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Local cultures present unique opportunities in soft drinks

2/7/2011
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There may be niche but profitable opportunities for manufacturers looking to exploit unique local tastes. Across the globe there are many nuances to local tastes. We often think of emerging markets or far away locations as the places to search for these opportunities. However, unique cultural tastes may often be closer than we assume.

In a well developed Western European country there is a relatively rare preference for a carbonated sports drink over globally more popular still sports drinks. A locally based manufacturer has taken advantage of this opportunity and the global soft drinks powerhouses, Coca-Cola and PepsiCo, have not fared as well with their globally well-established brands of Powerade and Gatorade.

The Local Situation

The Western European country is Denmark and the carbonated sports drink brand is Faxe Kondi manufactured by Royal Unibrew A/S. Sports drinks are consumed by teenagers and young adults. Consumers with a strong fitness and sporting interest are also an important consumer group. Certain sports drinks, in particular the sports drink Faxe Kondi, are consumed in a similar fashion to carbonates.

Sports Drinks are very popular with Danes; in fact in 2010, based on Euromonitor International research, they are the #2 country globally in off-trade volume ranking just behind the US.

Per Capita Sports Drinks Volume

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With the unique local preference for a carbonated sports drink, both Coca-Cola and PepsiCo have found it difficult to penetrate this market with their global still brands. While The Coca-Cola Company is a powerhouse in Western Europe with a commanding share of off-trade soft drinks volume, more than double Nestle, its nearest competitor, Powerade has been unable to take advantage of this strong distribution network. Powerade has been in this market since 2001 yet it is still a distant #2 brand with only a 12% volume share of the market in 2010. Gatorade is even lower on the ranking in Denmark with under a 4% off-trade volume share in 2010.

Danish sports drinks sales are dominated by the Faxe Kondi brand, which is a carbonated sports drink. Faxe Kondi is a leading brand within total soft drink sales and its strong performance is increasing carbonated products' share of total sports and energy drinks sales. Royal Unibrew is the leading player with its ever-popular Faxe Kondi sports drinks brand. The company controlled a 2010 off-trade volume share of 51% in 2010.

The importance of health and wellness concerns in dictating the development of sales is clearly apparent in the off-trade. Recent reduced-sugar launches have quickly established a strong distribution network and, similar to carbonates sales, reduced-sugar sports and energy drinks variants are winning share from standard sports and energy drinks.

To consolidate its position against new market entrants and incumbent competing brands, Royal Unibrew adopted an aggressive pricing strategy for its Faxe Kondi brand in 2009 and 2010. This entailed an increase in price discounting and promotional activities. As a supplement to this pricing strategy, Royal Unibrew relaunched Faxe Kondi in a lighter plastic bottle during 2009 and as a still sports drink, Faxe Kondi Pro, in 2008.

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