The soft drinks market in Latin America is undergoing a major shift. Changing market conditions are damaging the growth prospects of sugary beverages, especially carbonates, which have long been the focus of the category in the region. Meanwhile, healthier and functional products are gaining in popularity, appealing to consumers who are increasingly looking for more from their beverages. Although carbonates are still growing, these emergent categories are now the keys to growth in the region.
While carbonates is the largest category of soft drinks in Latin America, it is losing share to other categories such as bottled water and RTD tea. The category continues to grow, boosted by rising volumes in countries such as Bolivia and Guatemala and some still-vibrant categories such as mixers and low-calorie options, but their contribution to growth in Latin American soft drinks is slipping. They will soon fall to under half of total soft drinks sales for the first time ever.
Bottled water is now the leading growth category in Latin America in both value and volume terms. Most of this growth will come from still, although all subcategories of water are performing well. Energy drinks, plant waters and 100% juice are also among the standout beverage subcategories in the region, highlighting the growing interest in functionality among local consumers.
The changing demographics of Latin America have led to the rise in importance of three distinct (but overlapping) groups that are more interested in non-carbonated soft drinks options. These groups are the middle class, older consumers, and health-orientated consumers. All three are more likely to be looking for categories other than carbonates, and are thus the key long-term drivers of the wider shift in Latin American soft drinks.
While the two giants, Coca-Cola and PepsiCo, have interests in a wide range of soft drinks categories in the region, they are much more dominant in sugary categories such as carbonates and sports drinks. As consumers shift away from such products, this presents a major opportunity to local producers, who have been building their presence in energy drinks, RTD tea and carbonates alternatives.
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