Sector Insight: Carbonated soft drinks

Soft-drink manufacturers are withstanding pressures of the health lobby by focusing on clear and more natural variants.

Despite numerous other temptations vying for the money of young people, the lure of fizzy drinks has held strong, and carbonated beverages still constitute a significant sector of the grocery market.

While the majority of food and drink categories are under pressure to meet the changing requirements for healthier products, core consumers for carbonates - the under-14s - remain mostly impervious to the healthy-eating lobby. There is 86% penetration of carbonates among this age group compared with 57% for adults, according to TGI.

This is not to say that the healthy-eating trend is not having any impact on the market; healthier soft drinks are the fastest-growing category and many brands are positioning them-selves as healthier and more natural. Diet and no-sugar options have increased their share and now account for more than half of retail cola sales.

The tide is turning against opaque fruit-favoured carbonates in favour of clear ones; drinks with no colour or artificial additives are perhaps viewed by consumers as being more natural. The high sugar content and 'empty calories' associated with carbonates mean they are deemed unhealthy by the food lobbyists looking to reduce obesity in the UK.

However, even sales of the drinks associated with being healthier - water and smoothies - have been hit recently, with Britvic's Soft Drinks Report 2009 revealing that smoothie sales declined 15% and those of plain, non-flavoured water 9% in 2008.

Colas still dominate the flavoured carbonates category, accounting for about 60% of the total market. The on-trade and off-trade combined were worth £6bn in 2008, according to Mintel.

Impulse sales are crucial for carbonates, with demand stimulated by factors such as warm weather. On-trade sales have been responsible for what value growth there has been (up 24% since 2003) because discounting has the retail market's performance.

Brands dominate this sector, dwarfing own-label's 10% share of the market. Coca-Cola leads, with Britvic some way behind in second place.

As well as its Coke brand, Coca-Cola also owns Fanta, Schweppes, Dr Pepper and Sprite. Last year, it repackaged its Coke products and launched Schweppes Classics in the lead-up to the summer. It also added a Fanta Still variant to take the brand into the juice market.

Britvic's Tango fruit carbonate range has suffered in recent years, so the company embarked on a 'Save Tango' campaign last year to raise consumer awareness of the brand and boost sales. The flipside of consumers' shift toward clear fruit carbonates is that its 7-Up brand has benefited.

While Pepsi sells less than Coca-Cola, its growth over the past couple of years has strengthened. It addressed the health lobby last year with the introduction of Pepsi Raw, a natural cola variant made from sparkling water, natural extracts, cane sugar and no artificial additives. 

Advertising has always been a major investment for this sector, although, as children and young adults become harder to reach through traditional media, promotions have been extended into the new-media environment. Although healthier eating is a constant theme across the grocery sector, the marketing messages for carbonates tend to stay firmly in the 'fun' arena along with an emphasis on the taste proposition. Introduced in 2007, restrictions on the TV advertising of foods that are high in fat, salt and sugar, during children's programmes, have also affected how and when manufacturers can promote their brands.

While the economic climate is a cause for concern in all sectors, carbonates may be in a better position than many to weather this financial storm. They offer a quick feel-good fix, and their core consumers are younger people, who are typically the last to suffer in straitened times, making carbonates less likely to be negatively affected.

Mintel predicts that the value of carbonates will increase by 9% to reach a value of £6.5bn by 2012. This equates to a slip of 1% when inflation is taken into consideration. Volume sales are expected to decrease by 5% over the period.


Manufacturer's Carbonate Brands by Value and Share
RankBrand200820072006% change
1Coca-Cola GB, of which:  1334661302651296652.9
Coca-Cola  9684894247934473.6
Fanta   115612461276-9.4
Schweppes   1116102596515.6
Dr Pepper  6536136136.6
Sprite   6035635735.3
Lilt   151171211-28.6
2Britvic Soft Drinks, of which:  30515280142771410.1
Pepsi  25212224112151117.2
7-Up   30128124125
Tango   231281382-39.5
3AG Barr - Irn-Bru  91586482411
Other  884945965-8.3
Own-label  200102351223912-16.3
Total   2018100199710019901001.4


Carbonated Soft-Drink Advertisers by Adspend
RankBrand2008 Expenditure (£)
1Coca-Cola GB  35,919,932
2PepsiCo Intl   10,875,495
3Britvic Soft Drinks   8,590,970
4Schweppes Beverages  4,766,792
5AG Barr   1,547,038
6Rubicon Products   651,582
7D&G Drinks  316,301
8Cantrell & Cochrane  139,423
9Fentimans Beverages  86,524
10Barr Soft Drinks   27,826
Source: The Nielsen Company   


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