The market for sports and energy drinks grew by per cent in volume terms last year, another good performance for a segment which has expanded by 50 per cent over the last six years alone, according to the report.
Compared to other soft drink categories, volumes remain small, but the high value of energy and sports drinks has been the main driving force behind the category's expansion. Manufacturers such as Coca-Cola and PepsiCo, seeking new added-value opportunities, have been at the forefront of turning energy and sports drinks from niche products into mainstream drinks, ideally suited for today's time-poor, on-the-go consumer.
Indeed, it is this increasing interest on the part of the cola makers which has driven the rapid acceleration of the market in North America. Demand is growing at twice the rate as in Asia, the biggest volume market, with the increasingly mobile - and fitness-obsessed - Americans opting in particular for sports drinks sold via convenience and grocery stores, a significant shift into the mainstream retail sector.
But if the US and Japan remain the biggest markets by far (Asia and North America together take a whopping 80 per cent of the market), sports and energy drinks are becoming increasingly widespread in Europe, both west and east, and the arrival of big-budget brands such as Coca-Cola's Powerade is expected to raise their profile even further.
According to Canadean's report, the western European market for sports and energy drinks was approximately 1,005 litres in 2003, while eastern Europe consumed around 76 million litres. These figures represent compound annual growth of 15 and 25 per cent respectively over the 1997-2002 period as the market developed from just a handful of brands, such as Red Bull or Lucozade, into the multi-brand, multi-function bonanza it is today.
Eastern Europe's relatively low consumption levels mean that its CAGR over the next five years is likely to remain high - at around 16 per cent, according to Canadean, leaving 2006 volumes at a forecast at 109 million litres. The more mature western European market will show more modest gains (around 4 per cent), but the market will still remain nearly ten times greater than in the east at around 1,077 million litres.
Germany and the UK are the largest western European markets in terms of consumption, accounting for over half the volume sales in the region. Not surprisingly, perhaps, they were also among the fastest growers over the 1997-2002 period (16 per cent and 18 per cent respectively in incremental terms), but only the UK is expected to see further substantial growth in the period to 2006, Canadean said, forecasting a 6 per cent increase over that period.
Other western European countries with solid incremental growth rates over the last few years include Spain (19 per cent) and Ireland (16 per cent), and Canadean expects both countries to show further growth in the next five years - 12 per cent and 9 per cent respectively.
The European 'old guard' - brands like Red Bull, Isostar and Lucozade - remain strong, according to the report, but their market share is under increasing threat from new arrivals such as Powerade and Gatorade, the PepsiCo-owned sports drink, suggesting that the European markets could soon go the same way as the US.
Indeed, the shift towards sports drinks is already being seen, perhaps because the health benefits of such products can be more readily communicated than energy drinks, which have found it hard to shrug off their reputation as alcohol mixers.
Sports drinks have evolved in line with this trend, with traditional sparkling brands such as Lucozade losing ground to still variants, perhaps seen as more refreshing.
In eastern Europe, the pattern is somewhat different, with growth rates across the board coming in far higher than in the west, despite the fact that the high price of many brands inevitably restricts their take-up, because the category is at a much earlier stage of development.
Nonetheless, some markets are more advanced than others. Poland, for example, is the tenth biggest market across all of Europe, the only one of the new EU nations to make the top 10, thanks to a 17 per cent incremental growth in sales over the 1997-2002 period. Red Bull and Isostar have been instrumental in developing the Polish market, and continue to dominate sales there.
Starting from a low base, eastern Europe has shown some of the biggest compound annual growth rates on the continent - Yugoslavia (69 per cent), Bulgaria (49 per cent) and Estonia (48 per cent) are the top three nations - and this is expected to continue over the next five, with Yugoslavia continuing its impressive advance with forecast gains of 40 per cent, just behind Moldova (48 per cent) and Turkey (45 per cent).
Indeed, most of the growth will come from eastern Europe over the next few years, with just the under-developed Portuguese and Danish markets in the west expected to show substantial CAGRs - 21 per cent and 31 per cent respectively.
Canadean said that growth could be even faster if not for the high price of imported brands such as Red Bull, with eastern European income levels still languishing well below those of the west - a factor which could prove key as salaries begin to rise post EU accession.
Nonetheless, there are a number of local players - notably Druskininku Rasa in Lithuania and Qaudrant Amroq Beverages in Romania - which have managed to carve a growing niche for themselves by undercutting international brands, and more local players could emerge to fuel further growth. The early stage of development in the east is also reflected in the fact that energy drinks are more popular than sports drinks - again, mainly due to Red Bull's influence - but with Isostar already well established and Coca-Cola and PepsiCo looking for new market opportunities there, the balance is expected to shift in favour of sports drinks in the future.
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