Soft drinks: Some healthy competition

The sun was shining on the soft drinks industry last year. The category was up 18% on 2013 to be worth £11.8bn, according to Nielsen, and c-stores held on to their share (£7.6bn) with value and volume sales up 0.4%.

The convenience sector also experienced stronger value growth than the multiples (2.8%).

Britvic’s Soft Drinks Review 2015 says: “2014 was a year when the grocery and convenience channel held steady and showed its true resilience in the face of shifting consumer purchasing patterns.”

HIM Research & Marketing data backs up this theory. HIM communications director Katie Littler says the percentage of convenience shoppers who buy soft drinks has grown from 13% in 2004 to 22% in 2014.

While warmer weather always helps to hot up soft drink sales, Britvic believes there is another reason for the category’s success: consumer demand for healthier and lower calorie soft drinks. Britvic marketing director Jonathan Gatward explains: “2014 was a convergence of two macro trends - consumers continuing to seek great taste and also seeking a lower-calorie option.”

The government has had an impact. Under increasing pressure to tackle the obesity crisis, it introduced tougher rules on the drinks permitted in schools, limiting the size of fruit juices to 150ml and ruling out sugary fizzy drinks. The manufacturers rushed to please with reformulations and npd in healthier choices for adults as well as kids, backed up by marketing to push the better-for-you message.

Giles Brook, CEO at Vita Coco Europe, believes “the negativity from the press regarding the amount of sugar people consume has had a part to play in the new developments”.

Paul Graham, Britvic GB managing director, adds: “Shaped by multiple consumer trends, such as the increasing focus on the wider health agenda, marketing and legislation, the rise of on-the-go consumption and the demand for added value out of every experience, the soft drinks manufacturers who have been the most successful have adapted their immediate consumption formats and incorporated flavour enhancements, as well as reformatting to provide low or no-calorie variants.”

The extent to which soft drinks manufacturers have reacted to pressures to produce healthier options can be seen at squash brand Robinsons. Last year Robinsons made the decision to produce only no-added sugar variants, effectively removing 6.9 billion calories from the soft drinks category.

Britvic Soft Drinks’ Gatward says: “The scale of activity reflects our commitment to our overall category vision and ensures that our brands continue to satisfy consumers’ ever-changing taste and preferences.”

The manufacturers’ efforts haven’t been lost on retailers. Adam Hogwood of Budgens of Broadstairs, Kent, has noted the number of healthier variants. “This is the first summer that we will be stocking the likes of coconut water, Coke Life and low-calorie Lucozade. Healthier drinks give people the feel-good factor as they’ve changed something unhealthy in their life,” Adam says.

Anish Keshwara of Nisa Local, Whittlesey in Peterborough, was surprised at how many of his customers bought coconut water when he began to stock it last year. “I didn’t think it would appeal to our market, but it sold really well, especially on promotion. I think it is all part of people trying to lead a healthier lifestyle.”

Boost Drinks, which prides itself on being available only to independent retailers, notes that sugar-free sales are growing at a phenomenal rate. “Barriers to further growth had been calories and taste, so Boost invested considerable time and money developing Sugar Free Pink Lemonade,” says Boost Drinks managing director Simon Gray.

Raaj Chandarana of Tara’s News and Brindley Avenue Post Office in High Wycombe has stocked Boost energy drinks since the beginning of 2014: “It’s brilliant that they champion the independents, and their range absolutely flies off the shelves,” he says.

Raj Aggarwal, who owns two Spar stores in Leicestershire, has also observed his customers becoming more health conscious and says “people are beginning to drink more flavoured water variants, such as those from Volvic”.

Volvic has recently released two new variants, available in Sunny Orange and Lemonade, for both immediate consumption and the take-home category. Each drink has 33 calories or less per 100ml.

Raj’s experience that flavoured waters have been one of the winners in the soft drinks category is matched by Maurice Newton, sales and marketing director at CBL Drinks, who says: “The flavoured water section is one of the fastest growing sectors in the soft drinks market.” Britvic’s 2015 Review reports that water-plus grew by 9.5% in value in 2014.

However, it was plain water sales which saw the highest growth within the segment, with value sales climbing by 12.6% to £670m.

Kate Mills of Heath Stores in Horsmonden, Kent, sees her water sales shoot up when the warmer weather kicks in. “We stock Abbey Well water which was ranking as number eight across my entire impulse portfolio back in March.” Raj also notices that his water sales are increasing year on year.

“Water is fuel for the human body,” says Julian Taylor-Green of Spar Lindford, Hampshire. “Once the warmer weather appears, people tend to carry it about with them as water has a longer life than fizzy drinks and doesn’t have to be consumed immediately.”

Coca-Cola Enterprises trade communications manager Dave Turner points out that bottled water is a “real staple in the warm weather for those seeking refreshment and rehydration”.

2014 saw much more of an even split between sales of water for on-the-go consumption and that for take-home, and this has encouraged the launch of Glaceau Smartwater, a distilled water variant with added electrolytes for a clean, crisp taste.

James Logan, commercial director at Refresco Gerber, thinks that water sales could be increasing at the expense of other soft drinks, juices and smoothies, due to people’s concerns about health. The Britvic Report does in fact show smoothies saw a decline in value sales of 1.3% and in volume sales by 3.7% in 2014.

However, traditional soft drinks remain strong, according to both the Britvic Review and retailers, where Coca-Cola and energy drinks are the category’s star performers. Coca-Cola value sales totalled £1.6bn in 2014, although this was a drop on the previous year of 2.5%.

At Julian’s store, PepsiCo’s no-sugar Pepsi Max is the best-selling sugar-free variant, while at Heath Stores Kate’s top-selling soft drink is Bulldog Energy, closely followed by Coke, with Lucozade not far behind.

She adds: “Being near a school, most of our soft drinks customers are children and workmen. I do stock low-calorie variants, although they aren’t selling as well as I’d have hoped.” Bulldog has an rrp of 35p and because of this many of Kate’s customers buy more than one at a time.

Energy drinks saw a strong category growth of 4.6% this year, so Kate’s store may not be the only one to witness a spike in sales. Both Raj and Julian have noticed that their energy drinks sales are continuing to increase. Raj doesn’t stock many low-calorie variants, but it doesn’t seem to affect his sales. And like Kate, Julian’s best-selling soft drink is also an energy drink, although his is Red Bull, retailing at almost triple the price of Bulldog.

Iced tea and coffee

There is one category, however, which outdoes the rest in terms of year-on-year growth; iced tea and coffee has reported the highest growth in both value sales (up 30.7%) and volume (28.5%) for the fifth year running, bringing the total category worth to £68m. Britvic reports the best-sellers in this segment to be Lipton Ice Tea and Starbucks.

Britvic has developed a new raspberry flavour for its Lipton Ice Tea brand. The variant joins the existing variants peach, lemon and mango to complete the current fruity range. In addition to the new flavour, Britvic has also introduced a refreshed bottle format and recipe reducing sugar content by 30%, giving the soft drink less than 100 calories per 500ml.

Iced tea is a hit in Adam’s store, but not the traditional Lipton variant consumers may recognise. He stocks Organic Arizona Iced Tea, an American import available in many different variants, flavoured with a fruit such as peach, pomegranate and even yumberry. “The American tea has the novelty factor, which is why I think it is doing so well compared with the Lipton brand,” he explains.

The taste for tea can also be seen in the increase in the number of drinks containing green, black, white and even lemongrass tea.

Little Miracles, a range of organic soft drinks containing a blend of organic tea, super fruit juice, ginseng and or acai, aims to give a hit of energy without being followed by a subsequent energy crash. It claims to be “developed with consumer health and wellbeing in mind, sweetened with agave, containing less than 90 calories”.

Little Miracles international marketing manager Kate Harding says: “Our drink is aimed at women aged between 18 and 35 to encourage them that it’s okay to consume energy drinks. Many women don’t like drinking from large cans and consuming all the empty calories.”

Although Little Miracles variants contain less than 90 calories, the brand has been experimenting with its ingredients to find a way to give consumers the flavour they know, but with even fewer calories. “From June we will be rolling out a refreshed range of drinks containing 60 calories or less. Little Miracles will never be calorie-free because they contain all natural ingredients,” adds Harding.

Alongside the demand for newer flavours has come a rise in the popularity of premium drinks and flavours. Brands such as Belvoir Fruit Farms, Bottle Green and Fentimans have responded by rebranding or introducing new flavours.

Julian Taylor-Green stocks many of the Fentimans products and says: “It’s very much about trying to drive in alternatives to the core product. They are a great substitute to alcohol in the summer and because they are more premium they have got better margins.”

Bottle Green contains only 29 calories per 100ml, appealing to those who are calorie conscious.

Merchandising

The Big Night In opportunity

If you go big on dine in/Big Night In ranges, then you could be missing a trick if you are not including a non-alcoholic option in your line-up. Shloer brand manager Amanda Grabham says that in the UK 21% of people don’t drink alcohol and its range could be the perfect alternative.

Its sales are being driven by customers looking for affordable treats, Grabham says. “Shloer is a family friendly proposition. It is a non-alcoholic drink with a grown-up appeal. The glass bottle provides a premium look and doesn’t look out of place in a wine glass, especially Shloer Celebration which comes in a corked bottle.”

Fellow SHS brand Bottle Green also fits the bill as “over the past two years consumers have been turning to more sophisticated flavours such as grape, elderflower, pomegranate and a coconut,” Grabham points out. Bottle Green comes in a 750ml sparkling pressé and 500ml cordial bottles. “They are really versatile; people can use them to create theatre in their homemade drinks,” adds Grabham.

“Consumers like a treat over the weekend, so we suggest stocking up the fridges and optimising on impulse purchases by placing bottles next to products such as crisps and dips,” she adds.