Soft Drinks: Quarterly Statement Q3 2017

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.