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Soft Drinks New Product Development: Innovation in a New Growth Environment

August 2016

Targeted new product innovation is key in the slowing growth environment of global soft drinks. Producers must focus on fast-growing emerging categories and create value-added products that meet consumer desires for flavourful, functional and healthy products. The report identifies some of the most interesting examples of global product development in soft drinks from Euromonitor International’s latest research edition.

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Increased blurring of categories

As soft drinks producers aim to benefit from the continued growth of bottled water and energy drinks, they are introducing more soft drinks that blur category lines and offer the benefits of multiple product categories. In particular, consumer movement away from carbonates to bottled waters is leading more companies to launch water-like products.

Demand for healthier beverages

Consumers are increasingly seeking out healthier beverages such as bottled water, RTD teas, and vegetable juices to reduce caloric and sugar intake. Public health campaigns such as the UK’s “war on sugar” have alerted consumers to high levels of sugar in many beverages.

A desire for “clean labels”

In addition to a desire to reduce calories and sugar, consumers are looking for short lists of natural, pronounceable ingredients. Many health conscious shoppers want to avoid artificial colourings, flavourings, preservatives, as well as ingredients such as synthetic caffeine and taurine.

Energy boost wanted

At the same time that many consumers seek to avoid artificial ingredients such as synthetic caffeine, taurine and flavours in energy drinks, many still want the energy boost provided but in a more natural format such as caffeinated waters and cold-brew RTD coffee that also contain fewer calories and sugar than traditional energy drinks.

Local flavours and more complexity

Using local flavours and ingredients will remain important to consumers who are looking for corporate social responsibility, nostalgia, and transparency in soft drinks. Pushing the envelope in terms of more complex flavours such as bitter, sour, and spicy will also be vital in appealing to millennials.

Introduction

Scope
Key findings

The Need for Innovation

Global soft drinks growth entering steady state
New product development: Unlocking value

Sparkling Moves Beyond Carbonates

Carbonates: On the verge of global decline?
Water grows as beverage choices change across regions
Continued rise of bottled water to drive NPD in other categories
Bottled water brands focus on sparkling to attract carbonates drinkers
Sparkling Ice carbonate has grown by marketing itself as a water
Carbonates brand leaders seek to catch up in sparkling water
Juice companies extending into sparkling juice and water combos
RTD teas become fizzy
More water and juice brands to launch carbonated varieties

The New “Energy Drinks”

Soft drinks brands envious of energy drinks’ high growth rates
Energy drinks: 4 challenges being addressed by rival hybrid products
Bottled water becomes caffeinated
Carbonates producers launch more caffeinated varieties
Caffeinated juices and sports drinks offer functional benefits
New RTD coffees now offer a “clean label” drink with low calories
Energy drinks companies are responding with new formulations
Energy drinks face competition from other caffeinated products

Locally Focused Products s

Manufacturers are emphasising local flavours, ingredients, images

Locally Focused Products

Appeal to consumers’ desire for “authenticity” and nostalgia
Coca-Cola and PepsiCo respond to India PM’s call to use local fruit
Using local ingredients to create feeling of trust and efficacy
RTD tea: Opportunity to use local ingredients for health in Asia
Localising images: Consumers take pride in their communities

Locally focused products

Emphasis on local to grow – likely to be a big force in key markets

More Complex Flavours

Movement towards more complex flavours: From sweet to sour
Craft mixology ushers in soft drinks with bitter and sour notes
Growing interest in spicy ethnic foods crossing over to drinks
Vegetables take centre stage, can reduce sugar and calorie levels
Trend towards more complex flavours is a developed market trend
Soft drinks makers to add more complex flavours beyond sweet

Packaging Allows Customisation and Interaction

Packaging offers customers ability to customise and interact
Young consumers looking to customise their beverages
Beverages packaging allows for more interaction
Coca-Cola uses packaging and social networks to add excitement
Soft drinks makers to create more interactive packaging

What’s Next in Innovation?

Companies will launch more hybrid products that offer function
Product innovation: The five elements of the value equation

Appendix: Competitor Analytics

Competitor Analytics tool
Overview
Competitors
Market Overlap
Treemap
Overlap Matrices

Appendix: Industry Forecast Model

About Euromonitor International’s Industry Forecast Model
Soft drivers and the Industry Forecast Model
Growth decomposition explained
Significance and applications for growth decomposition
Key applications for Industry Forecast Models
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