Carbonates in Canada

PROSPECTS

Ongoing declining demand for cola carbonates as consumers increasingly choose healthier alternatives

Demand for carbonates through both off-trade and on-trade channels continued to decline in Canada in 2019, due to the ongoing poor performance by the main category of cola carbonates. The health and wellness trend in the country, particularly evident amongst the core consumer group of millennials, has led to increasing concerns about the high sugar content of carbonates, resulting in a greater focus on natural, less processed soft drinks.

Non-cola carbonates supported by innovation and interest in premium craft variants

The smaller category of non-cola carbonates experienced a relatively strong performance in 2019, supported by the growing interest in innovative styles and flavours, particularly linked to premium soft drinks. Ginger ale recorded the highest growth within this category due to the healthy perception of ginger-based products alongside significant investment from leading players such as Canada Dry and the entry of new products such as Jones Ginger Beer, which is made with natural ginger extract and contains no artificial colours or flavours.

Various factors, both positive and negative, could influence future growth trajectory of carbonates

The future performance of carbonates could be further impacted by a number of planned legislation/regulations in the country. While debate around the introduction of a sugar tax on certain packaged foods including soft drinks continues, and how effective this could be in the fight to combat obesity in Canada, other factors could also influence the category.

COMPETITIVE LANDSCAPE

Leading players look to diversify and expand in line with declining demand for regular cola carbonates

Carbonates continued to be led by giants Coca-Cola Ltd and PepsiCo Beverages Canada due to their strong brand image and effective distribution networks. However, in line with the poor performance of cola carbonates, their core category, both players continued to lose share and suffer declining sales.

Canada Dry Motts strengthens leadership of non-cola carbonates with wide portfolio and prominent promotional campaigns

Canada Dry Motts Inc strengthened its leadership of non-cola carbonates in 2019, due to its dominance of ginger ale, and leading position in tonic water/other bitters, orange carbonates and other non-cola carbonates. Its presence in the latter with Dr Pepper (with the new formation of global brand owner Keurig Dr Pepper) could help to turn around its performance after declining sales over the review period by capitalising on product innovation and holding greater negotiation power with suppliers and retailers, although it has some strong competition in the shape of A&W Root Beer.

Premium carbonates with craft or health positioning continue to make gains

The health trend continued to support positive performances for both smaller and larger brands that are attracting consumers through their use of natural ingredients and premium positioning. Jones Soda for instance, maintained its artisan soda and small batch production appeal, recording ongoing sales growth in 2019, in addition to expanding its distribution to channels such as warehouse clubs.

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