Euromonitor’s Q3 Soft Drinks Forecast Model update demonstrates that a deepening recession in Brazil and weaker expected growth in the US were two key factors negatively impacting global prospects through 2020. Political uncertainty in Western Europe has also reduced expectations in the UK and Germany. Despite a modest reduction in global forecasted growth, major brand owners continued to invest in new products and targeted acquisitions to their portfolios over the past quarter.
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The latest quarterly update to the Soft Drinks Forecast Model shows another decline in expected growth over the next five years, with the 2020 value size now 0.3% smaller than initially expected, equivalent to US$11.5 billion, and two thirds of researched markets facing a downgrade in forecast growth.
Social, economic and political turmoil in Brazil has the most significant impact on the global soft drinks industry again this quarter, with little reason to revise expectations. The downgrade to Brazil alone accounts for more than 20% of the reduction in the global value sales forecast.
Weaker than expected growth in the US economy is another major contributing factor. Per capita GDP growth of 1.9% for 2016 has been revised down to 1.0%, resulting in a substantial reduction in income elastic soft drinks categories in the largest market for beverages.
The long-term consequences of the expected UK exit from the EU are unknown, but uncertainty about the scope of potential trade and labour market arrangements in Europe has resulted in a GDP downgrade for the UK and other Western European markets, particularly Germany.
The last quarter saw several interesting new products and smaller scale acquisitions. The partnership between Starbucks and Anheuser-Busch to produce a US RTD tea beverage in 2017 was among the highest profile deals of the last three month, while Coca-Cola Co invested in LA Libations, the manufacturer of Aloe Gloe aloe water, in June.