Category Focus: Soft Drinks

The total take-home soft drinks market, comprising sales through grocery multiples and the impulse channel, grew by 2.8% to £6.07bn in 2007 but volume dipped by 2%, largely as a result of the weather (Nielsen).

Impulse retailers, however, outpaced their supermarket rivals.

Their value sales rose by 4% to £1.9bn in 2007, while sales at the top grocers grew by 2% to £4.14bn.

Co-ops and symbols were the star performers within impulse, growing soft drink sales by 7%.

Convenience stores increased their sales by 6% and independents enjoyed 4% growth.

By contrast, sales at out-of-town supermarkets – the biggest retailers of soft drinks – rose by 2% and sales on the high street were flat.

The figures, released in the Britvic Soft Drinks Report 2008, highlight the importance of the impulse channel in a leading grocery category.

Britvic's customer management director, Andrew Richards, says: “This emphasises the importance of a well-ranged front of store area and convenient on-the-go pack formats.”

Functional drinks fuel sales
Category growth was driven by “added value offerings”, specifically functional drinks including those with added vitamins and minerals, glucose and stimulant drinks and sports products.

According to Britvic, these drew new buyers into the market with 31% of the British population now buying glucose and stimulant drinks at least once a year.

Functional drinks are now the fourth largest sub category in the soft drinks market (after colas, pure juice and juice drinks) with an 8% share.

TNS, which measures take-home soft drink sales (all soft drink purchases that are taken home), reports sports and energy is a major growth sector too.

According to TNS data, penetration is up by 10% on last year with 9.5m households purchasing the category.

Unlike juice and juice drinks, which show a bias towards private label (57.8% of juice and juice drink value share comes from private label products) sports and energy tends to be brand oriented, it says.

TNS analyst Reena Sheth states: “Shoppers show a tendency to seek out 'functional' soft drinks and, as a result, sports and energy drinks are being bought more often and in increased quantities per trip, which led to a value increase of £21.5m for the category.”

Smoothies and pure juice
Smoothies and pure juice have also performed well.

Nielsen data shows smoothies increased by 31% in value in 2007, while pure juice rose by 5% to £1bn and is reported to be gaining ground on the largest sub-category, cola.

According to Britvic, the popularity of smoothies and juices supports the consumer trend to healthier lifestyles and more natural products.

TNS combines juice and juice drinks in one sub category in its assessment of the market.

Together it reports juice and juice drinks are the largest category in take-home soft drinks, worth £1.3bn and growing by 7.9%.

According to Sheth, the growth is mainly driven by consumers paying on average 93p per litre, a year-on-year increase of 8.1%.

“With consumers increasingly concerned about healthy diets, and parents taking care of healthy lunch boxes for their kids, 23.4m households now purchase juice and juice drinks,” she says.

“Orange and apple remain the most popular flavours but cranberry-based flavours are also common, and shoppers are becoming more adventurous with exotic variants such as tropical and apple and mango gaining market share.

Water and squash suffer
Despite the trend to healthy products, the water, squash and water plus products suffered as a result of the weather in 2007.

Nielsen reports these categories declined by 3%, 7% and 11% respectively.

TNS claims fewer purchase occasions for squash and water has been a key driver of the declines and, on average, shoppers purchase water 11.9 times per year – a fall of 5% from last year.

The weather benefited sales of carbonates, however, which increased their share at the expense of stills.

Coca-Cola Enterprises remains the largest supplier in the category. Its sales rose by 4% to £1.6bn in 2007.

Innocent and Red Bull were the fasted growing brands, however, with sales up by 46% and 27% respectively (Nielsen).

Retailer performance
According to TNS data (52 w/e 27 January 2008), Tesco dominates the market with a 32.6% value share of soft drinks, compared to 31.8% of total grocery.

Asda is the second largest player with a 17% share of soft drink sales.

However, the greatest overtrade in soft drinks is among the discounters, Aldi and Lidl. Both retailers punch considerably above their weight in soft drinks.

With favourable, warmer weather, coupled with the current credit crunch, that trend looks set to continue in 2008.