Inflation Surge: Soft Drinks in Asia Pacific

Delivery

This report comes in PPT.

Key Findings

Will costs keep increasing in 2022?

With the onset of the war in Ukraine, the global energy and food price index has increased significantly. The high crude oil and diesel prices are driving up costs for bottlers and distributors, despite localised bottling and distribution models. As they impact low-income markets which are highly dependent on energy and imports, this continual rise in prices on soft drinks is set to result in consumers reducing their spending amidst the risk of a cost of living crisis.

What strategies will be employed?

Soft drinks players in Asia Pacific are expected to creatively explore a flexible price/package mix, likely introducing new, smaller sizes, multipacks and formats that allow for prices to be passed on while maintaining affordability for the consumers. At the same time, price increases can be passed on in the format of larger SKUs, or those found in e-commerce, as well as focus on channels such as modern trade or on-premise channel or focus on premiumisation to drive value sales.

What to expect for the rest of the year?

The impact on consumer demand caused by an increase in prices is likely to remain minimal as manufacturers adopt covert strategies. Nevertheless, should extreme weather conditions or new variants of COVID-19 arise,  inflation is set to continue to rise in the mid term. As such, we do expect consumers to down-trade, leading to a decline in consumption of discretionary soft drinks categories such as RTD tea. It is therefore important for soft drinks players to constantly add value to products through premiumisation, so as to maintain value sales in the long term.