Leatherhead cites category overlap as ‘overriding’ soft drinks trend

UK research and analysis firm Leatherhead tipped global volume and value growth in soft drinks (569bn litres and $447bn: 2010) to continue rising over the next few years in its December 2011 report, ‘New Directions in the Global Soft Drinks Market’.

But the report warned that the European debt crisis and muted US consumer confidence had led the OECD to revise its forecast for global economic growth down to 3.8% (2011), with a 3.4% figure expected in 2012.

“These economic indicators suggest that any growth in consumer spending is likely to be extremely modest over the coming year,”​ the report authors wrote.

Where this concerned soft drinks, “the trend towards cheaper products is expected to continue for the short-term at least, a factor that may hold back growth in sectors with higher-value priced products such as sports and energy drinks,”​ they said.

Depressed consumer spending​

The authors added: “It is also possible that the bottled water market may suffer to some extent from depressed consumer spending, since people in the developed world may turn back towards tap water on cost grounds.”​

Discussing one ‘overriding’ market trend, Leatherhead said: “Many colas are now occupying a similar position to energy drinks, for example, on account of a higher caffeine content, while some functional bottled waters are actively competing against sports drinks.”​

The trend towards healthier soft drinks was likely to continue, Leatherhead said, with leading suppliers such as PepsiCo, Coca-Cola, Nestlé and Danone committed to improving the “perceived health and nutritional quality”​ of products.

But Leatherhead noted that reformulating carbonated soft drinks such as cola could make the difference with diet products less clear.

“Sugar and calorie levels are already falling for many of the market’s leading brands, as a result of which the distinction between regular and diet drinks may become less clear,”​ the company said.

Coconut water growth​

Despite continued successful penetration by sports and energy drinks, exploiting a wide consumer base in emerging markets especially, Leatherhead warned growth here could slow.

“Growth within both segments may…slow in parts of the world over the next few years. The growing demand for coconut water may have an adverse effect on the sports drinks market, while concern over artificial additives and ingredients may turn some people away from energy drinks.”​

Both Coca-Cola (Zico Beverages) and PepsiCo (Amacoco) have invested heavily in coconut water in recent years – with the global market for such drinks now worth $500m – which was being positioned as a competitor to mainstream sports drinks such as Gatorade.

“Sales are thought to be developing especially fast in markets such as the US and UK, where coconut water is increasingly being positioned as a rival to many sports drinks,”​ Leatherhead said.