector, premium soft drinks were a key growth driver up +32%. But more opportunity still exists, as premium share is still low at 7% versus spirits 30% & beer 43%.
Sustainable soft drinks.
The wider environmental impact of the packaged food and drink industry was increasingly in the spotlight. With global recycling rates currently low and litter a growing concern, the increasing consumption of single use plastic and its end of life impact on the environment has rightly been called in to question. The soft drinks industry has a role to play in minimising the impact of its activities on the environment. It must work hard to understand the causes of plastic waste, educate the consumers to recycle wherever possible and drive innovative packaging solutions which reduce the use of less sustainable materials.
Future soft drinks opportunities.
In 2017, the soft drinks industry has demonstrated its ability to evolve within a dynamic environment and deliver strong performance. While the category has performed well, Britvic believe there is even greater potential for the future to inspire the entire industry to think differently.
In 2017, people were conscious of what they were consuming. Sales of products that supported a healthier lifestyle increased including diet and fitness books, smart watches and fitness trackers to name a few.
Rise of low and no sugar.
With the announcement of the soft drinks industry levy in 2016, drinks manufacturers accelerated healthier product innovation. Whilst younger consumers are the most health aware generation, adults also grew increasingly concerned about sugar, for themselves and their children. As a consequence, no and low sugar soft drinks grew +£104m in value sales. Taste is still the leading factor when choosing a soft drink therefore healthier choice should be combined with taste.
This can be seen in the no sugar, full flavour cola market growing at 57%. Pepsi Max led the charge with its clear ‘Max Taste, No Sugar‘ campaign and Coke Zero following, adding a combined £63m to the channel. No alcohol = no problem Alcohol consumption became a more considered purchase in out-of-home occasions. One in three consumers moderated their alcohol intake, with one in five claiming to be teetotal (increasing to one in four in the under 25s). Soft drinks were the most popular choice for those moderating their alcohol intake4, and there was an appropriate increase in the number of adult soft drinks stocked and a greater share of space provided in the fridge.
Hydration on a high.
Water continued to perform well. As consumers sought better ways to hydrate they increasingly looked for healthy and tasty solutions. As a result, flavoured water grew, with a shift towards lower sugar and more natural flavour enhancers. A high number of new product launches were seen in this segment.
Influences and opportunities for 2018.
Low and no sugar drinks are in high growth, however 70% of total soft drinks sales in 2017 are from full sugar drinks. With increasing government focus on healthy balance initiatives and with two in three drink-led businesses stating they will take action as a result of the soft drinks industry levy, there is a clear opportunity for the channel to accelerate the share mix towards low and no sugar drinks in 2018. Staff should be briefed on low and no sugar drinks ranges and product health facts published on menus.
The focus, however, must be on moving the dial without compromising on taste and choice, delivering hydration in new, exciting and tasty ways. Finally, the trend towards alcohol moderation presents the perfect opportunity for soft drinks to offer new interesting flavours and serves that enhance the occasion, capturing potential lost alcohol serves. The over 35s are valuable consumers, spending more on soft drinks per trip. However they currently drink less than their younger counterparts, equating to an estimated 134m occasions per year. There is an opportunity to cater better for their needs to drive more drinks sales and value from this age group.
CREATED FOR KIDS.
As children grow up, so do their soft drinks needs and one size does not fit all. There are a variety of different occasions to meet, from getting active, to complementing food, or just having fun with friends. However only 6% of what kids drank out-of-home in 2017 was from specific kids soft drink brands.
Operators who tailored products and range to provide kids with choice, format, flavour and healthy balance achieved success with this important group. Childhood obesity was amongst the leading health concerns in the UK putting pressure on parents to make the right choices. Whilstparents were more likely to say yes to a treat when out-of-home, making it easier for them to do so is key. Low and no sugar were the most important factors for parents when choosing a soft drink and growth was delivered by products that were school compliant.
Influences and opportunities in 2018
The right offer of soft drinks for the right outlet type and all age ranges will continue to be important to build on the kids opportunity in 2018. Whether having a meal out, keeping active, socialising, or at school, choice for kids is a necessity. Operators need to inject new excitement into the offer, the serve, and provide interactive solutions to appeal to kids, whilst also delivering healthier options to allow parents to say yes, on more occasions.
2018 looks bright with two thirds of industry business leaders remaining optimistic for the coming year. Total value is expected to reach £89.2bn in 2018, growing +1.5%. This is at a slightly slowed rate to that seen in 2017 as the economic headwinds persist, however market analysts predict economic stabilisation and a return to accelerated growth in 2019. Ability to adapt to the rapidly changing channel landscape, offering value for money, convenience and quality experience with trusted brands will be essential to deliver the forecast growth.
As manufacturers and operators plan for the future, consideration should also be given to the broader, evolving influences around technology and sustainability, and how these can be woven into the offer. Within soft drinks, there is plenty of headroom to better meet the changing and evolving occasions and needs as adults and kids continue to ‘Drink Differently’. This year’s soft drinks industry levy provides a point in time to transform the category. With a coordinated effort to harness the favourable trends, focusing on the key category growth drivers, soft drinks will be well placed to unlock and accelerate volume growth success in 2018 and beyond.
THE ADULT SECTOR
The over 35’s are valuable consumers, spending more on soft drinks per trip. However they currently drink less than their younger counterparts, equating to an estimated 134m occasions per year. There is an opportunity to cater better for their needs to drive more drinks sales and value from this age group.
Continued rise of craft.
Over half of all adults find ‘natural’ and ‘real’ attributes the most appealing factors when choosing a drink. Manufacturers step changed presence in the market by offering choice of crafted drinks with a grown-up twist, Franklin and Son being a great example reaching £8.9m in 2017.
Taking soft drinks to new heights.
As adults looked to moderate alcohol choices, the zero proof category became more prominent, delivering a credible non-alcoholic flavour, experience and price point on par with alcohol. Innovation from brands designed to target the discerning adult palette, such as Monte Rosso from Wisehead and Seedlip demonstrated how soft drinks can raise the bar, offering distinguished ingredients, taste and serve.
Energy enters a new era.
Energy remains an important soft drinks category, but it needs to respond to the changing consumer needs for sustained, natural energy. Negative perceptions around caffeine and sugar content and headlines around operators taking steps to age-limit the sale of traditional energy drinks, has resulted in a decline in energy sales in 2017. The opportunity is for suppliers to innovate and brands to communicate products that deliver against the growing demand for sustained, more natural energy. Brands such as Purdey’s Multivitamin Energy Drink took the opportunity to capitalise on this emerging trend.
Influences and opportunities for 2018.
Research shows that a wider range of soft drinks aimed at adults would be welcomed by over two thirds of guests in restaurants, pubs and bars. By creating crafted, multisensorial drinks, the category can deliver greater relevance and value in line with other drinks categories. As full sugar stimulants come under further challenges in 2018, consumers opting for healthier solutions is foreseen. The mix is likely to shift to lower sugar, more natural energiser drinks, that are more permissible and sophisticated, offering a longer term sustained, cleaner energy boost