During the first half of 2022, life in Latin America re-established a more familiar rhythm, as lockdowns ended, hygiene restrictions were eased, and many citizens returned to the office or school.
This period of recovery increased demand for everyday health care products and services, as routine surgeries and other medical procedures were scheduled following frequent postponements over the last two years. The return to routines outside of the home also increased incidence of routine colds, influenza and common digestive illnesses such as viral gastroenteritis. More frequent social interaction also increased traffic in bars, pubs, and nightclubs – leading to more social drinking and, therefore, hangovers. Each of these factors has contributed to increased demand for hydration products – typically defined as glucose-based electrolyte solutions merchandised as OTC pharmaceutical drinks to remedy acute dehydration either from illness or fatigue.
However, during 2021 the leading hydration brand, Pedialyte (Abbott Pharmaceutical), experienced severe product shortage issues due to logistic disruptions, with approximately half of SKUs available in the region listed as out-of-stock, according to Euromonitor International’s e-commerce tracking tool Via. Median prices also increased by 23.5% as demand remained high even as retailers struggled to manage the availability of the brand on shelves.
Source: Euromonitor International Via SKU tracking tool
At the same time, the positioning of Pedialyte has been evolving. In some countries, particularly the US, the brand has started to be advertised and merchandised as a hangover remedy, promising consumers a faster recovery after a party – a product feature becoming increasingly valued as adults return to frequenting bars and other nightlife establishments as pandemic restrictions are eased.
Despite intensifying demand for hydration products (also classified as diarrheal remedies), value sales increased by just 5.3% in Latin America in 2021 (USD fixed exchange rate 2022) as the existing product offer was unable to cope with surging demand. Therefore, many consumers were unable to obtain Pedialyte as a traditional hydration solution. The expanding appeal of the brand as a hangover remedy and lifestyle beverage was at odds with existing supply. While alternative brands such as Electrolit or Suerox exist, they are less known and not readily available.
Alternative hydration solutions offered by soft drinks
Ongoing shortages, combined with wider adoption of isotonic beverages in both supermarkets and pharmacies, led many consumers to explore sports drinks as an alternative isotonic choice when looking for hydration solutions.
Sports drinks have benefited greatly from increasing activity and consumption occasions both during and after the pandemic. In Euromonitor International’s most recent forecast revision, off-trade volume sales of sports drinks in Latin America in 2021 grew by 27% from 2020 or by 15% from pre-pandemic levels. Similarly, demand for energy drinks grew by 31% from the previous year - evidence that functionality remains a key driver for both categories.
Source: Euromonitor International Forecast Model
A regional preference for self-medication and low consumer education on health issues may have bolstered an opportunity for sports drinks, despite recommendations from some public health agencies to avoid the category due to high sugar content. Consumer confusion between oral rehydration products and sports drinks may grow more significantly, as Abbott launched a new product – Pedialyte Sport – designed especially for athletes in July 2021. At the same time, sports drinks manufacturers in the region, such as Arca Continental, have expanded their product offering to include pharmaceutical hydration brands such as Isolate since 2019. In August 2021, US market leader Gatorade (PepsiCo) launched Gatorlyte in the US, with claims of being a “rapid rehydration” version of the popular sports drinks brand, by more closely resembling an oral rehydration solution in terms of both formulation and packaging.
Globally, the representation of product claims for “hydrating” soft drinks has declined, with only 0.2% of soft drinks SKUs currently making the claim on packaging in 2021. This signals both an increase in competition within the hydration space and also greater competition from alternative consumer health products and alternative functional claims such as “energy boosting” or “immune support”.
Source: Euromonitor International Passport Product Claim and Positioning 2021
Expansion opportunities in terms of format, positioning and availability
As consumption occasions continue to change, formats are becoming increasingly flexible and as consumers are paying greater attention to their health and wellbeing, the functional component of beverages and consumer health products becomes increasingly important, mirroring examples from both industries. Yet in Latin America and North America, an overall increase in SKUs has not occurred. Brands should take advantage by increasing their in-store and online availability, which was one of the main drivers for volume sales growth in 2021, while also continuing to emphasise the role of hydration beverages and their positive impact on health and wellness.
Blurring lines and new positionings – such as brands of sports drinks entering the medical hydration space or vice versa – is occurring in the context of ever-increasing demand for this type of product. To date, consumer migration in the region has been dictated not by preferences but determined by the simple availability of leading sports drinks and medical hydration brands, as supply issues take precedence. Consumer awareness and a more stable SKU availability could change the situation, but the longer trend within the industry points to the further blurring of lines between category, brand, function, and format.
For further insight into the trends driving product positioning, click here.