Competitor Strategies in Soft Drinks

June 2021

This report examines the competitive strategies of the major brand owners within global soft drinks as they navigate the recovery from on-trade collapse in 2020. Competitive activity over the past year is profiled, with a focus on the strategic direction of each major producer - from energy drinks M&A to action on sustainability.

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Key findings

Industry performance in 2020-2021 dictated by exposure to the on-trade channel

Global soft drinks producers faced a two-track performance in 2020, with a significant “channel shifting” effect lifting off-trade volumes during the pandemic, particularly in large-format grocery, traditional retail and other future consumption channels. At the same time, on-trade volume collapsed with tight restrictions on away-from-home consumer behaviour, with negative consequences for industry profitability leading into 2021.

Returning to product development across functional beverages

Product development was reduced over the last year, with major producers seeking to reduce SKUs and focus activities around successful, existing brand properties. However, energy drinks and other functional beverages (particularly in the area of gut health, digestive health and immune support) were a rare area of opportunity. In particular, PepsiCo increased its presence across energy drinks and enhanced functional drinks over the last 12 months.

Long-term outlook remains positive as industry leaders weather the storm

The long-term outlook for the industry remains strong and will be fuelled by recovery in the on-trade channel in the short term, and a push to increase transaction value in the mature markets of North America and Western Europe, which Euromonitor International’s macro model suggests are poised to recover faster in 2021. In emerging and developing regions of Asia, the Middle East and Latin America, industry leaders face a growing threat from value-positioned brands, which are taking industry share, particularly as consumers move from core sparkling categories into packaged water, coffee, tea and functional drinks.

Introduction

Scope
Key findings

Industry Overview

Coca-Cola retains global leadership in retail soft drinks
Stable share picture in soft drinks despite challenges of the past year
On-trade exposure shapes company prospects in 2021
Core trademark brands still dominate for “big soda”
Nestlé sells off its North American regional water business
Shifting from volume-led growth to profitable transactions in Europe/US
Energy drinks producers rising in the wider soft drinks top 10
Value-focused local and regional producers take share across soft drinks
Major M&A activity across soft drinks, despite challenging conditions
Considering soft drinks competitive performance for the rest of 2021

Key Players

Strategic priorities for Coca-Cola, the industry’s largest brand owner
Coca-Cola’s restructuring enables greater focus on master brands
Coca-Cola places greater focus on home consumption to drive sales
Smaller, sustainable, higher margin packaging launches feature in Q1
Functional drinks to energise during the day and relax at night
PepsiCo catching up in energy drinks category through acquisitions
Growing energy drinks share in the US and Russia is vital for Pepsi
Red Bull continues its activity around sports to promote core brands…
…while expanding healthier, fruitier and mocktail -inspired beverages
Suntory innovates for a “new normal” at home and health management
Danone’s sustainability agenda and its resonance with consumers’ values
Environmental and sustainability commitments differentiate Danone
In China, domestic players make major gains in carbonates
Chinese domestic brands differentiate through ingredients and packaging
More soft drinks occasions in the home could lift countertop commerce
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