Quench that thirst

The British public may love a cuppa, but lifestyle changes mean consumers are also developing a real thirst for soft drinks. In the last few years there’s been an explosion in the category, which now boasts a much wider choice – of flavoured waters, milk fruit drinks, cordials, smoothies and ready-to-drink ice tea and coffee.

The category has also seen the launch of more overtly functional products containing herbs, spices and flowers, as shoppers reach for quick and healthy refreshment.

A staggering 99% of households buy into the category, quaffing 13 billion litres last year and pushing sales to more than £5bn. “It was a good achievement compared with the previous year’s strong growth,” says Britvic’s MD Paul Moody. “We had a scorching summer in 2003 but 2004 soft drinks sales succeeded in the face of an immense challenge.”

The convenience sector accounts for one-third of all soft drinks value sales and, according to Britvic, functional drinks were last year’s star performer. David Patmore, marketing director of Princes, says: “Multiple grocers remain the dominant force in the market, but convenience stores and other independent retailers continue to play an increasingly important role for top-up shoppers, especially in the soft drinks sector.” C-stores contributed £1.7bn to the total soft drinks market however, although the sector was down 2% by value because of the dismal weather when shoppers were less inclined to buy impulse drinks. Princes’ Patmore says brand owners and suppliers responded with stronger and deeper cut promotions.

“Almost 40% of soft drinks volume in 2004 was sold on promotion – up 2% on 2003.”

Britvic’s Moody adds: “Manufacturers and retailers have responded effectively by evolving consumer demand for premium and better for you products – and consumers were happy to pay for a wide range of premium products that satisfied many different lifestyles and moods.”

But the sales growth slowdown meant that the perennial favourite – fizzy drinks – saw sales slump by an overall 5.2% in 2004 to 6,251 million litres, while market value was down 4.4%. Despite this, colas are the largest sector within the carbonates market, accounting for 54% of volume and 64% of value in 2004, and beverage firms are working hard to keep shoppers’ interest, introducing flavour extensions such as Pepsi Max with a twist of lemon and lime, along with wacky coloured Tizer and diet Coke with lime.

Meanwhile, the market for fruit juice and juice drinks has shown impressive growth rates, with overall sales volume increasing by 21% between 1999 and 2003 to reach 2,064 million litres – helped by the likes of J2O and Fruit Shoot – according to Mintel. Smoothies have also done well, as shoppers try to fit in their five portions of fruit and vegetables, but it’s dairy drinks – including probiotics – which have been the fastest growing sector in the take-home category, and according to the Britvic report an extra two million households bought them last year.

As a result, penetration of yogurt drinks continues to rise; it’s set to top 40% this year, as heavy promotional spend attracts shoppers into what was once a niche market. Danone’s Actimel leads the £199m category (ACNielsen 52 w/e 25 December 2004) with a 46.1% market share, followed by Yakult with 15.5% and Muller with 14.6%. It’s all pretty impressive, considering that the sector was only worth £50m in 2000.

Laura Kingsman, Musgrave Budgens-Londis’ trading manager, reckons it’s because consumers like the fact these products give them their daily nutrients all in one go. “Furthermore, sales are incremental and yogurt drinks are bringing new consumers into the market.”

The rapidly expanding water sector also shows no sign of slowing. The two largest water brands, Volvic and Evian, are still in growth – with a 12% and 4% increase respectively (ACNielsen, MAT 25 December 04). Much of the growth in sparkling has been driven by new flavoured waters and people trading up to multi-packs such as Highland Spring’s four pack of 1.5l sparkling, which grew by 25% in the last year (ACNielsen MAT to Feb 2005). Sports capped bottles are also becoming more popular, and Nestlé Water says its best selling products through this sector are Vittel 50cl and Vittel 75cl Sports cap.

 “The Perrier brand continues to out perform expectations within the cash and carry channel and has a very loyal customer base,” adds Sandy Madhar, senior business manager cash and carry.
According to Zenith, UK sales volumes of water grew by 0.5%, maintaining annual sales of two billion litres and £1.1bn in 2004.

Britvic recently relaunched Pennine Spring exclusively into the cash and carry market, in new 500ml plastic bottles and screw tops, with still also offered with a sports cap, as well as in a 750ml bottle with sports cap. It proves that manufacturers are keen to court the wholesale sector, acknowledging its importance – even if it’s not a big part of their business.

Helen Betts, business development manager for foodservice at Shloer, explains: “The total Shloer business in the wholesale sector is only worth 2% but it’s been growing really strongly in the last few years, driven by our work with Booker and Bestway. We’ve also moved into delivered wholesale quite aggressively in the last year which is doing well.”

It has worked with Booker on promotions that really got to the end-user during the last year, says Betts: “We haven’t worked quite this aggressively in the past – but we’re making sure that the retailer gets the benefit too and that there’s value in the promotion, such as doing multi-buys, supported by point of sale material. We plan to look at other cash and carries going forward.”

Britvic does a huge amount of promotions in wholesale by trying to be as competitive as it can versus the grocers, says Helen Bryant, business unit director for take home. She says price marked packs work well.

Coca Cola Enterprises also focuses on the wholesale sector and while account executives directly support cash and carry and delivered wholesale depots, teams of reps also call on independent outlets to pull through sales from wholesale. It recently extended the Fanta Win a Digital Camera promotion, with a free prize draw in cash and carries and introduced new incentives for delivered wholesalers, as well as running the Appletiser giant bean bag free prize draw within wholesale depots.

Most of the soft drinks manufacturers are happy to spend big bucks promoting their brand in the wholesale market and through the media, and this year will be no exception. Lucozade Sport is emphasising its association with football by airing a TV advertising campaign featuring the brand’s new face of football, England star Steven Gerrard. GlaxoSmithKline will also provide retailers with PoS to promote the new-look Lucozade Sport 500ml bottle, which has a new streamlined pack shape and sportscap. Lucozade Sport Hydro Active fitness water also now comes in a taller, slimmer 500ml bottle.

Ribena has also just got a new image – new 500ml bottle shape and logo – and GSK is putting £10m behind it this summer. Ribena’s new no-added sugar and low calorie variant, Ribena Really Light, replaces the Toothkind and Light variants, along with a Berry Burst flavour, which comes in squash and sportscap bottles, which GSK says should provide retailers with more sales opportunities.

Barr Soft Drinks is planning an investment of £2.5m in a new brand strategy, which will include trade activity, extensive PR and the first-ever dedicated Diet Irn-Bru TV advertising campaign, along with new packaging. And squash brand Robinsons will celebrate its 70-year association with Wimbledon this summer with on-pack promotions across the whole family of brands, highlighted with new pack labels and on shelf-ready packaging. Powerade will be the official sports drink of the British Lions tour, when there will be special offers in wholesale.

Another product getting a new look is the Tropicana range. As part of a £7.7m investment in 2005, Tropicana is introducing new corrugate cases with colour designs and point of sale specifically for the wholesale channel.

The new look cases have been designed to aid store shelf replenishment through easier brand and product flavour identification, and complement the new Tropicana ‘take home cartons’ and ‘on the go’ bottles that are being supported by a £5m TV campaign.

PepsiCo trade marketing manager Nicky Seal comments: “The new cases will give us much greater brand recognition and standout, and will clearly identify to both wholesalers and retailers the exact products and flavours. They will also now feature instructions for correct merchandising in-store, to aid retailers in their display and stocking decisions.”

To direct retailers to the chilled juice category within depot, Tropicana will also be investing in wholesale point of sale and merchandising.

Water manufacturers will be just as busy this year, as Highland Spring marketing director Sally Stanley explains her company’s key objective is to stimulate frequency of consumption; UK consumers drink about 35 litres per head a year but their European neighbours quaff nearly six times as much.

Sandy Madhar, senior business manager cash and carry for Nestlé Waters, says the wholesale sector is extremely important particularly for the Vittel, Perrier and Buxton brands. “We maximise our opportunity within this sector by using a variety of promotional mechanics: flashed packs overlaid with multibuy promotions, trade days and one day specials with selected customers. Promotional activity is up-weighted at key times throughout the year to support major brand events including Vittel’s sponsorship of the Flora London Marathon, Buxton’s association with the Wimbledon Championships and the Perrier Comedy Awards.”

As a result, the soft drinks category is looking healthier than ever – in more ways than one – and Prince’s Patmore reckons healthier and functional products will continue to help to drive market growth in 2005. He says: “As out-of-home consumption continues to rise, smaller pack sizes – which are ideal for lunchboxes and ‘on the go’ lifestyles – will continue to be the main area of growth.”

Retailers expect wholesalers to stock the biggest brands, adds Henry Dummer, category planning controller at GlaxoSmithKline, as about 80% of depot sales are generated from the top 20% of SKUs. “Cold drinks are retailers’ fourth largest profit driver – bigger than snacking – while 25% of delivered wholesale and cash and carry customers’ budget is spent on drinks. They need to have 100% availability, because out of stocks can lead to a 10% loss in sales.”

Buyer’s viewpoint
Jon Burton, Landmark trading controller

“Performance has been difficult to maintain since last August, with fruit carbonates especially having declined substantially. However, energy and sport products are fuelling the marketplace with a good continuing performance on branded dilutables and, in the wholesale market, Red Bull continues to out-perform. Our own label carbonates had their best year ever last year.
Flash pack outers and price marked products stimulate sales though the whole supply chain, as do major links to the sporting arena and pop music.

Retailers with the correct chiller ratio will continue to grow with merchandising assistance in the category. Landmark’s wholesale network is continuing to develop support for retailers through Hot House – a disciplined merchandising project reviewing the marketplace performance, creating merchandising solutions and revamping stores to a new level of expertise.”

New Products
A stream of innovation keeps the soft drinks category fresh and resulted in an incredible 400 product launches last year, which generated an extra £87m being spent. And there’s no reason to suggest that this will change in 2005.

In the last few months we’ve seen Pepsi Max bring out Pepsi Max Twist with a twist of lemon and lime, as well as Britvic’s Tango Clear, a new sub-brand primarily aimed at 18-30 year old women.

Also in carbonates, there’s been the new Tizer Blue, which brand manager Jacq Pye says will be backed by a TV presence, an on-street experiential road show featuring sampling, and interactive games. “We are also launching an on-pack promotion for the key summer months.”

Other new products include Intercontinental Brands’ J2O lookalike, j+. This range of high juice drinks has two identical flavours to Britvic – orange and passionfruit and apple and mango – along with three new varieties: orange and berry, pineapple and orange, and apple and blackcurrant.

Meanwhile, Tetley has just introduced a new T of Life flavour – Green Tea and Apple. Green tea is the fastest growing segment within the ice tea category, says Dorothy Sieber, Tetley’s commercial manager for ready to drink teas. “Ice teas are still relatively new to the UK, but they are showing good signs of growth. The market has responded well to the fruitiness of T of Life and we are confident the addition of a green tea variant will tempt new consumers.”

Coming up this summer is CCE’s new Z range (with Z standing for Zero Added Sugar) which will result in Fanta Z, Sprite Z, Dr Pepper Z and Lilt Z variants instead of the standard ‘light’ versions, backed by a substantial marketing campaign in May. And if that’s not enough, there’ll also be Schweppes Deuce, a premium adult juice drink available in two flavours, Cranberry and Raspberry and Orange and Guava, in wholesale from June, and the relaunch of Minute Maid fruit juice.

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