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Soft Drinks in Latin America Enter a New Era

March 2018

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.

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Carbonates are losing their leading role in Latin American soft drinks

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.

Functional and healthier beverages are capturing increasing shares of growth

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.

Three emergent consumer groups are the leading cause of this shift

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.

The slowing of carbonates growth will boost local players over multinationals

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.

Introduction

Scope
EMI research coverage in Latin America
Key findings

The Shift From Carbonates

F ading importance of carbonates shaking things up in the region
Carbonates will still grow, but most growth will come from elsewhere
Population and premiumisation are the drivers of soft drinks growth
Functional beverages outperforming the category overall
Population growth has been key to increasing volumes
Bolivia shows that expanding volumes are still possible…
…albeit Bolivia is increasingly an outlier in the region
Carbonates remain important in several key markets
Low-calorie products is the most significant growth area of carbonates
Mixers represent an opportunity for premiumisation
Conclusions: The shift away from carbonates in Latin America

A Changing Latin America

The major external factors shaping soft drinks consumption patterns
These changes create three key groups to focus on
The middle class is becoming larger at a regional level

Changing Latin America

The Colombian and Peruvian middle classes are growing especially fast
The changing structure of Peru has led Aje Group to adapt its strategy
GDP growth is highly important to less-developed categories
Case study: An emerging premium juice market in Peru
The population of Latin America is ageing rapidly
The ageing population is accelerating anti-sugar trends
Carbonates and juice will have to adapt to a greying region
Case study: Mitto takes juice in Brazil in a more mature route
Obesity is a major problem in the region
Mexico’s sugar tax was the game changer
Governments are passing public health legislation
Case study: Cachautun takes advantage of new health legislation in Chile
Case study: Zuko shows reformulation is not always the answer in Mexico
Conclusion: Three external trends affecting LATAM soft drinks

The Rise of Local Players

Foreign companies play the leading role in Latin America
The shift from carbonates will benefit local companies
Foreign companies are losing share within the growth categories
The three types of Latin American soft drinks companies
Aje Group is the largest local player in Latin America
Postobón adapts to slowing carbonates sales
Salvavidas is a rare company that dominates its home market
Quala is making the jump from national to regional company
Refres Now is an example of a smaller-scale local company
Case Study: Refres shows how local brands compete with foreign players
Meanwhile, Coca-Cola pivots away from its traditional category focus
Strategies used by local companies against the multinationals
Conclusions: The rise of local companies

Conclusions

Conclusion: The keys to the future of Latin American soft drinks
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