Spain's soft drinks market is expected to grow by around 7 per cent this year, a slight slowdown compared to 2003's heatwave-boosted performance but nonetheless healthy growth driven by premium and functional products.Soft drink sales in Spain rose by 9.6 per cent last year to €4.2 billion, with the exceptionally hot summer weather, an upturn in the Spanish economy and a raft of product launches combining to lift growth to nearly three times that seen a year earlier, according to a new report from analysts DBK.
The report suggests that the efforts of the major players - Coca-Cola, PepsiCo, Cadbury Schweppes, Danone and J Garcia Carrion - to diversify into new product sectors, and to create new versions of their popular existing brands, was the main reason for the excellent growth in carbonate, juice and water sales in 2003.
Sophisticated 'adult' soft drinks and functional products were the main focus of companies' new product development teams, catering for increasing demand for healthy, convenient and innovative products.
Carbonated soft drinks remained the biggest single product sector in 2003, taking 63.2 per cent of the market, while bottled water took 21.3 per cent and fruit juice 15.5 per cent. But the two smaller categories were also the ones which saw the fastest growth year-on-year, with producers capitalising on consumer demand for healthier products.
Fruit juice sales were 14 per cent higher than in 2002, while bottled water showed growth of 11.5 per cent. Functional juice products - those with a specific health benefit - showed particularly good growth, the report said.
Faced with such impressive growth, carbonated soft drink producers also opted to stress their health credentials, launching a number of new products such as isotonic, vitamin-enriched, energy or low-calorie drinks, in turn pushing up sales by 7.9 per cent in value over the previous year.
While the market is dominated by five players - Coca-Cola, PepsiCo and Cadbury Schweppes in carbonates, Danone in packaged water and J Garcia Carrion in juice, together accounting for 72 per cent of total value sales, - the soft drink sector as a whole remains relatively fragmented, with some 235 companies operating there. However, consolidation is slowly taking place - this figure is some 3.3 per cent less than in the year before.
Because of the strength of the big three carbonate players, just 25 per cent of the 235 companies are active in this sector, less than half those (55 per cent) operating in the packaged water sector despite the fact that the latter is far smaller. Some 20 per cent are active in the fruit juice sector.
DBK predicts that the leading companies will continue to strengthen their positions over the next few years, mainly through consolidation of a market characterised by a large number of regional players. High levels of product innovation are also likely to be a feature in the future as carbonate producers in particular seek to rejuvenate a somewhat stagnant market.
In the fruit juice sector, meanwhile, producers are expected to launch more functional products, spurred on by both new scientific discoveries about the healthy properties of various fruits and by increasing consumer demand for such products. Moreover, Spain has a relatively low per capita consumption of fruit juice compared to other European countries, DBK said, making it a key target for producers seeking growth opportunities.
This continued innovation and the ongoing health drive is likely to lead to further growth in the coming years (7 per cent in 2004 and 6.5 per cent in 2005, according to DBK's forecasts), lower than in 2003 but only because of the fact that last year's exceptional climactic conditions are unlikely to be repeated.