Carbonates in Canada

PROSPECTS

Carbonates continues to suffer from its unhealthy image

Canadian mainstream media continues to bombard consumers with headlines, discussions and reports which introduce the consumption of carbonates as one of the key reasons for the expanding epidemic of obesity and growing prevalence of diabetes. Millennials, who comprise a considerable proportion of the consumers of carbonates, are becoming increasingly concerned about their sugar intake, and this has made them reluctant to pay for carbonates.

Non-cola carbonates is performing much better than cola carbonates

Categories within non-cola carbonates, including ginger ale, lemonade/lime and tonic water/other bitters, are faring much better than regular cola carbonates in the current highly anti-carbonates public discourse. The growth of non-cola carbonates is supported by several factors, including perceptions of healthiness around certain non-cola carbonates, such as ginger ale, more active new product launches in this space, and the ever-rising cocktail culture, from which drinks such as tonic water and lemonade benefit.

Upcoming regulatory changes will pose another threat to sales

New regulations are set to change the market environment in favour of anti-carbonates campaigns even more. For example, carbonates might be subject to front-of-package nutrition labelling, which is aimed at highlighting products high in sugar, sodium and saturated fats.

COMPETITIVE LANDSCAPE

Coca-Cola and PepsiCo Beverages Canada maintain their lead

Two multinational giants continued to dominate sales of carbonates in both retail volume and value terms in 2018, because of their strong brand image, as well as their effective distribution networks. One of their key strategic focuses in 2017 and 2018 was to introduce and expand their zero sugar versions.

Key suppliers address consumer concerns through innovative initiatives

Although the price war between Pepsi and Coca-Cola continues in the Canadian market, ironically, the average price of carbonates is set to rise, due to the growing popularity of smaller packs, which tend to have a higher price per litre. The overall strategy of the two main players is to offer new packaging that brings a higher price per litre.

Small and niche players are gradually strengthening their positions

Despite the overall weakness displayed by carbonates, there are niche areas in which players, typically smaller brands and start-ups, are experiencing growth. Canada Dry Motts, Jones Soda Co and Cott Corp are leading this movement, followed by a number of small brands.

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