Inflation Surge: Soft Drinks in Asia Pacific

October 2022

With the rise of consumer price inflation impacting almost all CPG in the world and Asia Pacific in 2022, this report seeks to examine how soft drinks companies and consumers have been impacted. By looking at the median price movements of leading soft drinks categories across various markets, we are able to analyse and evaluate varying companies strategies in light of growing inflationary pressures.

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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.

Scope
About Via from Euromonitor International
Regional outlook continues to remain challenging
Substantial inflation increases expected amid rising economic uncertainty
The many layers of global inflation
Deconstructing inflation drivers for the soft drinks industry
Company impact: Varying strategies adopted by soft drinks players
Company impact: Direct unit price increase the most common strategy
Consumer impact: Inflation set to impact low-income consumers in developing markets
Consumer impact: Inflation set to drive consumers’ demand for value for money products
Carbonates: Both Coca-Cola and PepsiCo face challenges in absorbing costs
Price hike in carbonates more visible in Asia’s emerging markets
Case study: Vietnam’s Coca-Cola focus on smaller pack sizes to drive growth
RTD tea: Players in Asia Pacific adopt a mix of strategy in light of inflationary pressures
Price hike in RTD tea more prominent in South Korea, Thailand and Vietnam e-commerce
Case study: Vietnam’s C2 observes increase in unit prices for single-serve pack sizes
Case study: Indonesia’s Teh Pucuk Harum sees stable price movements in common SKUs
Energy drinks: Players seek to maintain price amidst growing inflationary pressures
Price hike in energy drinks more prominent in developing markets of Asia Pacific
Case study: M-150 energy drink in Thailand price hike attributed to 150ml pack size
How much pricing power do soft drinks companies have in an inflationary environment?
Conclusion

Soft Drinks

This is the aggregation of the following categories; Carbonates, Fruit/vegetable juice, Bottled water, Functional drinks, Concentrates, RTD tea, RTD coffee and Asian speciality drinks.

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