EXECUTIVE SUMMARY
Soft drinks consumption continues increasing
Soft drinks consumption continues increasing in the country, achieving a slightly better performance than 2010 sales. The consolidation of the market and the good performance of the economy are driving Chileans to consume more soft drinks with special care for healthier products. Although many Chileans continue practicing unhealthy habits due to low exercise and overeating, there is also more awareness about weight-related problems that motivates them to consume healthier soft drinks. Nevertheless, Chileans want to achieve a slim figure fast, but without drastic changes in habits.
Fruit/vegetable juice, sports and energy drinks are growing fast
Sports, energy drinks and fruit/vegetable juice experienced significant growth in 2011, being driven mostly by health and wellness trends. Consumers are concerned about general wellbeing, consuming natural products, practicing sports and doing more outdoor activities. There is also a special concern about getting a slim figure fast through reduced-calorie products. Energy drinks positioning is disassociating itself from partying and night activities, focusing on extreme sports and consumption in more common situations.
Competition is consolidating
Bottled water is consolidating in the market by the success of flavoured bottled water and premium brands of natural mineral water. Nestlé successfully entered mineral water and consolidated in larger packages, whilst Soprole SA led innovation with new flavours. Embotelladoras Chilenas Unidas SA (ECUSA) launched new carbonated flavours to reinvigorate the category and Andina and Embonor, two of the three bottlers of Coca-Cola, reached an agreement with the B-brand manufacturers after a lawsuit in the competition tribunal. Powder concentrates continued to be led by Tresmontes Lucchetti, reflecting dietary concentrates in high proportion. Fruit /vegetable juice is moving to healthier natural products or reduced sugar juices and Promarca has launched two new flavours of nectars.
On-trade channel is developing
Chileans spending more hours out of the home, crowded cities and larger distances for commuting have stimulated the demand for products that people can eat and drink on the go. Street sellers and kiosks provide an ever-larger number of soft drinks suitable for immediate consumption. Vending machines cover most high-traffic areas including transport stations, universities, shopping centres and other stores, as well as many captive places. Additionally, investments in chilled cabinets have increased and manufacturers have supported retailers in financing this equipment to improve their displays and product maintenance in optimal conditions. This is becoming a huge entrance barrier for smaller players that cannot afford similar investments, and that have been losing ground in many retail outlets.
Prominent future of soft drinks
Soft drinks is expected to experience growth in volume and value over the forecast period, albeit at a slightly slower rate than over the review period. Total value sales are estimated to grow faster than total volume sales due to rising unit prices caused by inflation and the expected increased consumption of value-added products. Growth will be slower than in 2006-2011 as the review period saw the appearance of new subcategories such as flavoured and functional bottled water and the explosive growth of sports drinks and energy drinks, the latter in a very early stage of development in 2005. Most of the growth in the forecast period should arise from healthy products. Natural juices, bottled water, low calorie carbonates and RTD tea should drive growth and their consumption should extend to middle- and middle-lower-income segments. Key Trends and Developments
Oligopolies in soft drinks
The Chilean outlook of the competitive environment within soft drinks is simple: one or two big companies that dominate the industry with more than 50% share, generating indirect entry barriers to smaller companies. This behaviour has been well known in the Chilean market since the introduction of soft drinks, limiting the introduction of new brands and innovation. Oligopolies’ strategies cover different variables involving prices, tie-in selling, exclusivity contracts with retailers and huge advertising budgets that are almost impossible to overcome by smaller companies. Targeting to niche segments is the only way that smaller companies can enter the industry as is already happening with some premium brands.
Current impact
Oligopolic behaviour has affected the market since the introduction of different soft drinks, limiting the amount of brands present in the market. For instance, carbonates is dominated by Coca-Cola which had 71% value share in 2011; the same situation happens in bottled water, which was led by Aguas CCU – Nestlé Chile with 52% share. Concentrates on the other hand is led by Watt’s in liquid concentrates and by Tresmontes Lucchetti in powder concentrates with each company owning more than 50% value share in each category respectively. Fruit/ vegetable juice is being led by Promarca and Coca-Cola and so on.
Moreover, advertising activity is driven by major companies that use mass advertising on national TV, radio, billboards, product placement and other media; instead smaller companies just advertise in certain events and some magazines. As most of the major products have a standard positioning, smaller companies try to offer premium products. Imported products for example account for a very small share due to the higher price. Other companies like Agrícola Forestal el Escudo have successfully managed to enter soft drinks offering premium products; however, its share is almost negligible.
Outlook
Given the present market condition, it is difficult to see the trend changing in the short term. As major companies are already covering different segments of prices with different positioning, it is very difficult for smaller companies to attempt to enter the market. These barriers are intensified considering the large advertising activity that is currently used and that should develop over the forecast period. There is also a huge investment by large companies in research and development in order to create new products and remain as leaders in the oligopoly.
Future impact
Euromonitor International expects that in many cases major companies will adapt to the condition of the market and launch premium products to appeal to wealthier consumers. For example, Aguas CCU – Nestlé has already launched a glass bottle of Cachantun in order to compete directly with premium imported brands such as Evian. Similarly, in an attempt to appeal to premium segments, Promarca launched a Watt’s Clear in glass bottles. Major companies will continue advertising through favourite TV shows. For example Livean is currently using product placements in one of most popular reality shows through Channel 13.
Healthier products increasing
As consumers become more aware of their health with increasing education levels, they start to pay more attention to the ingredients of the products. Moreover, they become more careful about weight management. Women consumers in particular prefer lower calorie products with which to control their weight. Television and expanding telecommunication systems play an important role in this, as being thinner is usually perceived as beautiful, especially on fashion channels. This new trend has increased the demand for healthier and lower calorie products within soft drinks.
Current impact
In Chile, consumers started to become more careful about their health and weight management with increasing education levels, and also with expanding telecommunication systems which give high importance to the appearance of people, especially of women. Following this new trend, companies started to focus more on health, nutrition and low calories in developing new products. For instance, Promarca launched three new flavours of its nectars alongside with the introduction of Watt’s Clear in the middle of the year, a reduced-calorie version nectar with the appearance of bottled water. Similarly Agricola Forestal el Escudo launched new flavours of Afe 100% juice besides an organic juice; likewise Hortifrut launched a new cranberry 100% juice in January of 2011.
Moreover, new package versions and flavours in nectars and 100% fruit juice increased as consumers started to prefer fruit/vegetable juice amongst other juices with no fruit content and carbonates for example. Consequently, nectars was the fastest growing category within fruit/vegetable juice in 2011, with a 15% total volume increase.
Outlook
Euromonitor International expects this trend to keep its importance over the forecast period; as the awareness of health issues in Chile is rising, the responsiveness to healthier products will also increase. Moreover, as advertising regarding health concerns continues expanding, influenced by private companies and government programmes, more people will be affected by weight management-related programmes. Women are expected to remain as the key target of the low calorie products over the forecast period.
Future impact
Over the forecast period, companies are expected to focus more on launching healthier, fortified and low calorie products to satisfy the demand of the consumers. Introduction of new flavours and versions of nectars is expected to increase over the forecast period. In addition, nectars is expected to be one of the fastest growing categories over the forecast period, with an 11% total volume CAGR. Moreover, low calorie products in soft drinks are expected to raise their shares. Companies are expected to launch low calorie versions of their products under each category, especially under carbonates with new flavours in standard carbonates, fruit/vegetable juice and RTD tea.
Soft drinks turning functional
During the review period, many soft drinks turned into functional drinks in order to appeal more to the consumer. Currently, diet products are being perceived as the standard in many categories; added ingredients and fortifying properties are well appreciated by consumers. However, in many cases, consumers are not aware of the specific purpose of the properties. In order to surpass that problem, companies are positioning their products toward a specific function. This trend appeared in the market recently in powder juices and is slowly spreading into other categories as well. Even though there are many products with beneficial properties or fortified, such as powder juices with added fibre or bottled water with vitamins, just a few are positioned as functional. Nevertheless, this is slowly changing as many brands were appearing claiming to facilitate a specific function in the review period.
Current impact
This trend is just the result of a deeper understanding of consumer behaviour. In order to take advantage of this knowledge, first movers and innovative companies are positioning their products to accomplish a specific function. For example, Carozzi launched Vivo Activo in 2011, a powder concentrate juice, with added ginseng highlighting its property to transmit an active effect on the organism and Vivo Relajado with camomile, emphasizing its relaxing effect on the body. Other examples are occurring in energy drinks that are already functional drinks: Battery Hydro was introduced in August of 2011 with isotonic properties aimed specifically at sports fans. In 2011 also was launched the first anti-energetic drink named Quiet Relax drink with added camomile, oatmeal and anise.
Outlook
It is expected that the functional trend will continue over the forecast period as companies will continue to explore consumer understanding of the segment. It is also expected that other companies will follow the strategy of first movers, furthermore enhancing the trend. It is not likely that the trend will decline, as better positioning of products will attract consumption, delivering more information and a clearer picture of products to consumers.
Future impact
As many companies are already emphasising functional properties of ingredients, it is expected that many companies will become followers and begin launching functional products on the market. There is also expected more advertising explaining the functionality of ingredients such as antioxidants or ginseng amongst others. Many fortified products should change their positioning, accentuating functional claims. As healthy trends are already impacting soft drinks, it is expected that many functional products will claim healthy properties in order to gain share. Healthy products should show the biggest growth over the forecast period.
Slim figure through easy ways in soft drinks
Although most of the Chileans have a conservative view regarding beauty, there is also a growing segment of younger Chileans who are especially worried about their bodies. In general, Chileans’ self-perception is not very positive; this is especially noticed when on many occasions Chileans rate their body weight as too high compared to foreigners. Even if many companies focus their advertising on enhanced natural properties of certain products, Chileans are really more focused on obtaining a better figure than achieving a healthy life. Demand for plastic surgeons is increasing fast, but also the consumption of fast food and obesity rates, revealing some kind of paradox amongst Chileans, the search for beauty through easy ways.
Current impact
The search for a beautiful figure has always been present in Chileans’ minds. However, with the appearance of reduced calorie products the trend is manifesting itself through consumption. Although many soft drinks are positioned as being natural and healthy, there is still a gap between healthy habits and beauty amongst Chileans. That is why many Chileans still believe that they can keep unhealthy habits and still produce changes in the figure in almost a magical way without substantial changes. The trend is impacting positively the consumption of reduced calorie products in soft drinks. This is reflected in the increased consumption of bottled water, sports drinks, diet powder concentrates and nectars; however, this is also present amongst other diet products like meal replacement slimming and dietary supplements. Nevertheless consumer foodservice, especially fast food, is also growing fast along with obesity rates that are similarly growing.
Outlook
Although healthy habits are slowly increasing in the country, fast food consumption and obesity rates are growing at faster rates. Healthy habits are adopted by mainly wealthy families, reducing the impact of the healthy trend to a narrow segment. Due to the economic stability and higher levels of disposable income, low- wealth families are slowly increasing their consumption at fast food restaurants, increasing obesity rates fast. Meanwhile, healthy habit rates move slower than those of unhealthy habits, represented mainly by the consumption of fast food and obesity rates. Hence the paradox of looking for slim figures the easy way will continue to be present in the country.
Future impact
People will continue to consume diet products in the fastest ways whilst the beauty trend is active. Meanwhile, the culture of healthy habits remains low in the country; companies will take advantage of this, launching products with the appearance of being healthier. Most of the population should continue to increase consumption without changing their habits dramatically, increasing consumption of healthier soft drinks. Along with this, it is expected that the competitive environment will intensify with the launch of new products, such as new fruit juices and products with new added ingredients and flavours, as is already happening in many soft drink categories.
Population structure favours healthy soft drinks consumption
Soft drinks benefited from the current structure of the population and also from the rising disposable income levels during the review period. Chile’s population is still ageing, rising from a median age of 30.5 in 2006 to 32.3 in 2011 due to the increased number of middle-aged and older adults. The number of people in their 20s is also increasing, carrying special concerns about global lifestyles and healthy concerns. They also, recently incorporated into the labour force, are earning money without having so much spending, thus being an attractive target to soft drinks advertisers. As people became older, they also grow aware of healthy issues and began consuming healthy products in order to remain in health. As middle-aged and older adults enjoy a better economic situation than, for example, people in their 30s, they also influence the consumption of premium healthy products.
Current impact
The growth of healthy soft drinks during the review period represented an ongoing shift. Consumers are increasingly opting for healthier alternatives such as fruit/vegetable juice and bottled water. Many young adults are strongly attracted by healthier brands, particularly those supported by strong advertising, with this attraction shaping shares. Although carbonates continues having most of the value share of soft drinks, its consumption rate has declined slightly in comparison with other more dynamic soft drinks. In powder concentrates for example, Livean and Vivo sell well mostly because they are healthier and fortified and are heavily advertised. The same happens in other categories such as fruit/vegetable juice; Watt’s Clear for example followed Tresmontes Lucchetti’s strategy, creating a nectar with the appearance of bottled water.
Outlook
The median age of the Chilean population will continue to increase from 32.3 in 2011 to 33.8 in 2016. This behaviour will still be driven mostly by the growth of the population older than 65 years. The population concentrated in their 20s will decrease their growth to slightly less than 5% on average from 2011 to 2016, which is obviously due to the shift to their 30s. However, further growth of this segment will be reduced by the decreased growth rates of children and teens, concentrating most of the population in a range above their 30s. As people grow older, it is also expected that the evolution of the awareness of healthy products will move to older segments.
Future impact
A more health-aware population will increase the consumption of healthier soft drinks over the forecast period. It is expected that older segments of the population will drive the consumption of premium products, intensifying the competition as income is higher in the older population. It is also expected that many healthy habits will grow in older segments. Alternatively, the increasing number of people in their 20s should intensify the consumption of drinks appealing to the young such as sports drinks and bottled water; nevertheless, it is also expected that the increase will last only as long as this segment continues increasing. According to Euromonitor International, the number of people in their 20s will grow steadily until 2015 and will shift negatively through 2020; until then it is expected that consumption of younger-oriented drinks will decrease. Carbonates will be one of the bigger losers, with decreasing growth rates due to the shift to healthier alternatives amongst soft drinks.Market Indicators
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Overview
Discover the latest market trends and uncover sources of future market growth for the Soft Drinks industry in Chile with research from Euromonitor's team of in-country analysts.
Find hidden opportunities in the most current research data available, understand competitive threats with our detailed market analysis, and plan your corporate strategy with our expert qualitative analysis and growth projections.
If you're in the Soft Drinks industry in Chile, our research will save you time and money while empowering you to make informed, profitable decisions.
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The Soft Drinks in Chile market research report includes:
- Analysis of key supply-side and demand trends
- Detailed segmentation of international and local products
- Historic volumes and values, company and brand market shares
- Five year forecasts of market trends and market growth
- Robust and transparent market research methodology, conducted in-country
Our market research reports answer questions such as:
- What is the market size of Soft Drinks in Chile?
- What are the major brands in Chile?
- What potential exists for multinational vs. local soft drinks companies looking to increase market share?
- How have changing social attitudes affected soft drink sales?
- How have sustainability issues; such as environmentally-friendly packaging, legislation on recyclability, or the amount of plastic in bottles, affected the soft drink industry?
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This industry report originates from Passport, our Soft Drinks market research database.
