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Soft Drinks: Quarterly Statement Q3 2017

September 2017

The Q3 quarterly update of the soft drinks forecast model yields a stable expected performance, although once again weaker than the Passport baseline. The US, Mexico and Nigeria lead market downgrades, while upward revisions to GDP in Europe give cause for optimism.

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Largely consistent with last quarter, Q3 yields a slower growth forecast than the Passport baseline

The quarterly forecast for soft drinks is broadly stable. While the global economy has improved relative to the previous quarter, the Q3 soft drinks forecast remains slightly below the Passport baseline. It now seems unlikely that global soft drinks will reach 3% volume growth over the forecast period (through to 2021).

The US, Mexico and Nigeria are the major contributors to underperforming global growth

In Q3, 60% of global soft drinks markets have been downgraded relative to the Passport baseline forecast in January, but most market downgrades are extremely modest, and reflect only small adjustments in GDP/per capita forecasts. Downgrades in three key beverage markets – the US, Mexico and Nigeria – remain the largest overall contributors to the Q3 downgrade relative to January 2017.

Meanwhile, Europe is the global bright spot in Q3, with significant forecast upgrades

Comparing Q3 to the previous quarter, the soft drinks forecast in Europe continues to improve. The forecast for the Eurozone economy in 2017 improved by 0.3 percentage points relative to the previous quarter. Spain, Germany and France were major contributors to the upgrade in the soft drinks forecast for the region, while in Eastern Europe, Russia and Croatia also demonstrated more positive growth prospects.

Slower GDP growth and a new tax regime threaten soft drinks prospects in the Gulf states

If Europe is the good news for the quarter, then uncertainty in key markets in the Middle East is bad news for the industry. Saudi Arabia and the UAE face weaker expected economic growth long-term, and the more immediate concern of substantial, newly implemented sugar taxes impacting soft drinks categories, particularly carbonates and energy drinks.

Q3 Macroeconomic Update

Executive summary
GDP forecasts: Revisions over last quarter
Global risk s cenarios
Major macro risks for the soft drinks industry

Q3 in Soft Drinks

Key findings
Global soft drinks may fail to see 3% volume growth through to 2021
The three largest market downgrades relative to Passport baseline
Europe provides the industry with reason for optimism in Q3
Bottler category guidance aligns with a rosier European forecast
Marginal short-term impact of Brexit on the UK soft drinks industry
A Gulf slow down intensifies as new excise tax regimes take effect
Strong RTD tea growth in Turkey reflects socio-economic drivers
Long term: Price and soft drivers are the main threats
Looking ahead to Q4

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 Model
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