Sector Insight: Adult soft drinks - 0%, doing well
Consumers' desire for alcohol alternatives is helping drive brands often debuted in the on-trade.
Britvic's announcement last week that it had suffered an 8%-9% slump in sales of its carbonated drinks in January and February, and an ensuing 23% fall in its share value, has forced it to admit that fizzy drinks have lost their sparkle and the trend toward healthier options is more pronounced than it had anticipated. Consumers are increasingly deserting the carbonated market and choosing options such as juices and water - a trend that is bolstering the adult soft drinks sector overall, which is expected to grow 60% by 2010 to £1.2bn.
Soft drinks have traditionally targeted children and teens but, as adults seek out healthy options, a category of soft drinks targeting adults has emerged.
Encompassing products such as flavoured waters, upmarket fruit juices and iced tea, but excluding energy drinks, bottled water and standard fruit juices, many are marketed as premium drinks - a positioning that has boosted growth in this sector.
These drinks are also consumed as an alcohol substitute, and the sector looks likely to benefit from the falling proportion of adults drinking alcohol.
Many of the brands in this market made their debut in the on-trade and their popularity there has ensured that bars and pubs account for about a third of sales in the sector - an increase of 40% between 2003 and 2005.
The sector is heavily influenced by health issues, with adults looking for high-juice, diet or low-sugar drinks, and much new product development has centred on health benefits.
This has led to an increase in fruit drink sales and a trend toward exotic fruit flavours and the use of fruits with particular health benefits, such as cranberries and blueberries.
Worth more than £700m in 2005, the adult soft-drinks sector grew by 84% in volume and 118% in value since 2000, according to Mintel, outperforming the total soft-drinks market. Sales of adult drinks were almost 6% of total soft-drinks sales in 2005, compared with 4.7% in 2003.
The different types of products in the sector appeal to different demographics, with 15- to 24-year-olds and C1C2s the biggest consumers of still fruit drinks, even though the packaging aims to attract ABs, who prefer iced teas.
Getting the packaging right is vital for brands in this category, to make sure the drinks appeal to an adult audience. It is especially significant in the on-trade, to encourage take-up.
Flavoured water, which is favoured by 25- to 34-year-olds, is the biggest category in the sector, with more than 60% of total sales by volume.
Traditional bottled-water brands have branched out into these flavoured variants in recent years; Danone extended its Volvic brand in 2002, launching Volvic Touch of Fruit, which is now brand leader, and last year Vittel introduced its first flavoured variants.
Danone's water brands include Evian, Badoit and Shape as well as Volvic. Shape started as a low-fat yoghurt brand, but the company extended it into flavoured water in 2004, focusing on its diet credentials. At the same time its Danone Activ, calcium-enriched water, was withdrawn due to poor sales.
As flavoured water has a comparatively low price per litre, it is actually second to premium adult soft drinks in terms of value.
These premium drinks, such as J2O, Oasis and Ame, are experiencing major growth, totalling £276m in sales in 2005, a figure expected to rise 20% in 2006. Benefiting from consumers' willingness to trade-up in the food area, these products have now expanded their appeal beyond the original on-trade environment, to be more widely consumed at home.
While Danone is the biggest supplier in this market in terms of volume, Britvic Soft Drinks dominates in value, in large part due to the success of its premium drink J2O.
J2O was launched in 1998 and effectively created the category in pubs.
It targets both sexes, is available in five flavours and is now worth £190m.
When Britvic acquired Orchid Soft drinks in 2000, the premium brands Ame and Aqua Libra joined its portfolio. Ame, a mix of sparkling fruit juice, water and herbal extracts, was relaunched last year with a £4m promotional budget, new packaging and greater emphasis on the fruit content.
After Britvic, Coca-Cola Enterprises (CCE) is the second-biggest supplier of adult soft drinks. Its brands include Oasis, Appletiser, Deuce and Nestea. CCE refocused Appletiser in 2004 to appeal to women in pubs and bars. As well as backing it with advertising, it signed a sponsorship deal with Channel 4 for Friends repeats in 2005.
Other companies operating in this market include AG Barr with its Orangina brand, Ocean Spray, Merrydown with Shloer and smaller companies such as Belvoir Fruit Farms and Bottlegreen Drinks, both making cordials and presses.
Continued concern with health, a willingness to spend more on premium products and demand for alcohol alternatives will boost the sector by 74% between 2005 and 2010, taking it to a value of £1.2bn - a growth of 60% including inflation, according to Mintel.
The biggest growth is expected in the relatively small ready-to-drink tea and coffee sector, followed by premium adult drinks.
SOFT DRINK SALES BY VALUE AND MARKET SHARE 2005 2003 2001 01-05 pounds m % pounds m % pounds m % %chng Adult soft drinks 709 5.8 559 4.7 380 3.7 86.6 Other soft drinks 11,557 94.2 11,422 95.3 9938 96.3 16.3 Total soft drinks 12,266 100 11,981 100 10,318 100 18.9 Source: Mintel ADULT SOFT DRINK SUPPLIERS BY SALES VALUE AND MARKET SHARE 2005(est) 2003 03-05 pounds m % pounds m % % chng 1 Britvic Soft Drinks 228 32 153 27 49.0 2 Coca-Cola Enterprises 68 10 48 9 41.7 3 Gerber 47 7 40 7 17.5 4 Danone 49 7 42 8 16.7 5 Merrydown 21 3 19 3 10.5 Others 151 21 145 26 4.1 Own-label 145 20 112 20 29.5 Total 709 100 559 100 26.8 Source: Mintel ATTITUDES TOWARD ADULT SOFT DRINKS BY % OF POPULATION, AUGUST 2005 Still Flavoured Fizzy Diet Plain/un- fruit water fruit fruit flavoured drink drink drink iced tea 1 Good to 25 28 29 22 31 accompany a meal 2 Healthier than other 21 21 21 14 20 soft drinks 3 Expensive for what 17 14 13 12 15 they are 4 Better for you than 25 20 20 28 22 other soft drinks 5 Fewer calories than 20 26 15 25 22 other soft drinks 6 Less of a sweet taste 18 18 14 15 23 than other soft drinks 7 A good substitute 11 12 15 11 20 for alcohol Source: BMRB/Mintel Base: 997 adults aged 15-plus
ANALYST COMMENT - PAUL TARLING, SENIOR MARKET ANALYST, ZENITH INTERNATIONAL
Adult consumers are becoming increasingly important to soft-drinks producers. Traditionally, the market focused on the kids' and youth sector; today, soft-drinks companies recognise the value of adult drinkers, and are developing products to cater to their diverse health, taste and lifestyle needs.
Britvic's J2O juice drink has been a huge success and companies such as Feel Good Drinks and Firefly have been quick to recognise the need for more adult-oriented offerings.
Coca-Cola's launch of non-carbonated fruit drink Ipsei and the proposed repositioning of Orangina as a premium adult soft drink also illustrate an appreciation of adult consumers.
Health is a major consideration for many adults, especially women, and this is reflected in recent innovations recognising the health properties of fruits, such as cranberry and pomegranate, and GlaxoSmithKline is set to launch a blueberry version of its Ribena brand. Products with added benefits, such as Tropicana Essentials and T&T Beverages' recently launched h2eau, with aloe vera and artichoke extracts, are also becoming more popular.
Iced tea and coffee have yet to become popular in the UK, though Coca-Cola and PepsiCo are both set to launch coffee variants of their popular colas - Coca-Cola Blak and Pepsi Max Cino. Time will tell whether an innovation described as an 'adult product in a carbonated beverage' is a recipe for success.
As restrictions on the sale of soft drinks to children continue, the potential of the adult sector remains strong. Further innovations are likely, with companies striving to provide adults with a soft drink option for all drinking occasions.
This article was first published on Marketing
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