That’s a conclusion drawn by research firm Euromonitor International, in a new research report on the world carbonates market.
Coca-Cola and PepsiCo had been quick to recognise the future potential of the Middle East and Africa, the research firm said, with the former trying to replicate its Latin American success via early market penetration.
“When we say cola we often think of just Coke and Pepsi, but even in this category there may be opportunity for entrepreneurial companies willing to take a risk,” said Euromonitor.
In Latin America, Coca-Cola held a “commanding” 57 per cent volume share of carbonates versus only 13 per cent for PepsiCo, which had been slower to recognise the market potential there, the research firm added.
“Coca-Cola was quick to recognise the potential of international expansion, developed Latin America long before their competitors saw the potential and is now the undisputed leader,” Euromonitor said.
PepsiCo’s Latin American lesson
Consequently, PepsiCo had recognised the long-term value of getting into developing markets early, said the research firm, with the Middle East/Africa “considerably more competitive than Latin America” as a result.
In 2010, Coca-Cola had a 52 per cent share, but PepsiCo was “much stronger «with 27 per cent of the market.
Euromonitor noted that this market stranglehold might at first appear to preclude further competition, but the firm said this may not be the case, given the “tremendous potential for [regional] carbonates category growth”.
The company noted that the Middle East and Africa possesses the youngest population across all world regions, with strong population growth across all age groups expected of 947m between 1980 and 2020 to over 1.5bn.
Notably, the Middle East and Africa is also the world region with the highest projected growth in age brackets below 40 years, and thus offered “considerable opportunity” for carbonates firms, Euromonitor said.
Urban retail expansion was one way for new players to gain “rapid market entry” in the 2 regions, according to Euromonitor, “with a favourable young worker demographic expected to emerge”.
Specifically, there could be opportunities for so-called ‘secondary brands’, given that Big Cola in Latin America, for instance, had exploited an economy carbonate niche despite Coca-Cola’s domination, Euromonitor said.
The firm added that a similar tactic could work in the Middle East and Africa, given that – as per Latin America – private label brands in the 2 former regions now have an “insignificant” market share within carbonates.
Carbonates recover
Overall 2010 carbonates sales were still below pre-recession levels in 2010, Euromonitor said, but there was 2 per cent global volume growth in 2010, after market recoveries in the US, Latin America and Western Europe.
At first sight, a 1 per cent annual growth rate across the Middle East and Africa (due to slower off-trade sales) was unimpressive given 4 per cent growth between 2005-2009.
But Euromonitor said this was due to a market decline in Saudi Arabia – the Middle East’s third-largest market – due to large price rises after years of stasis – with regional growth elsewhere close to the 4 per cent figure.
Within the US, low-calories success for Coke Zero and Pepsi Max brought a return to slight growth, although Western Europe was “still struggling with flat movement” the researchers said.
But Latin America had recovered particularly quickly, they added, due to the fact that markets there are characterised by a large number of cheap high-volume products.
Euromonitor predicted that, in product terms, cola carbonates would show the greatest acceleration in terms of volume sales – 7bn more litres through to 2015 compared with just over 4bn from 2005-2010 – with growth again led by Latin America, the Middle East and Africa.
And despite a slowdown in sales of orange and other non-cola carbonates would likely slow between 2010 and 2015, Euromonitor noted:
“Other non-cola carbonates, including Dr Pepper and tropical fruit flavours as well as root beer, are predicted to see the second-highest volume growth of any category, including more than low calorie cola, adding nearly 5bn litres.”